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Tishman Speyer Buys Manhattan Site for $438 Million


The firm, controlled by the father-and-son team of Jerry and Rob Speyer, plans to build a 2.8-million-square-foot office tower on the site, which occupies a full block near several other huge projects that are under way.

"We think we're entering the sweet spot of office development in New York," said Rob Speyer.

The site—on 10th Ave. between West 34th St. and West 35th St.—consists of two separate parcels and currently is populated by parking lots and older, low-rise buildings. One parcel was owned by Sherwood Equities, the other by New York's Rosenthal family.

The deal, which closed Tuesday, is the most significant New York transaction by Tishman Speyer since the economic downturn. During the recovery the firm has been investing in California and Chicago in the U.S., and in Europe, Brazil and China.

Tishman Speyer is joining a group of developers who believe the New York office market is turning a corner after experiencing relatively slow growth in rents and occupancies during the recovery. About 3.6 million square feet of new office space was added 2013 compared with zero in 2012, according to the brokerage Cushman & Wakefield.

Over the next five years, builders are expected to add 17.2 million square feet. "New York needs more office space," Rob Speyer said. "There's a scarcity of large blocks of space that's going to be more pronounced in years ahead."

But debt financing for new development is still difficult to obtain from conventional sources, especially for so-called "speculative" buildings that aren't preleased. Rob Speyer said that Tishman Speyer plans to find a major tenant before it starts building.

This push to build new office space has helped drive up land values. Sherwood bought its parcel for $8 million in 1986, and has invested only a few hundred thousand dollars in the properties since then, according to Jeffrey Katz, Sherwood's president.

Tishman Speyer is paying $200 million for that property. "This is one of the hottest markets for land I can remember. I've never seen an acceleration of price so fast," Mr. Katz said.

Manhattan's far West Side is especially hot right now because of the massive Hudson Yards development and the city's extension of the No. 7 subway line, which is scheduled to open in the neighborhood this year.

Related Cos.' $15 billion Hudson Yards project is beginning to take shape just south of the Tishman Speyer site. Construction of the first tower, which is being anchored by Coach Inc., COH -3.36% is under way and scheduled to be completed in 2015. Earlier this year, Time Warner Inc. TWX +0.45% announced plans to move its headquarters to Hudson Yards.

Also nearby, Brookfield Properties BPO.T +0.14% has plans for $4.5 billion worth of development, including two office buildings, an apartment building and parks.

In addition, former New York Gov. Eliot Spitzer's real-estate company late last year paid $88 million for a vacant property in the Hudson Yards area. And in September, Sherwood and a partner sold a development site at 10th Ave. and West 30th St. for $167 million, to developer Frank McCourt, who is planning a mixed-use tower. The price was three times what they paid for the site in 2011.

Tishman Speyer has considered building in the area before. In 2008, the firm struck a deal with the Metropolitan Transportation Authority to buy the 26-acre Hudson Yards site. But the deal fell apart as the economy weakened. Related was selected as the project's developer later that year.

Wall Street Journal
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