The Real Deal New York

Law firm Simpson Thacher’s $766M lease tops Q2 ranking

TAMI tenants accounted for over a quarter of most valuable deals

August 08, 2013 03:00PM
By Hiten Samtani

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From left: 425 Lexington Avenue, Stephen Ross and a rendering of Hudson Yards

From left: 425 Lexington Avenue, Stephen Ross and a rendering of Hudson Yards

Updated, 10:55 a.m., Aug. 11: A new acronym recently entered the lexicon of Manhattan office players, and judging by the numbers, it’s here to stay. TAMI (technology, advertising, media, and information) tenants accounted for over a quarter of the top ten leasing deals in the second quarter of 2013, continuing the trend seen last quarter, according to The Real Deal’s quarterly ranking of Manhattan’s most valuable office leases.

The ranking covers office leases signed in Manhattan in the second quarter of 2013, ordered by dollar value over the lease term. The Real Deal used data from commercial real estate information company CompStak, cross referenced with data from commercial brokerages, CoStar, news reports and interviews with commercial brokers and real estate players.

Though law firms and financial firms accounted for many of the top deals – indeed Simpson, Thacher & Bartlett’s renewal at 425 Lexington Avenue topped the list at about $766 million — companies such as Facebook, Yahoo, SAP and AppNexus have changed the perception in Manhattan that the biggest deals are the sole dominion of the financial and legal sector.

“By representing 27 percent of this quarter’s [most valuable] deals, it is clear that the technology industry is not just influencing, but is meaningfully impacting the New York City economy,” said Wayne Yu, a senior research analyst at CompStak.

As with any other asset portfolio, “this diversification of the New York City economy should lead to greater long-term stability in the region,” Yu added.

Last quarter, the narrative revolved around Downtown, where five of the ten most valuable leases were signed, as The Real Deal reported.

See below for the top ten most valuable lease deals signed in the second quarter.

Manhattan's most valuable leases of Q2 (Click on image to enlarge)

Manhattan’s most valuable leases of Q2 (Click on image to enlarge)

1) 425 Lexington Avenue
Estimated Value: $766 million
Market: Midtown
Tenant: Simpson, Thacher & Bartlett
Landlord: JPMorgan Asset Management
Square Footage: 595,799
Effective Rent Per Square Foot: Mid-$80s
Lease Term: 15 years

The law firm inked the quarter’s most valuable lease deal with Hines when it opted to stay put at the 31-story, 800,000-square-foot tower, which JPMorgan purchased in June for $700 million. Simpson, Thacher will continue to occupy the building’s first 26 floors.

“We have enjoyed a long relationship with Simpson Thacher, and their confidence in and recommitment to 425 Lexington Avenue speak volumes about the quality of this unique asset,” Hines’ executive Tommy Craig, who represented the landlord in the deal, said in a statement at the time.

“We are happy to have secured 425 Lexington to serve as our world headquarters for at least another two decades,” Michael Hersch, chief operating officer of Simpson Thacher, said in the same release. The firm was represented by CBRE’s Lewis Miller, Ken Rapp and Ramneek Rikhy, but none of the brokers were available for comment.

2) Tower C (South Tower), Hudson Yards
Estimated Value: $417 million
Market: Midtown West
Tenant: L’Oreal
Landlord: Related Companies/Oxford Properties
Square Footage: 402,000
Effective Rent Per Square Foot: High $60s
Lease Term: 15 years

The French beauty giant signed up in April as the second anchor tenant at Related and Oxford’s 1.7 million-square-foot tower, following in the footsteps of luxury retailer Coach, which also has an equity stake in the building.

L’Oreal will establish its national headquarters there, taking a portion of the 23rd floor as well as floors 24 through 32.

The signing of the leases with L’Oreal, Coach and software giant SAP was an important step in one of the most complex and largest ventures in Manhattan history, Jeffrey Lenobel of law firm Schulte Roth & Zabel, who advised Oxford in its joint venture with Related to develop Hudson Yards, told The Real Deal.

The landlord was represented by CBRE’s Stephen Siegel, Michael Geoghegan, William Hedman and Lauren Crowley, while L’Oreal was represented by Jones Lang LaSalle. A source involved in the transaction confirmed the terms to The Real Deal, but declined to comment further.

3) 1133 Avenue of the Americas
Estimated Value: $274 million
Market: Midtown
Tenant: Patterson Belknap Webb & Tyler
Landlord: Durst Organization
Square Footage: 198,300
Effective Rent Per Square Foot: Low $70s
Lease Term: 20 years

The law firm signed another 20-year commitment to Durst’s 45-story, 1.1 million-square-foot tower between 43rd and 44th streets, which had undergone a $10 million renovation a few months prior to the deal.

In another sign of continuity, the same people who brokered the initial deal — Durst’s Tom Bow for the landlord and Studley’s Ira Schuman – handled this transaction. Bow and Schuman were not immediately available for comment.

4) 9 West 57th Street (Solow Building)
Estimated Value: $199 million
Market: Midtown
Tenant: Och-Ziff Capital Management
Landlord: Sheldon Solow
Square Footage: 95,200
Effective Rent Per Square Footage: Mid-$100s
Lease Term: 12-15 years

In a deal reminiscent of the real estate boom, one of the world’s only publicly-traded hedge funds agreed to pay rents of over $200 per square foot for the entire 39th and 40th floors in the priciest deal struck post-2007, as The Real Deal reported. It will also pay rents in the low $100s per square foot for the entire 13th floor.

Jones Lang LaSalle’s Scott Panzer, who oversees leasing at the building, did not respond to requests for comment. CBRE’s Peter Turchin, who brokered Och-Ziff’s previous lease, declined to comment. Jonathan Gasthalter, a spokesman for Och-Ziff, declined to comment.

“There are three or four buildings in New York that always get these astronomical rents,” top real estate attorney Robert Ivanhoe, who was not involved in the transaction, said of buildings such as the Solow Building, the GM Building at 767 Fifth Avenue, and the Seagram Building at 375 Park Avenue. “They’re in a class by themselves.”

5) 1 Battery Park Plaza
Estimated Value: $171 million
Market: Lower Manhattan
Tenant: Hughes Hubbard & Reed
Landlord: Rudin Management
Square Footage: 220,000
Effective Rent: High $30s
Lease Term: 20 years

Though there was speculation last year that the law firm would be shopping for alternatives, it ultimately decided to stay put at Rudin Management’s 35-story, 837,052-square-foot tower at 24 State Street.

Rudin was represented in-house by Thomas Keating, while Hughes Hubbard was represented by Newmark Grubb Knight Frank, though it is unclear which NGKF brokers were involved. Keating was not immediately available for comment.

In January 2012, Rudin bought out Rose Associates’ 50 percent stake in the property for $92 million, ending a half-century partnership between the two families at the site.

6) Tower C (South Tower), Hudson Yards
Estimated Value: $136 million
Market: Midtown West
Tenant: SAP
Landlord: Related Companies/Oxford Properties
Square Footage: 115,000
Effective Rent Per Square Foot: High $70s
Lease Term: 15 years

Chalk up one more for Hudson Yards. The German software giant’s decision to take floors 44 through 47 at the 1.7 million-square-foot tower was a major milestone for Related and Oxford at the megaproject, according to the developers’ law firm, Schulte Roth & Zabel.

“SAP got the beautiful views,” SRZ’s Fonda Duvanel said of the lease deal for the four top floors of the tower.

SAP was represented by Jones Lang LaSalle’s Alexander Chudnoff and Scott Vinett, along with Fischer & Company’s Steve Andrews and Christopher Joyner. CBRE’s Robert Alexander, Howard Fiddle, Rob Stillman, Len DiMicelli, Zakery Snider and Ryan Alexander represented Related and Oxford, according to a statement from the joint venture at the time of the lease signing.

“In establishing a single flagship New York location, our only goal was to find the city’s most innovative development,” SAP’s co-CEO, Bill McDermott said in the April statement.

None of the brokers was available for comment.

7) 28-40 West 23rd Street
Estimated Value: $116 million
Market: Midtown South
Tenant: AppNexus
Landlord: Colliers International
Square Footage: 220,000
Effective Rent Per Square Foot: High $40s
Lease Term: 10 years

The advertising technology firm signed a renewal and expansion deal at this 561,271-square-foot building in tech-friendly Midtown South between Fifth and Sixth avenues. The deal will see AppNexus take over the entire second, fourth, fifth and sixth floors, expanding from 66,000 square feet on the fourth floor.

NGKF’S Mark Weiss and Rob Eisenberg represented AppNexus, while Colliers’ Michael Cohen and Andrew Roos — who are also part owners of the building — represented the landlords. Roos noted to the New York Observer last year that that the building is a combination of the original Stern Brothers department store at 40 West 23rd Street and the smaller annex building at 28 West 23rd Street.

8) 229 West 43rd Street
Estimated Value: $95 million
Market: Midtown
Tenant: Yahoo
Landlord: Blackstone Group
Square Footage: 176,201
Effective Rent Per Square Foot: Mid $50s
Lease Term: 10 years

Marissa Mayer doesn’t mess around. Soon after acquiring social media platform Tumblr for a cool $1.1 billion, Yahoo inked a deal for its New York headquarters at the Times Square building, which once housed the New York Times.

The Yahoo deal — and others like it – indicate that Blackstone’s strategy to reposition the 789,826-square-foot building as a tech oasis in the heart of Times Square has paid off, as The Real Deal reported.

NGKF’s Brian Waterman, Brent Ozarowski, Jonathan Tootell, James Kuhn and Lance Korman marketed the space on behalf of the landlord, according to CoStar. It was unclear who represented Yahoo. None of the brokers responded to requests for comment.

9) 110 East 59th Street
Estimated Value: $71 million
Market: Midtown
Tenant: Northshore LIJ Medical Group
Landlord: Jack Resnick & Sons/IMAX Corporation
Square Footage: 70,434
Effective Rent Per Square Foot: High $60s
Lease Term: 15 years

The hospital opted for an early renewal at the 612,181-square-foot building, located between Lexington and Park avenues.

“We are pleased that 110 East 59th Street will remain a key Manhattan location for this highly respected healthcare organization,” Jonathan Resnick, president of Jack Resnick & Sons, said in a statement at the time. Other major tenants include financial firm Cantor Fitzgerald, cosmetics company Estee Lauder and IMAX Corporation, which is a part owner of the building, according to CoStar.

The hospital was represented by NGKF’s Brian Waterman and Brent Ozarowski, while the landlord was represented in-house by Dennis Brady. None of the brokers were available for comment.

10) 770 Broadway
Estimated Value: $67 million
Market: Midtown South
Tenant: Facebook
Landlord: Vornado Realty Trust
Square Footage: 98,570
Effective Rent Per Square Foot: Low $60s
Lease Term: 11 years

Vornado Realty Trust executives liked their deal with Facebook so much, it was a major point of discussion in the company’s second-quarter earnings call, as The Real Deal reported.

Facebook took the entire eighth floor and a portion of the seventh floor in the deal at the 15-story, 1.1-million-square-foot building, which involved Vornado accepting a $4.5 million lease termination payment from analytics firm Nielsen and making a short-term deal for 60,000-square feet for the remaining seventh floor space with a gaming company, should Facebook feel the need to expand in the future.

“The deal was complicated and an example of what we do every day to create value in the portfolio,” Vornado’s New York president David Greenbaum said in the call. “The overall transaction involved five different tenants, 16 legal documents and was finalized in 23 days.”

Facebook was represented by its brokers from the West Coast in the transaction, Greenbaum added, but it was unclear who he was referring to.

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