New York City’s real estate press regularly chronicles which firms buy and sell Manhattan’s most prized office towers. But handicapping how much those trophy buildings actually throw off in cash from rents is another story.
This month, however, The Real Deal did a first-ever ranking of which companies are generating the most income from their Manhattan office-building portfolios.
What we found is that the highest concentration of lucrative buildings is not along Park Avenue or even in the Plaza District as one might expect. Instead, it is clustered on Sixth Avenue between 47th and 55th streets.
Meanwhile, the General Motors Building — at 767 Fifth Avenue — is the city’s single most profitable building.
Click to enlargeTRD’s ranking used the city’s tax records, which estimated the net operating income (NOI) — or the revenue the building is generating minus its operating expenses — to analyze hundreds of Manhattan office buildings. Where NOI numbers were not available, TRD used the city’s stated market value to calculate one.
While NOI is not a perfect measurement of an owner’s financial strength, because individual owners may have debt payments to make and partners to share income with, it is the gold standard for determining the raw value of a building.
“The [NOI] fairly accurately describes the revenue stream from properties, which is [a] measure of economic power,” said Paul Massey, CEO of brokerage Massey Knakal Realty Services.
Click to enlargeIn addition, though the city generates the NOI partly through income and expense statements that property owners are required to file annually on most commercial properties, in some cases the city’s income figures are higher than what landlords claim.
Glenn Borin, comanager of the tax certiorari group at Stroock & Stroock & Lavan, estimated that for two-thirds of the buildings, the city’s NOI figure has been inflated by about 5 percent over the landlord’s reported figure, while for a third of the buildings, NOI might be off by 10 percent or more. (Also, when calculating the NOI, the city did not subtract real estate taxes.)
The MetLife Building, Tishman Speyer’s most lucrative Manhattan building.The city tax records, released in January and finalized last month, were based on 2010 financial results. In calculating the companies’ totals, TRD brought the numbers up to date by only counting buildings currently owned by each company. The figures were shared with each firm, who all declined to comment.
What we found is that the amount of cash being generated is staggering.
For example, Vornado Realty Trust topped the list with more than $918 million in NOI at 31 buildings.
While it’s not surprising that REITs like Vornado and SL Green Realty have the most valuable portfolios, a handful of the city’s family dynasties are not far behind, the ranking revealed.
More surprising, of the top 10 firms raking in the most money, only three — Brookfield Office Properties, the Durst Organization and Boston Properties — are currently moving forward with construction plans for new office buildings. Instead, the majority of the firms on the list are either acquiring buildings or sitting on towers they’ve long owned.
Below is a breakdown of the 10 companies with the most lucrative office portfolios in Manhattan.
Vornado Realty Trust
Total Manhattan office NOI: $918 million
Type of firm: REIT
Average income: $41 per square foot
Vornado’s 31 Manhattan office buildings, which total 22.2 million square feet, are generating $918 million a year — more money than any other real estate firm in New York.
And the crown jewel in its portfolio — 1 Penn Plaza — is not even located in the most prime office tower location in the city. The skyscraper, however, generates $108.7 million, more than any other building in Vornado’s Manhattan office portfolio, according to TRD’s analysis.
The 2.4 million-square-foot building, one of the largest in the city, counts the law firm Milberg LLP and the financial company Penson among its tenants.
Vornado chairman Steven RothHeaded by chairman Steven Roth and CEO Michael Fascitelli, Vornado has been actively buying properties since the downturn. The last time it sold a major office building was in 2003, when it unloaded 2 Park Avenue to a German investment fund for $292 million.
Over the past year, the REIT has purchased the office condominium at 666 Fifth Avenue as well as the entire 1 Park Avenue building. It hasn’t constructed a building in Manhattan since 2004, when it completed the Bloomberg Tower at 731 Lexington Avenue, a mixed-use office and residential building. And while it had several development projects in the pipeline, it’s unclear when any of them will begin construction.
Rockefeller Center, the core of Tishman Speyer’s office portfolio.Indeed, the REIT’s plans for building its proposed 15 Penn Plaza are currently on ice and its construction time line for a commercial development site in Harlem is also unclear.
After 1 Penn Plaza, the firm’s most valuable Manhattan property is 1290 Sixth Avenue, home to AXA Financial and Cushman & Wakefield.
SL Green Realty
Total Manhattan office NOI: $790 million
Type of firm: REIT
Average income: $35 per square foot
SL Green has also been hard to ignore lately. The company currently has 34 buildings totaling 22.9 million square feet. A handful of those properties have been picked up in the last few years.
The firm, which ranked No. 2 on the list with $790 million in total NOI, owns a broad collection of buildings spread throughout Manhattan.
Its top-earning building is the 1.6 million-square-foot Times Square office tower 1515 Broadway, which is throwing off $70 million a year — more income than any other building in the firm’s New York portfolio, according to city records. And the building will remain a money-maker for years. That’s because the media behemoth Viacom signed the largest lease of the year — a renewal and expansion — in April, and is expected to occupy the entire building in coming years.
SL Green CEO Marc HollidaySL Green CEO Marc Holliday acknowledged on the firm’s first-quarter earnings call in April that the company is anticipating more cash flow from 1515 Broadway because of the Viacom lease.
“This asset, in our minds now, moves into elite core status in Manhattan with an $80 million near-term NOI,” he said.
SL Green has been especially active buying and selling properties over the past year. For example, it unloaded 28 West 44th Street for $161 million in May 2011, and in December purchased 51 East 42nd Street, which is part of a potential 1.2 million-square-foot office development site on a small square block bounded by Madison and Vanderbilt avenues, and 42nd and 43rd streets.
Total Manhattan office NOI: $736 million
Type of firm: Privately owned
Average income: $47 per square foot
The family-owned real estate company may have lost Stuyvesant Town and Peter Cooper Village in a high-profile foreclosure at the beginning of the financial meltdown, but it is still generating $736 million from its Manhattan office portfolio.
Tishman Speyer CEO Jerry SpeyerThe firm, headed by father and son co-CEOs Jerry and Rob Speyer, owns 14 Manhattan buildings totaling 15.5 million square feet, in addition to millions of square feet around the globe in places like China, India and Brazil.
Ten landmarked buildings in Rockefeller Center have formed the core of its Manhattan portfolio since 2001, when it partnered with the Crown family to buy full control of the complex for $1.85 billion. (It had been a partial owner since 1996.)
Still, the Rockefeller Center office properties brought in only about $310 million of the firm’s total. Part of the reason for that is that in 1996, just after Tishman Speyer bought its ownership stake, the partnership sold 1.6 million square feet of the complex to NBC for $440 million.
Tishman Speyer’s most lucrative Manhattan building is the Brutalist 200 Park Avenue, the MetLife Building, which the firm bought in 2005 for $1.72 billion and which generates about $127 million per year in NOI.
The GM Building, owned by Boston Properties, generates more money than any other building in the city.But even as Tishman Speyer has been building projects all over the world, it hasn’t developed any New York office properties in years. And other than a couple of condo floors at 30 Rock, which it bought back from NBC in 2007, it hasn’t purchased anything here either.
Total Manhattan office NOI: $545 million
Type of firm: REIT
Average income: $66 per square foot
The Boston-based REIT, which focuses on Class A buildings with white-shoe law firms, owns the General Motors Building at 767 Fifth Avenue, the city’s most valuable building. It alone generated $157 million of the firm’s total $545 million annual income. That was far ahead of the second most-valuable building in the city, the Durst Organization’s 1 Bryant Park.
Boston Properties head Mort ZuckermanPartly because of the GM Building, the company also wins the distinction of having the highest average income per square foot — at $65.56 — among the top 10 owners.
The REIT, which is headed by Mort Zuckerman, has only seven Manhattan buildings totaling 8.3 million square feet. But in contrast to some of the others on the list, it is in development mode. The firm is constructing a 1 million-square-foot office tower at 250 West 55th Street, estimated for completion in 2014, with law firm Morrison & Foerster signed on as the anchor tenant.
Brookfield Office Properties
Total Manhattan office NOI: $534 million
Type of firm: REIT
Average income: $30 per square foot
The company headed by CEO Ric Clark is part of the Toronto-based Brookfield Asset Management and has a massive portfolio. But city tax records show it has a low per-square-foot NOI.
Brookfield Office Properties CEO Ric ClarkWhile its total income portfolio-wide came to $534 million, the income on its World Financial Center properties averaged between just $18 and $32 per foot, far below most of the city’s modern Class A office buildings. That may reflect both that the leases are old, and that tenants pay less for aging buildings in Lower Manhattan.
But Brookfield, which owns 10 Manhattan buildings totaling 17.9 million square feet, is also one of the few firms that is making the ultimate bet on the city: new building construction. It’s planning to build up to 5.4 million square feet of commercial and residential space at 10th Avenue and 33rd Street. The project, which is being called Manhattan West, is still waiting to secure an office tenant before construction begins.
Brookfield’s most lucrative building is 245 Park Avenue, with nearly $96 million in annual NOI.
Total Manhattan office NOI: $405 million
Type of firm: Privately held German investment fund
Average income: $41 per square foot
The investment company founded by the German Otto family is one of only two owners among the top 10 on TRD’s ranking with overseas ties. (The other is the Japanese Rockefeller Group Development.)
Headed by CEO Albert Behler, Paramount was founded in the 1960s to buy U.S. real estate. It currently owns 10 Manhattan buildings with 9.8 million square feet that bring in $405 million annually.
Through the years, it’s successfully taken advantage of the cyclical nature of Manhattan property prices to purchase major office buildings in distress.
For example, Paramount acquired its most profitable building, the 1.8 million-square-foot 1301 Sixth Avenue, in 2008 after owner Harry Macklowe defaulted on his loan to Deutsche Bank. The tower, which includes tenants such as the law firm that recently imploded, Dewey & LeBoeuf (see “Life after Dewey & LeBoeuf”), and French bank Credit Agricole, had an income of $84.8 million. Yet Dewey’s effective shutdown has sent Paramount scrambling to find new occupants. And according to news reports, the landlord has already started showing potential tenants some of Dewey’s 474,000 square feet of space.
Total Manhattan office NOI: $357 million
Type of firm: Privately held
Average income: $42 per square foot
The midtown-based firm finished construction on the 2.1 million-square-foot 1 Bryant Park in 2010. That building, among the five most valuable in the city, generates a third of the income that Durst brings in from its office portfolio, or about $129.3 million. (The family firm has a substantial residential portfolio as well.)
Unlike most of the other property owners among the top 10, Durst built every one of its 10 buildings, which encompass 8.5 million square feet. The buildings brought in $357 million in income last year. And, along with the Port Authority of New York and New Jersey, it’s a part-owner in the city’s highest-profile building: the 3.2 million-square-foot 1 World Trade Center, which isn’t counted in this ranking because it’s not bringing in income yet.
The Durst Organization’s 1 Bryant Park is the company’s most lucrative NYC building. (source: dbox branding & creative)Other than 1 Bryant Park and 1 World Trade, two massive projects, Durst isn’t currently launching construction of any other office towers in the city. Instead, it’s reaping the benefits of a collection of office buildings the family built along Third Avenue and Sixth Avenue in the 1960s and 1970s. One example is 1133 Sixth Avenue, built in 1969, which generated an NOI of $32 million, city records show.
On the residential side — through its Durst Fetner Residential, a partnership with developer Hal Fetner — it is in construction mode. The company is building a hotel and residential tower at 855 Sixth Avenue, and last month construction was underway at 625 West 57th Street, where it plans a pyramid-shaped residential condo building designed by Bjarke Ingels.
Total Manhattan office NOI: $283 million
Type of firm: Private, family-owned
Average income: $28 per square foot
Rudin Management has 15 buildings, which bring in a total of $283 million a year, in its 10.1 million-square-foot office portfolio. But the family firm has not constructed a new office building in more than a decade.
The most profitable of its buildings is 345 Park Avenue, which the company built in 1969. That building has an annual NOI of $68.9 million. The 855,000-square-foot 3 Times Square, which was erected in 2001 and was the last building it constructed, is the second most-valuable office property it owns, producing an NOI of $46 million.
Many of the buildings in the family’s portfolio are smaller office properties, concentrated on Lexington and Madison avenues, that generate less than $10 million in NOI per year. And, of course, Rudin, led by company CEO William Rudin, has residential projects as well, including the 350 apartments it’s planning to build at the former St. Vincent’s Hospital site in the West Village.
Total Manhattan office NOI: $222 million
Type of firm: Private, family-owned
Average income: $44 per foot
Fisher Brothers, another of the city’s long-time development families, owns four large office buildings — which are among seven the company built between 1957 and 1980.
The most valuable property in its 5-million-square-foot Manhattan office portfolio is the 1.9 million-square-foot 1345 Sixth Avenue. It was constructed in 1968 and has an annual income of nearly $109 million. Asset management firm AllianceBernstein occupies nearly 1 million square feet in the tower, CoStar figures show.
The family has not constructed an office building since it built Park Avenue Plaza, at 55 East 52nd Street, in 1980.
The Rockefeller Group’s McGraw-Hill Building has the third-highest income in the city.Rockefeller Group Development
Total Manhattan office NOI: $216 million
Type of firm: Privately held by a foreign corporation
Average income: $48 per square foot
Despite the influx of foreign money into the city in recent decades, Rockefeller Group Development and Paramount are the only foreign-owned entities in the top 10.
Rockefeller, a subsidiary of the Japanese Mitsubishi Estate Co., owns just two office buildings totaling more than 4.5 million square feet in Manhattan. But it cracked the top 10 because of the high NOI for each one.
The company, which was purchased from the Rockefeller family in 1989, owns the property with the third highest NOI in the city: the 2.55 million-square-foot McGraw-Hill Building at 1221 Sixth Avenue, where NBC Universal leases 245,000 square feet. The building generates nearly $129 million per year. The firm’s other skyscraper, the Time-Life Building, at 1271 Sixth Avenue, brings in $87 million.
In addition, Rockefeller Group owns a 99-year ground lease under the 1 million-square foot 745 Seventh Avenue, public records show. The company built it in 2001 and, that same year, sold it to Lehman Brothers. The building is now owned by Barclays Capital, so it is not included in the ranking.