Will HIP lease spark Downtown revival?
Will the Health Insurance Plan of New York's recent signing of a 20-year, 485,000-lease at 55 Water St. convince other tenants to move Downtown?A team of four GVA Williams brokers who represented HIP in the deal thinks so.
"We truly believe that this will be a catalyst for the improvement of Downtown over the next six to 12 months," said managing director Steven Jaray.
During a recent interview Jaray - along with senior executive managing director Brian Given, managing director brokerage services Donald Lutt, and associate director Hal Stein -- discussed elements of the deal. The transaction has been described as the largest relocation from Midtown since Sept. 11.
For the past 15 years, HIP has been a client of GVA Williams, which has completed about 50 sale and lease transactions in the Metropolitan New York area on behalf of HIP. GVA began working with the company about a year ago to help find Downtown space where HIP could consolidate and relocate existing operations at 7 West 34th St.. 132 West - 31st St. and 32 Old Slip.
The 55 Water St. deal is noteworthy for many reasons, but among them is that HIP was not facing an expiring lease and did not have to move at this time, said the brokers.
"This was a unique moment in time," said Given. "HIP was outgrowing its existing facilities. Also, its business plan was changing. The company is considering going from non - profit status to for-profit."
With its business requirements in mind, HIP set out to look for space of between 400,000 to 500,000 SF with large, efficient floor plates. Ideally, the company wanted to be located in its own building. HIP looked at about 30 Downtown spaces before selecting 55 Water St., according to GVA Williams.
"When we began the process, we were forecasting that HIP could expect softening of rents Downtown with more spaces becoming available," said Jaray.
HIP will lease the entire 13-story north building at 55 Water St. as well as 'the 13th floor of' the south building. The space HIP will lease used to be occupied by JP Morgan Chase before it moved operations to Jersey City, N.J. HIP is expected to move during summer 2004, said the brokers.
HIP selected this site for a number of reasons, but tops on the list were the government incentives they received. The company received "as of right" and discretionary funding, said Lutt, who is part of the GVA's municipal incentive group. Under the city's Lower Manhattan Plan established in 1995, HIP 'will receive reductions in real estate tax, commercial rent tax and energy costs. These "as of right" benefits will total about $10 million over the five years, according to GVA Williams.
HIP also received federal 'benefits under a discretionary program administered by the city's Economic Development Corp. and the state's Empire State Development Corp. GVA did not disclose the amount of this benefit but applauded the government for its decision to grant it.
"The incentives were a key driver to the deal," said Lutt. "The company's decision to move from Midtown to Downtown was a significant factor."
The 55 Water St. site - and its pension fund owner, Retirement Systems of Alabama - were other factors in HIP's 'decision to move. GVA applauded Edward' Kulick Jr., senior owner's representative for Retirement Systems of Alabama, for the landlord concessions included in the deal.
As part of the transaction, HIP received significant tenant improvement 'contributions and base building improvements such as a new lobby, sidewalks, elevators and a 1acre public plaza. A 17,000-SF food court will be built at the lobby level that will be open to all 55 Water St. tenants. Monument signage with the HIP company logo will be located outside the building. The company's. name will also appear on two locations of the building's exterior, said the brokers.
"55 Water St. provided significant branding opportunities for HIP," Jaray said.
Retirement Systems of Alabama was jointly' represented by Insignia/ESG and GB Richard Ellis. The team included Insignia/ESG's Howard Fiddle, Bradley Gerla, Robert Martin, Tom Shirocky, and GB Richard Ellis' Mary Ann Tighe and Ken Rapp.
The GVA brokers called" the building's infrastructure "superior" and said transportation in the area was sufficient for the company to feel' comfortable' making the switch from' 'Midtown to Downtown. The Wall Street ferry is 'less than two blocks away and there are several subway stops in the area.
"This building kept rising to the top' as being the building that best met HIP's needs," said Given.
GVA also credited HIP with its willingness to look beyond the real estate elements of the deal.
"HIP's been in New York City for' 50 years. They wanted to show their commitment to Lower Manhattan," said Given.
When aspects of the HIP lease are made public, it may spur other tenants to consider making a similar move Downtown.
"This has already generated some interest among tenants. This is a moment in time," said Given.
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| Title Annotation: | Health Insurance Plan of Greater New York Inc. signs 20-year lease, commits to Lower Manhattan, New York |
|---|---|
| Author: | Keith, Natalie |
| Publication: | Real Estate Weekly |
| Geographic Code: | 1U2NY |
| Date: | May 7, 2003 |
| Words: | 830 |
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