June 19, 2015
By Michael Benison, CPA
EisnerAmper’s Harry Dublinsky, Aaron Kaiser, and Michael Benison attended the "Development on the Westside of Manhattan" seminar hosted by Stroock & Stoock & Lavan LLP on June 3. Panelists included Dr. Michael Horodniceanu, President of the MTA Capital Construction Company, Andrew Cantor, Vice President, Development of Related Companies, and Hilary J. Spann, Managing Director of Northeast Real Estate Acquisition’s for JPMorgan Asset Management.
The East Side Access Project which will connect the Long Island Rail Road to Grand Central Terminal is continuing to enter into future contracts and funding initiatives and has already finalized 75-80% of the current outstanding contracts into agreement. Roughly $2 billion of new contracts are needed to continue with the project which will hopefully come with the 2015-2019 MTA Capital Program.
The Hudson Yards joint venture project with Related Companies and Oxford Properties is currently being built on the West Side of Manhattan. Under the project, the Number 7 line will be extended to West 34th Street and 11th Avenue. This subway line will be directly connected to the 30 Hudson Yards building. The MTA is scheduled to fully complete the Number 7 Line Extension during Q3 of 2015; they have started training subway operators and staff for opening day. (As an aside, MTA ridership is rising, with more than 6 million travelers on a daily basis. Ridership hasn’t been this high since the late 1940s.)
The space above the Eastern and Western rail yards between West 30th and West 33rd Streets from 10th to 12th Avenues over Penn Station will be fully utilized by erecting platforms which will in turn support new buildings .Mr. Cantor discussed the challenge of the platform creation over the railyards. All of the foundations for the platform needed to be built simultaneously. The MTA wanted a guarantee of completion of the platform before authorizing the project. Dr. Horodniceanu believes that future development will be able to be constructed over additional MTA railyards. The Hudson Yards project will set a precedent in New York City, as the first structures built over the MTA railways. Creative ways of financing will be necessary to fund future developments. Robust investment is needed in the infrastructure for development to prosper and grow.
The Hudson Yards project will feature over 18 million sq. ft. which includes residential, retail, office, and mixed use space. The observation deck, a part of 30 Hudson Yards, will be the highest open-air lookout in the city. Time Warner will also relocate its headquarters to 30 Hudson Yards. Neiman Marcus will open its first luxury department store at Hudson Yards, occupying the top three floors of a retail space.
Retail space is the anchor for mixed-use neighborhoods, and the demographics on the West Side are changing. Midtown South is becoming one of the hottest markets for office tenants; residential space near West Chelsea and the High Line is booming; and there is significant development near 42nd St. and Hell’s Kitchen.
The Hudson Yards project will also feature a culture shed, which was a requirement under the zoning obligations when the project was initially established. A not-for-profit organization will be responsible for the site, which It will be housed adjacent to the High Line and Chelsea. The facility will be used for multipurpose events such as art exhibits, fashion, ted talks, large product openings and many more, including serving as the new home for Fashion Week in New York.
JPMorgan Asset Management has about $50 billion assets under management and about $1 to $1.5 billion of investments are funded into real estate each year. These investments consist mainly of core investment and value- added strategies. They decided that they want to invest in the Hudson Yards project because of the commitment between the city, state, MTA, Related Companies, and Oxford Properties Group. Ms. Spann stated that there are not too many opportunities like this in New York City -- to invest in a best-in-class, brand new office tower. Most of the average age of office buildings in New York is 50 years or older. It was considered one of the most complicated projects to work incorporating urban, development, and investment approaches. It was extremely vital to understand the obligations of all the entities that were involved. Each organization has a different mission and goal and there needed to be unity to complete the successful project.