Commercial market report
From WeWork’s Dock 72 debut to Thor Equities’ latest loss, a look at some of the recent news in the commercial sector
Sponsors remain confident in WeWork-anchored Brooklyn project
WeWork’s recent troubles were largely out of sight and out of mind at the launch event for the massive Dock 72 office project at the Brooklyn Navy Yard.
The completion of Rudin Management and Boston Properties’ 675,000-square-foot building marks Brooklyn’s first ground-up commercial development in more than a decade. And WeWork — whose CEO, Adam Neumann, stepped down amid the startup’s botched initial public offering — is anchoring the 16-story building, with 222,000 square feet of office space.
“You may have heard we’ve been in the news lately, not all of it that flattering,” Sebastian Gunningham, WeWork’s new co-CEO, said to an audience at the Oct. 15 event. “So it’s great to be among friends and with this beautiful building behind us.”
But after the brief nod to WeWork’s failed IPO and financial woes, he quickly changed the subject, focusing the rest of his comments on Dock 72 itself and how proud he was of the project. Gunningham left quickly after the event ended and refused to take questions from the press.
Bill Rudin, CEO and co-chair of Rudin Management, said that WeWork had been a solid partner on the project, and he was not concerned that their recent struggles would damage Dock 72 in the long run.
“I’m highly confident that the WeWork team will figure out their short-term issues, and they’ve been great to work with,” he said. “They’re working on restructuring, and I think, hopefully, they’ll get done in short order, and then they can move on to focusing on their business.”
Interest in Dock 72 among other tenants has picked up now that the building is officially open and more accessible thanks to a new NYC Ferry stop, according to Rudin. He cited media, fintech and advertising companies as some of the specific businesses they are targeting and said rents generally go for between $50 and $60 per square foot. The average office rent in Brooklyn is about $43 per square foot, according to CBRE.
Boston Properties and Rudin Management inked a 99-year ground lease for the property from the Brooklyn Navy Yard Development Corporation for $47 million in June 2015 and filed plans for the project that November, with WeWork set to serve as the anchor tenant. — Eddie Small
Thor Equities gets booted from 545 Madison Avenue
Joe Sitt has officially left the building.
Sitt’s Thor Equities was evicted from its ground lease at 545 Madison Avenue on Oct. 15, Crain’s reported. Marx Realty, owner of the land underneath the building, is now assuming control of the 140,000-square-foot building and planning to conduct a $10 million renovation.
Marx President and CEO Craig Deitelzweig said he expects the office and retail space to be fully leased by 2021. Marx has been trying to evict Thor since July over $554,583 in unpaid rent and $1.6 million in outstanding real estate taxes.
Trouble began this year after Thor’s ground rent rose by $450,000. The firm struggled to cover its payments on a $30 million CMBS loan from Barclays on the property, and it was sent to special servicing for “severe cash flow issues.”
Thor’s eviction wipes out the Barclays loan and a mezzanine loan of about $5 million from Waterman Interests.
Marx told Crain’s the situation put “a real strain on the building.”
“Given the situation, they weren’t doing anything to enhance the building,” he said. “We’ve met with all the tenants and let them know we’re going to do the right thing for the property.” — Erin Hudson