Midtown East planned rezoning will require complex deal-making
Negotiations that would normally occur in the shadows will likely take place in the spotlight
Mayor Michael Bloomberg’s proposal to incentivize large office construction on the East Side of Midtown will require some of the city’s most aggressive developers to convince smaller property owners to make a deal. Builders such as Extell Development, Starwood, Solow Development and the Durst Organization own pieces of parcels that would need to be assembled to conform to the proposed upzoning. They will need to acquire parcels from much smaller organizations, such as Brause Realty, Samson Management and Kensico Properties.
View a breakdown of owners in a full screen map of the 10 sites the city believes are most likely to be developed within the Midtown East Rezone.
While assemblage has always been seen as one of the high arts of commercial development, it usually takes place in the shadows. In many instances, buyers, fearing that the seller will attempt to drive up the price, don’t want the parcel’s current owner to know why they are buying the property.
In this instance, the secret’s out. Additionally, the city has identified 10 sites as the most likely to be developed, although it says there are as many as 38 potential sites in the 74-block zone between 39th and 57th streets, east of Fifth Avenue — reaching almost to Second Avenue.
“The leverage is certainly not there as it would be if it was under the radar,” Richard Farley, director of leasing at ABS Partners Real Estate, said. His firm owns the 19-story 270 Madison Avenue, which is in a block the city believes is likely to be developed. Other owners on the block fronting Madison Avenue between 39thand 40thstreets, include Abramson Brothers and Quartz Realty. Farley was not aware of any efforts to assemble the block.
The Real Deal, using the property database (see page 26 of this city document) the city included in an analysis of the rezoning proposal, identified all 32 owners of the available parcels within those 10 sites.
What we found was that in five of the sites, a single company owns the property. The most prominent example is SL Green Realty, which last week released a sketch of its planned tower 1 Vanderbilt, which would be built on land it owns between Madison and Vanderbilt avenues and 42nd and 43rd streets.
The other companies that own the entire parcels are RHC Operating, the Pakistani government-controlled company that owns the Roosevelt Hotel; a joint ownership entity composed of Tishman Speyer Properties and the Korean National Pension Service, which own 300 Park Avenue; Intercontinental Hotels Group, which owns the hotel at 111 East 48th Street; and the investment fund TIAA-CREF, which owns 425 Park Avenue.
But in the remaining five sites, the developer will need to make a pitch to get all the smaller owners on board — and do so under the glare of the spotlight.
One example includes Extell Development, which purchased a portfolio of parking garages last year including 138 East 50th Street, between Lexington and Third avenues. The city expects the site will be developed with a hotel that could be as large as 924,893 square feet. But first Extell would have to strike deals with hotel giant Starwood Capital Group, as well as the smaller players Ramosar Realty, San Carlos Building Corp., and Samson Management.
Another parcel has no large developer in control. The Metropolitan Transportation Authority in February put 341, 345 and 347 Madison Avenue, between 44th and 45th streets, on the market, and that buyer would control most of the potential site.
The city also includes 52 Vanderbilt Avenue, owned by long-time real estate investment firm Brause Realty, as well as the Yale Club at 50 Vanderbilt Avenue, in the projected development parcel. A builder would have to convince both those owners to sell if that site were to be developed into what the city says could be as large as 1.5 million square feet.