When the Gural family and Northwind Group signed a contract to buy the headquarters of Guardian Life Insurance in the Financial District a little more than a year ago, they knew they had their work cut out for them.
The 1980s-era building at 7 Hanover Square needed to be brought into the modern age, and it was looking at some 900,000 square feet of vacancy later this year.
Now, before the ink on the $300 million purchase is dry, GFP Real Estate has a plan to put $250 million into modernizing the Downtown tower and a 500,000-square-foot tenant to get it started.
NYC Health + Hospitals, the nonprofit corporation that operates the city’s public hospitals and health care facilities, signed a lease for nearly 527,000 square feet at the property, the health administrator told The Real Deal.
The massive organization will relocate some 2,600 administrative staff members spread out at six different offices in Manhattan, Brooklyn and Queens and consolidate those offices into the base portion of the building, which GFP is rebranding as 50 Water Street.
“This lease brings our central office and health plan staff together,” Mitchell Katz, MD, NYC Health + Hospitals’ president and CEO, told TRD. “It strengthens the work environment to better support our frontline clinicians throughout the five boroughs. It eliminates a number of inefficiencies. And it saves us $200 million.”
Health + Hospitals’ lease runs through 2043, with an option to renew for 10 years. The asking rent for the space was in the high $50s per square foot, and GFP Real Estate puts the value of the lease at $758 million.
Newmark Knight Frank’s Brian Waterman, who negotiated the deal for the tenant with his colleague Ira Rovitz, said the hospital system considering a move more than two years ago as it eyed a large, 350,000-square-foot lease expiring in the near term for space it occupies at 160 Water Street.
Brian Waterman
Health + Hospitals saw it as an opportunity to strengthen its bottom line by cutting excess costs. The nonprofit, for example, was paying for shuttle buses to ferry employees from one office location to another.
“This was really about driving savings through efficiencies,” said Waterman, who added that GFP acquired 7 Hanover while the search was already underway.
“They put a very compelling proposal in front of them,” he said.
The new entrance at 50 Water Street will be directly across the street from 55 Water Street, where Health + Hospitals will continue to occupy more than 200,000 square feet, creating a corporate campus.
Employees will start moving into the building in stages starting later this year, with the last cohort arriving in 2024.
GFP and Northwind meanwhile, have ambitious plans for the rest of the property.
The two partners will reallocate space they’re freeing up in the lower portion of the building by combining two floors into one double-height space, and use it to construct two new penthouse floors on top of the 27-story building.
The owners are rebranding the tower floors as a separate, new building with the address of 100 Pearl Street.
“We’re taking [7 Hanover] and dividing it into two separate buildings,” said Brian Steinwurtzel, GFP Real Estate co-CEO. “The tower of this building has efficient floor plates and amazing views.”
The developers also plan to bring a block-long food hall to the building. An NKF team of Hal Stein, Andrew Peretz and Ben Shapiro will handle leasing for 100 Pearl Street’s tower floors, and Newmark’s Benjamin Birnbaum will handle leasing for the retail.
GFP and Northwind had teamed up in 2015 to buy the 300,000-square-foot office building nearby at 40 Exchange Place, which they renovated to the tune of $20 million.
In late 2017, they signed a contract to purchase 7 Hanover for roughly $308 million.
As the 20-year lease Guardian Life signed in 1998 covering most of building neared its expiration, the insurance company exercised a purchase option in 2017 to buy the tower from Milstein Properties, Weiler Arnow Management Company and the Swig Company for $147 million.
Soon after, Guardian Life hired Cushman & Wakefield to flip the property, and then signed a sublease deal with the Coach to relocate its offices from the Financial District to excess space the fashion company had at 10 Hudson Yards.
GFP and Northwind are expected to close on the deal in October when Guardian Life Insurance completes its relocation. The 7 Hanover contract was the first deal GFP signed after family patriarch Jeff Gural changed the firm’s name amid Newmark Knight Frank’s initial public offering last year, so as to eliminate confusion about the relationship between the public and private companies.
Elsewhere, GFP is planning on developing a $240 million biotech center in Long Island City with lab-space landlord King Street Properties.