Manhattan Office Market

Transcription

1 Manhattan Office Market 1 ST QUARTER 2015 REPORT A NEWS RECAP AND MARKET SNAPSHOT Pictured: 380 Second Avenue

2 Looking Ahead Potential Garment District Rezoning Brings Mixed Response The city s Garment District could see a new wave of changes as the City Planning Commission (CPC) considers possible zoning changes that would result in the easing or removal of restrictions on landlords so as to allow renting their buildings entirely to office tenants while remaining a strictly commercial area. Critics of a reform to the current zoning regulations have claimed that although U.S. manufacturing doesn t solely depend on the city s Garment Center, the initial prototypes and high-end manufacturing is based in New York and still considered the backbone of the industry. Other opponents further predict that the current trend toward made in the U.S.A. after the factory fires in Bangladesh will prompt the return of production. In contrast, supporters of the proposal predict it will increase property values that have already been on the uptick in the now 24/7 neighborhood that has recently enjoyed a growing diversity and resurgence in popularity. The district which runs from 35th to 42nd Street between 5th and 9th Avenues has reportedly added 30 new hotels over the last 10-years with 10 more in the immediate pipeline. The neighborhood s central location between major transportation hubs Penn Station, Port Authority Bus Terminal and Grand Central Terminal opens the door to employees residing in Westchester, Long Island, or New Jersey. Early 1930s The Garment District boasted the largest concentration of clothing manufacturers in the world. After World War II some facilities began to locate out of state, with many eventually migrating overseas. By 1950, the fashion industry represented 13.5% of the city s employment which diminished to just over 1% in The city enacted a special zoning regulation that obligated landlords to reserve half of their property space for manufacturing purposes, but it was unable to thwart the growing shift of manufacturing to overseas Garment District employment in the fashion industry fell 44% in comparison to non-fashion employment s 82% growth. While the re-evaluation of the Garment District s zoning awaits review by the City Planning Commission, some landlords have moved ahead with building upgrades and renovations, further accelerating revitalization. The Empire State Realty Trust (ESRT) led the way, 1333 Broadway undergoing renovations in 2013 with other landlords following: 1407 Broadway The Lightstone Group has spent over $15 million on improvements, and expects to invest an additional $15 million on new storefronts, lobby renovations, and other upgrades; also considering a rooftop conversion to offer a restaurant and bar Broadway San Francisco, CA-based Swig Co. is redoing the public plaza at the site as well as upgrading the lobby entry storefronts. 132 West 36th Street The Kaufman Organization decided to reinvest in the building, abandoning the company s previous consideration of selling the property. P2 P.2

3 Market Snapshot: Class A & B New York City s Unemployment According to the New York State Department of Labor s figures, the city s unemployment rate rose to 7.2% (not seasonally adjusted) at the end of February; in comparison to 6.2% at the end of the 4th quarter. Year-over-year figures resulted in a 15.29% improvement from the 8.5% rate of February Unemployment on the National level rose to 5.7% at the end of February, increasing 9.62% from the 4th quarter figure of 5.2%. Year-over-year figures resulted in an 18.57% improvement from the 7.0% rate of February Q 2015 Vacancy Rental Rate Net Absorption Total Class A Class B Employment activity in New York City s private sector resulted in the loss of 51,800 jobs in the 3 month period between November 2014 and February 2015, yet year-over-year figures continued to show a 2.9% gain of 102,500 jobs; in comparison to 2.0% and 2.8% year-over-year growth for New York State and the nation respectively. Educational and Health Services led the way in private sector job gains, followed by Professional & Business Services. The Information sector rebound during the quarter resulting in a 1.74% year-over-year job gain at the end of February. 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% Feb 04 Feb 05 NYC Unemploy Rate Feb 09 Feb 08 Feb 07 Feb 06 US Unemploy Rate Feb 13 Feb 12 Feb 11 Feb 10 Feb 14 Feb 15 Weekly Wages Overall weekly wages in New York City averaged $1,733 at the end of the 3rd quarter 2014, representing a positive 4.0% improvement year-over-year according the recent report released by the U.S. Department of Labor. The Financial sector boasted the sharpest rise of positive 5.09% year-over-year, in contrast to the Information sector that saw a more moderate increase of 1.72%. Vacancy for Class A & B office space rose 1.56% over 4th quarter s 8.25% figure, resulting in an 8.38% vacancy at the end of the 1st quarter. Midtown South accounted for the strongest quarter-over-quarter improvement and a drop in vacancy of 7.85%, while Midtown vacancy held steady at 7.90%. In contrast, Downtown vacancy rose 7.94% quarter-over-quarter despite continued robust activity, with close to 1 million square feet being introduced to the market at Fosun International s 28 Liberty Street due to JPMorgan Chase vacating the former 1 Chase Manhattan Plaza. NYC Yr-over-Yr Job Statistics 1,000, , , , , , , , , , , , , ,000 Feb 2014 Job#'s 3Q2013 Weekly Wage 442, , , ,800 Feb 2015 Job#'s 3Q2014 Weekly Wage 183, ,800 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 Source: NYS Department of Labor and US Department of Labor, Bureau of Labor Statistics $500 $0 Absorption closed the 1st quarter at negative 567,501 square feet, representing a reversal over 4th quarter s positive 639,339 square feet. Both Midtown and Midtown South absorption remained positive, in contrast to Downtown s significant reversal and negative absorption. Rental Rates rose moderately in the 1st quarter. The overall weighted average asking rent for Class A & B office space of $59.30 per square foot represented a 0.97% increase over the previous quarter; as compared to 4th quarter s steeper quarter-over-quarter rise of 4%. Class B asking rents accounted for the more significant increase of 3.03%, while Class A asking rents saw only a negligable 0.23% increase. Sources: P3 P.3

4 Market Snapshot (cont d) Office of the NYC Comptroller: NYC Quarterly Economic Update 4Q14 The report released in February revealed several positive indicators affirming an outlook of ongoing improvement of the city s economy. Despite some setbacks during the 4th quarter, the overall results for 2014 maintained an improving trend with the city growing at a faster rate that the nation. Real Gross City Product (GCP) Grew at an estimated annual rate of 2.8%. Despite the slowdown from the 4.2% rate in the 3rd quarter, the overall 3.1% rate for the year was comparatively better than the national Real Gross Domestic Product (GDP) rate of 2.4%; of which the city accounted for over 4% of the nation s total economic output in Venture Capital Investment (VC) Totaled $1.2 billion during the 4th quarter, remaining unchanged year-over-year. The overall $5 billion in VC investment spread across 478 deals during 2014 represented a 56.25% surge above the year-over-year total of $3.2 billion and 469 deals, despite a 29.4% decline from the quarter-over-quarter figure of $1.7 billion. NYC Personal Income Tax Revenues Rose 10.8% year-over-year to an estimated over $2.3 billion, the highest figure for a 4th quarter since Strengthening U.S. Dollar and Tourism a Bad Mix Tourism, which has been a significant driver in helping New York City weather the recession, may begin to see a slowdown as the strength of the U.S. dollar improves. Escalating costs of being a tourist in the city an industry that has reportedly grown to $60 billion, may prompt travelers to seek bargains in other countries as currencies weaken in 9 of the city s 10 largest tourist markets. The Intercontinental Exchange dollar index which tracks the currency s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona rose to 11% since July 2014, its highest level reportedly since Tourism volume which has climbed to about 55 million annually over the past decade triggering a sharp rise in jobs. Tourism-related employment surged 22%, equating to 3-times the city s overall job increase. A study done by the New York Fed in 1995 of the city s exposure to currency fluctuations found that a 6.7% appreciation of visitors currencies would lead to a 1% rise in hotel occupancy rates. Conversely it can then be hypothetically assumed that a 1% depreciation in the city s tourism would translate to a $600 million economic loss, or the equivalent of the annual wage elimination of about 14,000 average leisure and hospitality workers based upon the $60 billion figure the industry currently generates. Sources: P4 P.4

5 Class A & B Statistics At A Glance 1st Quarter 2015 Vacancy WTD Average Asking Lease Rent Net Absorption Downtown 5.41% 13.55% Downtown $56.49 $40.28 Downtown Midtown South 3.52% 5.29% Midtown South $65.08 $90.01 Midtown South Midtown 5.91% 8.42% Midtown $53.60 $65.20 Midtown % 5.00% 10.00% 15.00% $0.00 $50.00 $ Class A Class B Thousands (1,000) (500) Quarter-over-Quarter Vacancy Lease & Sublease Sq. Ftge Net Absorption 6.35% 9.89% 6.31% 10.04% Net Absorption Class A Net Absorption Class B Class A Class B Lease SF Class AB Sublease SF Class AB 5.58% 9.55% 5.67% 9.33% 6.07% 9.46% 1Q14 2Q14 3Q14 4Q14 1Q % 9.00% 6.00% 3.00% 0.00% Thousands 40,000 30,000 20,000 10,000 0 Lease Rent AB Sublease Rent AB 1,500 $65.00 $60.00 $55.00 $50.00 $45.00 $ Q14 2Q14 3Q14 4Q14 1Q15 1Q14 2Q14 3Q14 4Q14 1Q15 3,938 35,271 3,682 33,423 3,762 35,039 3,487 32,979 3,410 33, (30) (51) 459 1, (676) 1, ,000 Thousands Quarter-over-Quarter Inventory Changes Downtown Midtown South Midtown Removed Added Removed Added Removed Added 1Q2015 4Q2014 3Q2014 2Q2014 1Q2014 1Q2015 4Q2014 3Q2014 2Q2014 1Q2014 1Q2015 4Q2014 3Q2014 2Q2014 1Q2014 Thousands Thousands Thousands *Buildings 75,000 SF and larger; vacancy and absorption calculations based upon move-in date versus deal signing date P5 P.5

6 Submarket Statistics Overview: Class A & B Office Manhattan Inventory Vacant Sq. Ftge. Vacancy Rate WTD Avg Rent PSF Submarkets Districts Total RBA* Direct Sq. Ftge. Sublet Sq. Ftge. Total Sq. Ftge. Direct Vacancy Sublet Vacancy Overall Vacancy Direct Asking Net Absorption Year-to-Date Sq. Ftge Downtown 110,462,756 11,999, ,599 12,692, % 0.63% 11.49% $ ,075 City Hall 14,746, , , % 0.00% 5.64% $ Financial District 41,846,828 4,829, ,709 5,152, % 0.77% 12.31% $ ,142,548 Insurance District 12,046, ,142 18, , % 0.15% 4.44% $ ,017 TriBeCa 6,647, , , , % 1.81% 4.84% $ ,721 World Trade Center 35,176,146 5,620, ,210 5,852, % 0.66% 16.64% $ ,978 Midtown South 60,314,221 2,752, ,435 2,927, % 0.29% 4.85% $ ,271 Chelsea 10,417, ,026 20, , % 0.19% 1.28% $ ,013 Flatiron 21,919,319 1,183, ,012 1,309, % 0.57% 5.97% $ ,345 Gramercy Park 10,288, ,579 18, , % 0.18% 8.97% $ ,098 Greenwich Village 4,353, , , % 0.00% 3.98% $ ,665 Hudson Square 9,393, ,899 5, , % 0.06% 3.31% $ SoHo 3,942,692 73,595 5,237 78, % 0.13% 2.00% $ ,528 Midtown 271,129,387 18,871,113 2,542,121 21,413, % 0.94% 7.90% $ ,303 Columbus Circle 32,157,669 1,261, ,054 1,586, % 1.01% 4.93% $ ,117 Grand Central 52,853,745 4,771, ,197 5,216, % 0.84% 9.87% $ ,800 Murray Hill 11,144, ,450 99, , % 0.89% 5.34% $ ,141 Penn Plaza/Garment 46,500,913 2,784, ,032 3,275, % 1.06% 7.04% $ ,125 Plaza District 80,641,592 6,094, ,246 6,852, % 0.94% 8.50% $ ,066 Times Square 44,268,129 3,449, ,905 3,872, % 0.96% 8.75% $ ,259 U.N Plaza 3,562,575 13, , % 0.00% 0.39% $ ,693 Grand Total 441,906,728 33,623,337 3,410,155 37,033, % 0.77% 8.38% $ ,501 *Buildings 75,000 SF and larger; vacancy and absorption calculations based upon move-in date versus deal signing date P6 P.6

7 Leasing - Large Banks are Back in the Game Stability is returning to the banking industry after years of weathering the aftermath of the financial crisis. Adjusting to the new regulatory requirements banks are finding alternative ways to remain profitable. A further sign of the industry s brightening outlook was the announcement late last year of Canadian financial firm Toronto-Dominion Bank s (TD Bank) commitment to lease approximately 200,000 square feet as anchor tenant at One Vanderbilt, Madison Avenue (Grand Central) upon its expected 2020 delivery. Continuing to shrink their footprint and consolidate employees, some large banks are reportedly beginning to explore options in an effort to update outdated spaces as lease expirations loom on the not too far off horizon. The process of relocation by a large investment bank can take several years, having to determine needs of individual units and commuting patterns of its employees. While a decision to remain in place and retrofit existing space is typically more expensive than relocating, the debt incurred can be spread out over a longer term of years. JPMorgan Chase recently decided to remain at 270 Park Avenue and 383 Madison Avenue, leasing 123,000 square feet at 5 Manhattan West, 450 West 33rd Street (Penn Plaza) for some of its technology staff. While some relocation deals give rise to potential big block absorption, moves may only be a parallel shift of space and what lately has been characterized as the office space shuffle; having little effect on office space vacancy as a result one man s gain is another man s loss. Deutsche Bank AG The Frankfurt, Germany-based bank is in the market for roughly 1 million square feet, considering whether to relocate, downsize, or renew their current lease that runs until 2022 at 60 Wall Street (FiDi) where they occupy the entire over 1.6 millionsquare-foot building. Offices at the tower would require extensive remodeling, Deutsche establishing its headquarter there since acquiring the building in 2001, ultimately selling it to the Paramount Group in 2007 as a sale/leaseback deal for $1.18 billion that would see the bank remain as a tenant for another 15 years. HSBC Holdings PLC The London, England-based bank issued a request for proposal (RFP) for 500, ,000 square feet as they consider their future needs. In addition to about 312,000 square feet of multiple offices spread across 4 other Manhattan locations, HSBC s current headquarters of over 300,000 square feet is located at 452 Fifth Avenue (Penn Plaza) in a lease that expires Wells Fargo The San Francisco, CA-based lender is in the market for 200, ,000 square feet to house some of its top investment bankers, reportedly weighing its options at 3 of its New York locations in the Plaza district Seagram Building, 375 Park Avenue as well as 2 smaller locations at 540 Madison Avenue and 640 Fifth Avenue. Currently headquartered in close to 300,000 square feet at the Socony- Mobil Building, 150 East 42nd Street (Grand Central) where the bank is expected to remain. BNP Paribas SA The Paris, France-based bank has been located at the Equitable Building, 787 Seventh Avenue since about 1986 when the building opened. BNP s current lease that will be expiring early in the next decade and a request for proposal (RFP) was issued last year as the bank considers its options. Sources: P7 P.7

8 Competition in the Co-Work Space Market Heats Up The ongoing popularity of short-term, shared space has flooded the market with co-working companies. As competition intensifies for market share some co-working space providers focus on their marketing efforts to help differentiate themselves and standout amongst the growing numbers, exemplified by: In Good Company which offers shared workspaces exclusively to women; Writers Room leases workspace exclusively to writers; Edison Offices only offers executive suites and private offices; Makeshift Society offers shared workspace in a common space geared toward freelancers; Emerge212 is a subsidiary of SL Green Realty Corp. that was initiated in 1999 offering fully furnished, boutique shared offices amongst the (3) SL Green-owned locations. AlleyNYC recently added a 2nd Manhattan location, becoming the first new tenant to sign at West 24th Street since Kaufman Organization secured the 99-year leasehold for the former F.M. Ring building. The company hosts events to establish a following, offering rates that reportedly range form $25 per day for desk to $2,200 per month for personal office space. PivotDesk launched in 2012 has added a unique twist by establishing relationships with building tenants that have more space than they need, and connecting them with potential short-term subtenants. The company currently has locations across 45 states with New York City reportedly accounting for 60% of the company s national revenue. Host companies create an online profile of the space, company industry, and office environment complete with photos to facilitate workers locating a match for their needs. Rents for the space that are typically around $550 per person per month are determined at the discretion of the host company, and are secured by a 30-day license. PivotDesk generates revenue by charging a monthly 10% license fee for which the company helps close the deal and handles the responsibility of rent collections. Due to a growing interest by brokers, PivotDesk launched Cultivate, a company referral platform for brokers working with prospective tenants seeking short-term space; enabling brokers to maintain and cultivate relationships with start-ups until they are ready to commit to a real lease. WeWork which has been hailed as one of the fastest growing co-working space providers typically takes a discounted lease on a floor or more in a building and then demises the space into smaller parcels, charging monthly memberships to start-ups and small companies that reportedly range $425-$750 per month pending use levels that range from whatever desk is free at the time or for a private office. Taking the company s already successful office model further, WeWork is considering combining it with the company s WeLive concept of shared, affordable housing that is being pursued in Crystal City near Washington, D.C. The recent announcement of a planned addition of small apartments and community facilities on the top of Rudin Management s 110 Wall Street is intended to help reduce the growing challenges of TAMI industry recruits that are unable secure affordable housing in the city. While co-working space has primarily attracted start-ups, established companies have discovered the advantages of more readily available short-term space with reports of Google s interest to rent space at one of SL Green s Emerge212 facilities for temporary training events. However, some industry sources predict that the market is nearing saturation; and as startups mature and graduate into traditional office leases, co-working companies may begin to see a lessening in shared space demand. With this in mind, a rising concern amongst some landlords of the future usability of co-working designed layouts that have a significant amount of compartmentalized offices and the potential significant expense to demise the space for a typical office tenant. P8 P.8

9 Leasing - Concerns of a Market Glut Loom Findings of a recently reported market study projects an estimated total of 9.5 million square feet of top-priced, brand new office space that will need to be absorbed between now and 2018, raising the concern of a potential office space glut. The new space some of which is already hit the market comes at a time when large users, particularly amongst the financial sector, are downsizing and reducing the overall square footage per employee. Whether or not the leasing market is strong enough to absorb it and avoid a spike in vacancy has met with mixed opinions from some industry sources. While it has been noted that the 9.5 million square feet is a small fraction of the city s reported total of 450 million square feet of inventory, the question warrants serious consideration and a predicted need to absorb about 1.5 million to 2 million square feet per year. The projected figure omits space that has already secured deals or full commitment such as law firm Skadden Arps Slate Meagher & Flom s letter of intent at 1 Manhattan West; the Bank of China s agreement to purchase the leasehold for 7 Bryant Park and a possible occupancy of 200,000 square feet at the tower upon its delivery this year; and on the horizon, TD Bank s commitment to anchor One Vanderbilt, Madison Avenue in a lease for 200,000 square feet upon planned delivery in pending final approvals of the project. 2 Million Square Feet has already come online at One World Trade Center and 4 World Trade Center 7.5 Million Square Feet of anticipated new inventory comprised of several projects in different stages of construction and permit approvals include: 3 World Trade Center - 2 million square feet 1 Manhattan West million square feet 55 Hudson Yards million square feet 10 Hudson Yards - 250,000 square feet Plus the redevelopment by L&L Holdings of: 390 Madison Avenue, formerly 380 Madison Avenue 845,000 square feet 425 Park Avenue 650,000 square feet It is anticipated that new space which is LEED-certified and offers column-free floors with state-of-the-art features will present challenges for the older Midtown stock. Although being marketed at higher price levels, the new construction may still lure big users away from the Midtown area, despite landlord s efforts to invest in upgrades to elevate the competitive capabilities of older properties. It has been further noted that the thrust of leasing activity Downtown has for the first time shown signs of a shifting away from Midtown as the center commercial core, yet is has been recognized that while Midtown s profile could be shifting towards a predominantly back-office district, global companies will continue to establish locations on 5th- and Park Avenues. 390 Madison Avenue - Rendering 425 Park Avenue - Rendering Sources: P9 P.9

10 The Office Market s Highest Valued Deals Some of Manhattan landlords will reportedly get a piece of the estimated $7.6 billion in rent income as a result of the 10 most valuable office deals signed last year based upon values 1 reportedly provided by an online real estate and analytics platform. Large deals by a creditworthy tenant are attractive to landlords because they can drive leasing in surrounding buildings, but more importantly the rental stream generated by them raises the property s value which in turn increases the landlord s borrowing power or helps facilitate a sale. Yet in a market that is dynamic, the downside is that both the landlord and tenant are locked into a rent rate for years; and pending which way the real estate market turns during the life of the lease, the risk of carrying a lease at below-market rents or paying rent at above market rates can potentially be incurred by both landlord and tenant respectively. The top deals also further demonstrates the financial sectors continued receding footprint, with only 2 deals amongst the roster from financial firms; opening the door to a more diversified tenant roster in some buildings previously dominated by financial tenants. Credit Suisse s renewal at 11 Madison Avenue reduced the global financial firm s footprint by about 800, ,000 square feet, enabling both electronics firm Sony and online review site Yelp to establish new headquarters at the Flatiron tower. Tenant Address Sq. Ftge. Base Rent Term Lease Type Value Industry Credit Suisse 11 Madison Avenue 1.1 Mil $70s 20 yrs Renewal $1.7 Bil Finance Kirkland & Ellis 601 Lexington Avenue 403,000 High $90s 20 yrs Renewal $872 Mil Law Mt. Sinai Health Sys East 42nd Street 448,819 High $40s 33 yrs New $860 Mil Healthcare White & Case 1221 Sixth Avenue 440,218 High $80s 21 yrs Relocation $840 Mil Law Weil, Gotshal & Manges 767 Fifth Avenue GM Building 390,000 Mid $110s 15 yrs Renewal $671 Mil Law Neuberger Berman 1290 Sixth Avenue 354,891 Mid $70s 22 yrs Relocation $610 Mil Finance Sony 11 Madison Avenue 547,996 Mid $70s 16 yrs Relocation $599 Mil Electronics Amazon 7 West 34th Street 456,000 $ yrs New $540 Mil E-commerce Time Inc. Hudson s Bay 225 Liberty Street Brookfield Place 225 Liberty/250 Vesey Streets Brookfield Place 669,832 Low $50s 18 yrs Relocation $506 Mil Publishing 398,712 High $50s 18 yrs Relocation Consolidation $449 Mil Retail Trade 1 Values were determined by adding up all of the rent payments and then subtracting free rent and tenant improvements (TI) paid by the landlord. 2 Mt. Sinai purchased space as leasehold condo to save taxes paying $110.6 million, consolidated offices as a result of merger with Continuum Health Partners P.10

11 Leasing Activity Big Block Tenants in the Market News Corp. / 21st Century Fox Rumors have resurfaced of the separate media companies controlled by Rupert Murdoch exploring options for a new Manhattan headquarters that would likely result in an expansion of the currently combined 1.2 million square feet they have under several different leases at and 1211 Sixth Avenue (Times Square) that are due to expire in Recent news announced that both media companies have been in discussions for the last few months with the Port Authority of NY & NJ (PANYNJ) and Silverstein Properties, considering a joint headquarters in 2 World Trade Center. The 88-story, 3.1 million-square-foot tower has remained in planning stages, lacking a required anchor tenant to break ground on the project. If a deal moves forward, the companies could become co-developers; and the tower s current design would require substantial revisions in order to accommodate the media companies request to house television studios at the base of the tower. Both companies are still considering other options, reportedly viewing Related Companies Hudson Yards complex earlier this year, but ultimately decided to pass on the opportunity. In the meantime, ongoing discussions could result in both companies remaining at their current locations. Twitter The social media company is rumored to be considering an additional expansion, simultaneously to preparing for their move into the 140,000 square feet at W 17th Street (Chelsea) leased early last year. Although currently unconfirmed, the company may be on the prowl for an additional 60,000 square feet. Fried Frank Harris Shriver & Jacobson The law firm is rumored to be considering a relocation from their long time 390,710-square-foot headquarters at 1 New York Plaza (FiDi) to the Manhattan West mixed-use complex on the Far West Side that is currently being developed. An early termination of Fried Frank s lease renewed in 2005 may be facilitated due to both properties under the same ownership of Brookfield Office Properties. Currently seeking commitments for the multi-building project, Brookfield may favor a buyout of the FiDi lease that extends through 2015, acknowledging that current high-levels of leasing activity in Lower Manhattan are making it easier to fill vacant space for those properties. Nike The athletic footwear company is reportedly seeking about 100,000 square feet to relocate from their current 90,000-square-foot office at Google s 111 Eighth Avenue building. The current lease that is due to expire this year reportedly includes a renewal option that could extend term through Since acquiring the building in 2011, Google has offered buyouts for early lease terminations of many of the property s tenants in order to free up space for its growing number of employees, but several including Nike refused. Lease Deals To Watch For Google / Pier 57 Superpier (Chelsea) The Mountain View, CA-based technology company is reportedly in preliminary discussions to lease a portion of the former Marine and Aviation building that has been rebranded as Superpier. The planned redevelopment project of co-developers Youngwoo & Associates and RXR Realty is located across the street from the former Nabisco factory at 85 Tenth Avenue. Google signed a lease in November for 180,000 square feet which is expected to double in size upon the federal government vacating their space this year. Department of City Planning (DCP) / 120 Broadway (FiDi) The city agency is reportedly considering a consolidation of approximately 300 employees from 2-Lower Manhattan offices into a 120,000-square-foot space on floors at the tower known as the Equitable Building, pending approvals of an application filed on behalf of the agency by the Department of Citywide Administrative Services. Currently headquartered in the entire 99,000-square-foot city-owned building at 22 Reade Street (City Hall), a move has been prompted by ongoing maintenance issues due to the building s state of disrepair. In addition, the lease would allow the DCP to consolidate under one roof its off-site transportation division currently housed at 2 Lafayette Street (City Hall). P.11

12 Leasing Activity (cont d) Large Vacancy on the Horizon New York Stock Exchange (NYSE) / 20 Broad Street (FiDi) Atlanta, GA-based IntercontinentalExchange Group (ICE), parent company of the NYSE will not be renewing the lease at the longtime location of the exchange. The decision comes in an effort to cut costs since the company s $8.2 billion acquisition of NYSE Euronext in While NYSE will retain its entire space at nearby 11 Wall Street where their stock trading floors have operated for reportedly over 221-years, NYSE Euronext s presence in the financial district will be significantly diminished by close to 400,000 square feet when the current lease at the Broad Street location expires in August 2016; reportedly despite having the option to extend the term of sublease until The entire 542,504-square-foot building is being marketed for lease, seeking large users of 100,000 square feet or greater. The property that is expected to undergo renovations, the building currently under a Vornado Realty Trust-controlled leasehold through 2081 from fee-owner NYSE. Move-out by the NYSE opens the door to ICE further cashing-in on the land that the exchange has owned since 1928, and the opportunity to either sell the land to Vornado or another investor. Large Blocks of Space that became Vacant in the 1st Quarter 28 Liberty Street (Downtown/FiDi) 984,116 square feet as a result of JPMorgan Chase shifting about 2,000 employees to buildings the financial giant owns in Brooklyn s MetroTech Center; having sold the building to Fosun International in Madison Avenue (Midtown/Plaza) 112,489 square feet was reintroduced to the market following a $60 million building upgrade by the Kaufman Organization Broadway (Midtown/Penn Plaza) 183,065 square feet of sublease space spread across entire floors 2, 4-5, due in part to a downsizing by The Jones Group, Inc. which owns several fashion brands including Jones New York, Nine West, and Stuart Weitzman Sixth Avenue (Midtown/Times Square) 117,112 square feet of sublease space spread across entire floors due in part to the downsizing of law firm King & Spalding, LLP; and the relocation of law firm Zuckerman & Spaeder to 399 Park Avenue Notable Move-ins MediaMath / 4 World Trade Center (Downtown/World Trade Center) 106,000 square feet on entire floors The software company will be expanding from approximately 23,000 square feet at 1440 Broadway. As part of the signing, MediaMath was awarded incentives totaling $5.8 million through the federally funded Job Creating and Retention Program offered jointly by Empire State Development and Economic Development Corporation for the anticipated addition of 1,000 new jobs. The asking rent was reportedly in the mid-$70s per square foot. Mount Sinai Medical Center / 150 East 42nd Street (Midtown/Grand Central) 448,419 square feet. The leasehold for the condo unit was purchased, allowing the healthcare provider the merged with Continuum Health Partners to consolidate offices and operations. MUFG Union Bank, N.A. / 1221 Sixth Avenue (Midtown/Times Square) 109,700 square feet spread across 3-lower floors. The subsidiary of Mitsubishi UFJ Financial Group will be consolidating several offices including 1251 Sixth Avenue and 1633 Broadway Sixth Avenue (Midtown/Times Square) Avison Young 40,240 square feet in a sublease from publisher Condé Nast that expires in 2020, relocating from 623 Fifth Avenue. Redeemer Presbyterian Church 40,240 square feet in a sublease from publisher Condé Nast that expires in Barnes & Noble 40,240 square feet in a sublease that expires 2021 P.12

13 Submarket ReCap: Midtown Times Square s Overcrowding Raises Concerns Times Square is notably the city s most successful tourist destination, aglow with glitter and bright lights from its array of digital billboards and lineup of Broadway theatres, that according to the Times Square Alliance experienced one of its highest grosses to date during the last week of December. However, some landlords and office tenants are reportedly concerned about its future outlook and dissatisfied with overcrowding according to a survey conducted by the BID in May. Even theater owners are worried about the decline of New Yorker attendance when looking ahead and predicting an eventual leveling out or even reversal of the current tourism boom, despite recent record sales. Midtown Class A and B Vacancy 7.90% Rental Rate $63.21 per sq. ft. Net Absorption 117,303 sq. ft. Due to the growing popularity of the neighborhood that is roughly bound by 40th- and 53rd Streets to the north and south between 6th- and 8th Avenues, crowds lured to the area s booming retail corridor have become so thick that sidewalk navigation by local office workers has become a challenge making a 30-minute lunch almost impossible. Some area buildings have alleviated the lunchtime dilemma by offering on-site cafeterias and gyms for employees as exemplified by 1540 Broadway at West 45th Street. The true test of the district s desirability by office users will be the pace of leasing activity to fill the large block of space at 4 Times Square that anchor tenant Condé Nast has begun to vacate as the company begins to shift its employees to their new headquarters at One World Trade Center; and the potential relocation of law firm Skadden Arps Slate Meagher & Flom having signed a letter of intent (LOI) to relocate to the planned 1 Manhattan West, 401 Ninth Avenue development. The collaborative efforts of city officials and the state in the 1990s brought new development and increased tenancies, transforming Times Square and the area once known as the red light district. Today, the neighborhood is facing a new set of problems due to its current popularity overcrowding and a swell of costumed characters and vendors. Pedestrian traffic has surged to a reported 480,000 per day compared to the 350,000 per day figure of 2009 in part due to the addition of a series of public plazas that closed down Broadway between 42nd and 47th Streets, doubling pedestrian space. Retail leasing and hotel occupancy have benefited from the ongoing heightened activity, but office leasing rents reportedly continue to remain below 2007 levels while retail rents have quadrupled since Although some of the large firms that settled in the neighborhood during the 1990 resurgence have left, such as multi-media company Bertelsmann and now publisher Condé Nast, Times Square has been able to lure large firms including Microsoft and Yahoo. Sources: P.13

14 Submarket ReCap: Midtown (cont d) Lease Deal Highlights - 1st Quarter 2015 Franklin Templeton & Fiduciary Trust International / 280 Park Avenue (Plaza) The financial services companies will be making what appears to be a parallel relocation as a result of a lease for 126,000 square feet announced in January. The deal will allow Franklin Templeton and its subsidiary to consolidate offices onto a single floor for each company versus being spread across multiple floors within their current offices at 600 Fifth Avenue (Plaza). The headquarter move is expected to take place in 2016 to the SL Green and Vornado Realty Trust property that just underwent a $150 million capital improvement program. Asking rents were not disclosed, but reportedly ranged $95-$130 per square foot last October. CohnReznick / 1301 Sixth Avenue (Plaza) The accounting firm signed a relocation deal in early January for 125,000 square feet at a reported asking rent of $68 per square foot that will see the firm relocate from its current offices at 1212 Sixth Avenue (Plaza) in The building continues to struggle to fill the large vacancy totaling about 470,000 square feet left by the now defunct law firm Dewey & LaBoeuf one-year ago. Bloomberg LP / 919 Third Avenue (Plaza) The prominent financial reporting and media firm leased 150,000 square feet at the building. The new space is located near the company s main headquarters at Bloomberg Tower, 731 Lexington Avenue, having signed a 5-year renewal last year for an 188,608-square-foot space there. In addition, an expansion deal at 120 Park Avenue in 2013 resulted in the company s increased footprint of 68,000 square feet at the Grand Central neighborhood tower in addition to the 482,399 square feet leased in PJT Partners / 280 Park Avenue (Plaza) The investment firm will be significantly increasing their Manhattan footprint as a result of a 100,000-square-foot relocation deal that will see the company relocate from a reportedly 13,000-square-foot office at 40 West 57th Street (Plaza). Details of the lease were not released, but asking rents range $100-$150 per square foot according to sources. Kirkland & Ellis / Citigroup Center, 601 Lexington Avenue (Plaza) The law firm signed an early renewal of its 403,000-square-foot office, extending the lease that was currently set to expire in 2019, by 20-years to run through The company had explored a possible relocation, deciding that an early extension at their existing outpost was most economical option, protecting the company from a further market rise. As part of the deal, the company was able to relocate to higher floors within the building, trading the currently occupied floors for the upper level 45, 46 and 51 floors. Asking rents at the building reportedly range in the high-$60 s-$150 per square foot. P.14

15 Submarket ReCap: Midtown (cont d) MetLife / MetLife Building, 200 Park Avenue (Grand Central) The insurance company will consolidate multiple locations in the city, returning to its namesake home as a result of a 12-year, approximately 430,000-square-foot lease announced in mid-march. The relocation of the company s operations and 1,700 employees will begin in December 2016 and proceed in phases that are expected to be completed by the first half of 2017; vacating both 1095 Sixth Avenue (Penn Plaza-Garment) and 277 Park Avenue (Plaza) as a result. The newly expanded footprint is reportedly the largest block of space at the tower that MetLife has had since acquiring the building back in Currently about 450 employees of the insurance giant are housed in roughly 110,000 square feet; and now MetLife plans to take advantage of the expanded space to create a state-of-the-art environment that will allow for greater collaboration among employees. The deal was reportedly made possible by an agreed upon give-back of 335,000 square feet by existing tenant Barclays PLC who has been looking to downsize. Decisions to consolidate were in part due to simple economics. Rents at the MetLife Building are currently less expensive than at 1095 Sixth Avenue where MetLife has about 350,000 square feet, the majority of which is on the upper floors that are currently commanding asking rents exceeding $80 per square foot according to sources. It was previously reported that MetLife was in discussions with Canadian-based firm Cambridge and Chicago, IL-based Callahan Capital Partners, ownership of the tower also known as 3 Bryant Park, to release them from their existing lease; freeing up the space to re-rent at the higher, current market price. In the event that MetLife subleases the space, due to the escalated rents, the space could be offered to a subtenant at an attractive rate while potentially still netting a profit. The core of MetLife s New York City employees were located at 1 Madison Avenue (Flatiron) since 1958, ultimately relocating to 293,018 square feet at Queens Plaza North in Long Island City in 2002 in a long-term lease with current escalated rent in the $30s per square foot. In 2008, MetLife vacated the Queens Plaza space upon relocation to 1095 Sixth Avenue, subleasing the entire 293,018 square feet to other companies. Fortress Investment Group / 1345 Sixth Avenue (Columbus Circle) The finance firm is expanding its presence at the tower by 44,000 square feet as a result of a recent renewal/expansion deal announced in early February. The signing will increase their total footprint to 200,000 square feet and extend the company s presence at the building another 15 years beyond the current lease expiration at the end of Publicis / 1675 Broadway (Columbus Circle) The global advertising agency signed a renewal/expansion deal that will increase the company s footprint at the tower to 580,000 square feet. Currently housing multiple divisions in 480,000 square feet spread across floors 2-16 and 24-30, the recent expansion of 100,000 square feet will allow the company to consolidate offices of its Publicis Worldwide North America division that will be relocating from 950 Sixth Avenue (Penn Paza) by the end of this year or early The renewal now extends Publicis presence at the building through 2013, where average per square foot asking rents are reportedly in the $70s. WeWork / 1460 Broadway (Penn Plaza/Times Square) The co-working office space provider signed a lease for 180,000 square feet Just about 1 month following the large deal at Downtown s 85 Broad Street. The 19-year lease that reportedly executed on March 31st coincided with the existing tenant law firm Skadden Arps vacating the space used for the company s back-office services. The building owned by the partnership of Himmel + Meringoff and San Francisco, CA-based The Swig Co. recently underwent $25 million in modernization upgrades. HNTB / 350 Fifth Avenue (Penn Plaza) The architecture and engineering services firm signed a 10-year, 5-month lease for 78,000 square feet spread across floors at the Empire State Building. The deal with an asking price in the $60s, will allow the company to consolidate several suites when they relocate from 5 Penn Plaza at the end of the year. Interpublic Group of Companies (IPG) / 5 Manhattan West, 450 West 33rd Street (Penn Plaza) The advertising services company signed a 15-year renewal/expansion deal at the Brookfield Office Property s tower that is undergoing a major renovation as part of the company s Manhattan West project. The 278,037-square-foot lease included an expansion of 52,350 square feet at a reported asking rent of $70 per square foot, of which IPG s subsidiary R/GA will be taking 173,000 square feet this summer as a result of a relocation deal announced last August. Markit / 5 Manhattan West, 450 West 33rd Street (Penn Plaza) The London-based global financial data provider will be consolidating 2 existing Manhattan locations as a result of the 140,000-square-foot lease for the entire 5th floor announced in March. The deal will see the firm increase its footprint upon anticipated relocation from roughly 47,000 square feet at 101 Park Avenue (Grand Central); and 32,000 square feet at the New York Times Building, 620 Eighth Avenue (Times Square). Source: P.15

16 Submarket ReCap: Midtown South Escalated Rents Threaten Long-time Tenants Previously protected by long-term leases, the pool of older tenants in Midtown South are now faced with significantly escalated rent prices as they face impending expirations, continuing to deepen the changing personality of neighborhoods in the submarket. News of several long-time established restaurants that have already been affected by rent spikes has previously made headlines, as international retail chains, banks, pharmacies and other higher revenue businesses fill storefronts. The closure of popular restaurant Pastis exemplified the growing trend, shuttering its doors last February at 9-19 Ninth Avenue, a property located in the Meat Packing Midtown South Vacancy Rental Rate Net Absorption Class A and B 4.85% $70.36 per sq. ft. 249,271 sq. ft. district that is currently undergoing an expansion to make way for national tenant Restoration Hardware. The impact of rising rents has also spread into the office sector and some tenants amongst the ranks of yesteryear are being prompted to consider a move for perhaps the first time in several years. December brought news of The Nation, the magazine publisher with a history that spans close to 150 years to be considering a possible relocation. The company s 16,000-square-foot office spreads across the 8th floor at 33 Irving Place (Gramercy Park) that borders popular Flatiron district in Midtown South, where they have been a tenant since The lease that expires in 2016 is anticipated to demand an asking rent of $62 per square foot which is reportedly about double The Nation s current rent figure, prompting the company to explore options. Until recently 51 Astor Place, the new Class A state-of-the-art tower in Greenwich Village was the bellwether for commanding asking rents in the $80 per square foot range within the predominantly Class B submarket. However, the Ashkenazy tower will not be alone for long; and the redevelopment of 430 West 15th Street (Chelsea), a 99,558-square-foot garage may soon be sitting by it side. The earlier potential hotel redevelopment by leaseholders Atlas Capital Group and Rockpoint Group has shifted to an office conversion that is expected to command asking rents of $80-$100 per square foot. In addition, 675 Sixth Avenue, a 1900s building that underwent renovations in 2013 introduced space on the 3rd- and 4th floors in December at an asking rent of $85 per square foot. P.16

17 Submarket ReCap: Midtown South (cont d) Lease Deal Highlights - 1st Quarter 2015 WebMD / 395 Hudson Street (Hudson Square) The online health information and news provider will be vacating its approximately 100,000-square-foot office at Google s 111 Eighth Avenue a bit sooner than the company s November 2015 lease expiration. As a result of a buyout deal made with Google for an undisclosed sum, WebMD signed a sublease for 147,670 square feet and will relocated to the Hudson Square building. WebMD will be subletting the space that spans the entire 3rd- and 4th floors from test-prep company Kaplan who will be downsizing to a 7-year, 80,000-square-foot sublease from sublandlord Condé Nast at 750 Third Avenue (Grand Central). To secure the deal, Kaplan reportedly provided the often-used concession of upfront cash to help WebMD pay for its state-of-the-art buildout. The tenant improvement (TI) monies will ultimately be recouped over the term of the sublease since WebMD will be paying a rent above the per square foot figure in the $50s that Kaplan was originally seeking. The signing includes an extension option of at least 5-years directly with the building s landlord New York District Carpenters, on top of the remaining 9-year sublease term. Facebook / 770 Broadway (Greenwich Village) The social media company expanded 79,998 square feet onto the entire 15th floor at the tower, reportedly increasing their total footprint to roughly 200,000 square feet since first establishing a presence at the building in The base rent of $105 per square foot for the expansion deal further exemplifies the ongoing escalation of rents in the popular submarket, the company having paid in the low-$70s per square foot rent for space on the 7th- and 8th floors less than 2 years ago. Estée Lauder / West 23rd Street (Flatiron) The cosmetic company will be expanding their presence at the tower as a result of a 100,000-square-foot deal announced in mid-february, increasing their total footprint to 166,000 square feet spread across the 3rd- and 6th-9th floors. Details for the deal were not disclosed, but asking rents reportedly range $69-$75 per square foot. P.17

18 Submarket ReCap: Downtown Downtown s Comeback - 20 Years in the Making The revitalization of Lower Manhattan, one of the city s oldest neighborhoods, brings a story that is as exhilarating as the energy that fills the neighborhood today. The resiliency of Lower Manhattan has allowed it to emerge as one of the hottest neighborhoods in the city today, despite major setbacks that included the September 11, 2001 attacks; significant damage incurred in the aftermath of Hurricane Sandy; and the decentralization of the financial services industry which at one time served as the economic hub of Lower Manhattan. The Downtown Alliance s Lower Manhattan Real Estate Year in Review report released in February offers findings that deliver a positive forecast of continued growth in Downtown Class A and B Vacancy 11.49% Rental Rate $53.89 per sq. ft. Net Absorption -934,075 sq. ft. Revitalization since 1995 has resulted in a total of 15.8 million square feet of office space being repositioned into residential or hotel use; improvements to numerous streetscapes with an increase in open space; and nearly 40 acres of new parkland has been created. Now 20-years later, the Downtown neighborhood boasts: Residential Population has more than tripled in growth since 1995 to the current total of roughly 60,000 residents; Business Diversity has been growing as a major influx in large companies from a mix of industries continue to migrate to the area; Wall Street which once only served as a place where you made a living has now evolved into a live/work neighborhood that claims 41% of employed residents now living in the area as well. Tourism is booming, and the 12.4 million people that visited the district in 2014 continues to prompt a spike in hotel development that resulted in a 20% year-over-year increase in hotel room inventory. By the end of 2015 Lower Manhattan will have added 25 new hotels since Retail Activity has risen significantly, delivering the opening of 76 new stores and restaurants in 2014 as retail leasing continues to fill the over 2 million square feet of new or repositioned retail space that will open or be in development by the end of Accessibility has become increasingly essential over the last 10-years as the number of professionals living within a 30-minute commute to Lower Manhattan continues to rise, reaching 557,000 in The opening of the Fulton Transit Center that will ultimately connect 10 of Lower Manhattan s 12 subway lines and the NJ Transit Path Train has significantly improved Lower Manhattan s accessibility. In addition, the area offers 30 bus routes, 2 PATH routes, 6 ferry terminals, 7 Downtown Connection buses, and 25 Citi-bike docking stations. Private Sector Employment currently totals 318,000, representing a 12% improvement from the 2009 post-recession low; and due to increased leasing activity, is predicted to continue to grow with heightened diversification as significant shifts in business industries continue in 2015 and beyond. Value continues to lure tenants to Lower Manhattan with overall office space asking rents continuing to remain about 15% and 10% below that of Midtown and Midtown South respectively, despite an ongoing upward trend. P.18

19 Submarket ReCap: Downtown (cont d) Office leasing activity 2014 recap of the top 20 deals: The World Trade Center and Brookfield Place accounted for the largest deals during the year for a total of million square feet in deals. One World Trade Center 237,000 square feet leased amongst 10 tenants 4 World Trade Center 149,000 square feet leased amongst 3 tenants Brookfield Place over 1.9 million square feet Tenant Name Location Sq. Ftge. Leased Lease Type Quarter Signed Sector Time Inc. / 225 Liberty Street 669,832 / Relocation Q2 / TAMI - Media Hudson s Bay Co. / 225 Liberty & 250 Vesey Streets 398,712 / Relocation Q3 / Retail Trade Bank of New York Mellon / 225 Liberty Street 346,607 / Move within LoMa Q2 / FIRE - Finance MacMillan Science & Education / 1 New York Plaza 176,121 / Relocation Q3 /TAMI - Publishing Teach for Amerca / 25 Broadway 172,774 / Relocation Q1 / Non-profit Amerigroup Corporation / 14 Wall Street 165,029 / Renewal Q1 / FIRE - Insurance OSP Group / 1 New York Plaza 157,210 / Relocation Q4 / Retail Trade Allied World Insurance Company / 199 Water Street 142,000 / Renewal* Q1 / FIRE - Insurance Jane Street Capital, LLC / 250 Vesey Street 114,000 / Move within LoMa* Q3 / FIRE - Finance NYC Dept. of Investigation / 80 Maiden Lane 111,012 / Renewal* Q2 / Government MediaMath / 4 World Trade Center 106,000 / Relocation Q3 / TAMI - Technology City of New York / 80 Maiden Lane 94,896 / Renewal Q1 / Professional Srvcs Revlon / 1 New York Plaza 90,194 / Relocation Q1 / Retail Trade High 5 Games / One World Trade Center 87,663 / Relocation Q4 / TAMI - Technology Union of Orthodox Jewish Congregations of America / 11 Broadway 75,120 / Renewal* Q2 / Non-profit Hugo Boss / 55 Water Street 73,690 / Relocation Q4 / Retail Trade BCG Brokers / 199 Water Street 71,990 / Renewal Q3 / FIRE - Finance NYC Office of Labor Relations / 40 Rector Street 69,033 / Renewal Q2 / Government Trinity Wall Street / 120 Broadway 68,350 / Move within LoMa Q1 / Non-profit WellCare Health Plans / 1 New York Plaza 68,325 / Relocation Q4 / FIRE - Insurance *Expansion Lease Deal Highlights - 1st Quarter 2015 WeWork / 85 Broad Street (FiDi) The co-working office space provider expanded again, adding 240,000 square feet to the company s continually expanding footprint in the city. The deal that was announced late February will absorb a large block of the longtime vacant space left by Goldman Sachs upon relocating to 200 West Street in Founded in 2010, the company now boasts 14 Manhattan locations plus its first Harlem outpost at 5 West 125th Street which is currently under construction; and 1 location in Brooklyn at 81 Prospect Street in DUMBO, with a 2nd upcoming location at 242 Bedford Avenue, Williamsburg upon new construction delivery. OSP Group / 1 New York Plaza (FiDi) The online apparel retailer signed a 15-year lease for 157,210 square feet that will spread across the entire 13th- and 14th floors at the tower at a starting rent just shy of $42 per square foot. The deal will enable the company to consolidate 2 Midtown locations including 463 Seventh Avenue (Penn Plaza), investing $20 million as a result. As part of the signing, OSP was awarded a $1.8 million grant from New York State s Empire State Development & New York City s Economic Development Corporation in exchange for the creation of 150 new jobs. Sources: P.19

20 Sale Activity Sale Deals to Watch For RXR Realty 6-Building Portfolio Stake Blackstone Group LP, through its core-plus real estate fund, is reportedly in contract to acquire a roughly 50% stake in the office properties that RXR Realty has been acquiring since the Uniondale, Long Island-based company s 2009 debut into the Manhattan market. RXR s purchases predominantly represented deals at sharp discounts for properties where prices were significantly lower than pre-recession values, ultimately improving cash flows for future re-sale to investors seeking steady and less-risky returns. As a result, Blackstone will benefit from the future potential to increase its company s cash flow with the addition of the portfolio that is currently about 90% leased with some tenants paying below-market rents. The sale reportedly values the 5.3 million square feet of commercial space at a combined total of $4 billion; and proceeds from the sale will return almost all of the investors equity, generating an annual return of 25% on their money. While the deal further substantiates the city s real estate market recovery, some analysts comment that price gains may have peaked due to current prices reaching the point where property is now fairly valued. Additionally, a leveling off of price gains could shift to losses if there is not sufficient inflation to push tenant rents higher and offset the eminent rise in interest rates. Included amongst the 6-buildings within the stake offering are: Thousands Quarter-over-Quarter Sale Statistics Thousands Downtown 2,700 1, Q2014 2Q2014 3Q2014 4Q2014 1Q2015 Midtown South 1, TTL Sq. Ftge. WTD Price PSF TTL Sq. Ftge. WTD Price PSF $750 $600 $450 $300 $150 $0 $1,250 $1,000 $750 $500 $250 Starrett-Lehigh Building, 601 West 26th Street (Chelsea) Purchased in 2011 for $920 million; 0 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 $0 340 Madison Avenue (Grand Central) Purchased a 49% interest in the office component for $ million in cash in 2010 plus the replacement of unassumable financing with a new $310 million mortgage that valued the deal at a total of $547 million; Midtown 6,000 TTL Sq. Ftge. WTD Price PSF $1, Sixth Avenue (Flatiron) Acquired an approximately 55% interest in the building for $ million in 2011, exercising an option to acquire the remaining 45% for $225 million in 2012 for a total acquisition price of $ million; 1330 Sixth Avenue (Plaza) Acquired the building for $400 million in Thousands 5,000 4,000 3,000 2,000 1, Q2014 2Q2014 3Q2014 4Q2014 1Q2015 $1,000 $750 $500 $250 Data reflects a sample of sold buildings over 100,000-square-feet P2 P.20