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Carter's View

This week the Related Cos. is awarding a contract to demolish a former metal products distribution center to clear a development site at the "Hudson Yards" near the Jacob K. Javits Convention Center for a 1.4-million mixed-use tower, according to an article by Eliot Brown in today's edition of The Wall Street Journal.

"Seeing green shoots in the New York City office market, development firm Related Cos. is stepping up early work on a massive project planned during the economic boom over the West Side rail yards by the base of the Javits Center," the article said.

The article said that Jay Cross, who is leading the rail-yards development for Related, said that Related is focusing its planning on starting the building on the southeast corner of the rail yards and that it would have up to 1 million square feet of office space, topped with 25 floors of apartments.

"This 800-foot-plus tower would sit on firm ground, while the rest of the site requires an expensive roof to first be built over the tracks, the article said.

"The company is under pressure to get moving," the article said, "given its agreement with the Metropolitan Transportation Authority, which owns the 26-acre rail yards. The agreement calls for the developer to begin paying hefty rental payments once an improving office market hits an availability rate of 11% availability rate. It is currently 12.6%, down from 15% a year ago."

"It is clearing a development site for what Related hopes will be the among the first post-recession office towers to be built. Related is talking to about a dozen possible tenants," according to Mr. Cross, who also said that "Like many developers, Related plans to effectively give away the office space at cost to a major tenant - asking for rents of about $70 a foot - while it would look to make its money on the residential above."

The article said that according to Mr. Cross "The efforts we are undertaking ensure we are ramped up and ready to go because it's hard to predict exactly when you are going to hit on your first and second tenant deals," adding that "This market is very diverse when it comes to large users, and the market seems to be very resilient."

"The site," the article continued, "has long been a priority of the Bloomberg administration, which sprinkled tax abatements on the property, and the city is funding an extension to the area of the No. 7 subway line, currently slated to be completed in 2013."

In 2008, Related agreed to pay the Metropolitan Transportation Authority $1 billion for the rights to the Hudson Yards and the deal was finalized last May and calls for the MTA to lease the land to Related for 99 years and Related plans to erect 12 million square feet of commercial and residential development.

Related, which will have to erect a deck over the LIRR yards without disrupting service, has arranged to get up to $475 million in equity from the Ontario Municipal Employees Retirement System for the project, which calls for about 5,000 apartments in 9 buildings, three office buildings, a retail complex, a 300-room luxury hotel, a 1,000-room convention hotel, a 750-seat public school, 12 acres of public open space and cultural facilities.
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Architecture Critic Carter Horsley Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.