Joining the ranks of the expensive NYC towers...
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NYC buildings with mega price tags
It’s not just 1 WTC — a look at other buildings with construction costs in the billions
From left: Related’s Stephen Ross, 30 Hudson Yards, 10 Hudson Yards and Tishman Speyer’s Rob Speyer
October 01, 2014
By Adam Pincus
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It’s no shock to hear that 1 World Trade Center, the centerpiece of the famed Lower Manhattan development site, has a construction price tag of $3.8 billion dollars.
But that world-famous tower is not the only New York City building that developers are forking over that much money to construct.
“New York developers are long on Manhattan and long on New York City,” said David Pfeffer, a co-chair of the construction practice at the Manhattan-based law firm Tarter Krinsky & Drogin. “They feel this is the place they can invest in these massively expensive buildings and get long-term returns on their investments.”
This month, The Real Deal looked at three other planned and under-construction towers — all located in the Hudson Yards area — which have $1 billion-plus price tags, according to paperwork that the development companies filed to obtain tax breaks with the New York City Industrial Development Agency, which is tasked with spurring economic development in the five boroughs.
The developers at those projects are apparently confident enough in the market to take the gamble and move ahead — that is once they have an anchor tenant.
Scott Singer, president of the financial advisory firm Singer & Bassuk, characterized the prevailing optimism: “It is the willingness to stake your reputation and financial well-being and relationships on a bet as to what market conditions will be years out in the future,” he said.
Developer: Related Companies
Address: 30 Hudson Yards (351 10th Avenue) and Shops at Hudson Yards
Buildings size/type: 2.7 million square feet (office), 1.1 million square feet (retail)
Total cost of project: $4.1 billion
Related is set to spend a massive $4.1 billion on the 84-story office tower dubbed 30 Hudson Yards and an adjacent retail complex called Shops at Hudson Yards.
The company made headlines last month when it confirmed that the high-end department store Neiman Marcus will anchor the 1.1 million-square-foot mall with its debut 250,000-square-foot outpost in New York City. No tenants have been announced yet for the 2.7 million-square-foot office tower, which has an address of 351 10th Avenue.
Jacking up the price of the two towers is the cost of the land ($193 million) and the platform ($721 million) that needs to be built over the famed rail yards. The joint price tag for both of those line items comes to $913 million, tax-abatement documents showed.
“If you look at Hudson Yards, you almost can’t compare anything to it because of the cost of the platforms,” said Jeffrey Schotz, an executive vice president at developer SJP Properties, which developed the 1.1 million-square-foot office building 11 Times Square.
The rest of the $4.1 billion price tag was made up of roughly $2.2 billion in hard costs — for things like constructing the building and installing mechanical systems — and $1.1 billion in soft costs for financing and leasing the office space.
According to the Related’s tax filing, it funded 34 percent of the project with equity, 27 percent through debt, 24 percent from future tenants pitching in for construction costs, and 14 percent from mezzanine financing.
Related, which is headed by Stephen Ross and Jeff Blau, did not respond to requests for comment.
Developer: Tishman Speyer
Address: 509 West 34th Street
Building size/type: 2.55 million square feet (office and retail)
Total cost of project: $3.29 billion
The massive tower that developer Tishman Speyer has planned for Hudson Yards will be one of the most expensive office buildings ever built in Manhattan.
The 2.55 million-square-foot building planned for the block bounded by 34th and 35th streets and 10th Avenue and Hudson Boulevard East is slated to cost $3.29 billion — or about $1,289 per buildable square foot. Construction is expected to start in the third quarter of 2015 and to be completed in four years.
The hard costs for the project — which include things like demolishing the existing buildings on the site and constructing the exterior shell — are estimated at $1.4 billion, according to Tishman Speyer’s IDA filing.
The soft costs, meanwhile, are pegged at about $1.1 billion. Among other things, that includes $356 million in loan interest charges and $200 million in commissions and additional leasing costs to rent the building, which does not yet have any signed tenants. Add in the cost of the land (which includes multiple parcels purchased at different times), and the total cost of the project comes to nearly $3.3 billion. (Tishman Speyer pegged the land at $768 million in its tax filing.)
“The scale of these buildings is massive,” said Pfeffer, referring to both Tishman Speyer’s project and Related’s 30 Hudson Yards.
While Tishman Speyer declined to comment, real estate insiders told TRD most developers would expect a building to throw off an annual return of about 6 percent of the total construction cost once it is fully occupied. That would imply revenue of about $200 million per year — assuming office rents of about $90 per square foot.
The building, which is expected to open in 2019, is slated to be one of the largest in the city, although at only 61 stories, it will be shorter than the planned towers at Related’s neighboring Hudson Yards site.
Tishman Speyer, which is headed by the father-and-son duo of Jerry and Rob Speyer, is financing half of the building with its own equity and the other half with debt, according to the tax-cut filing.
The 50-50 split is not unusual for an office tower, Singer said. “Office development has historically been the most difficult to finance,” he said. “It is not surprising to see a high amount of equity expected to be required.”
He noted, however, that developers typically wait to start construction until they have an anchor tenant signed on.
Developer: Related Companies
Address: 10 Hudson Yards (380 11th Avenue)
Building size/type: 1.2 million square feet (office and retail)
Total cost of project: $1.25 billion
Related’s smaller project in Hudson Yards — 10 Hudson Yards at 380 11th Avenue — will still cost a pretty penny. The total price tag on the building is $1.25 billion, according to the company’s IDA filing.
Construction of the building, which will be home to the corporate offices of the handbag company Coach, and will also have a ground-floor Fairway Market, is underway. (The groundbreaking took place in December 2012 after Coach became the first anchor tenant to sign on at the larger Hudson Yards site.)
While the overall price of constructing the building may not be as high as Tishman Speyer’s 509 West 34th Street or Related’s other Hudson Yards towers, the cost is not that much lower on a price-per-square-foot basis.
Indeed, the all-in per-square-foot cost for building the project is $1,000, compared with $1,289 per foot for the Tishman Speyer project, for example.
The building’s $1.25 billion total breaks down like this: $640 million in hard costs, $317 million in soft costs and $289 million for land.
The buildings, mechanical systems and finishes will be high-end, according to Schotz. “You’re talking about marble in the bathrooms, and lobbies with stone finishes,” he said.
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