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With bankruptcy plan, 55 Water has future.

Freeing the way for capital improvements and a repositioning of the building, a prepackaged bankruptcy and reorganization plan was filed May 7 by Olympia & York Water Street Finance Corp. and the Noteholder Committee for 55 Water Street.

That plan is expected to leave the second largest building in the world free of $540 million in debt but with $50 million in an operating account for building improvements and its new owners, the Retirement Systems of Alabama.

Wilbur L. Ross, Jr., senior managing director of Rothschild Inc., and financial advisor to the Noteholder Committee, said he regards the deal as final for all practical purposes. Nevertheless, two thirds of the claimants are needed to seal the deal. Ross said 60 percent have already escrowed releases and Bankruptcy Court Judge James L. Garrity Jr., who is familiar with Olympia & York matters, has them on a "fast track," that is expected to wind up in four months.

Under the agreement, the Retirement Systems of Alabama will purchase shares of stock from current noteholders who may elect to convert their claim into stock in the new corporation that will own the building. Claims are being paid on a 28 cent per dollar of bond basis.

According to Thomas Milne, assistant director of fixed income for the Retirement Systems, if everyone turns in their stock, the pension fund is ready to buy it at a total cost of between $100 million to $149 million.

The 3.6 million-square-foot building is poised for a new beginning as its operating account will be left with at least $50 million in cash and it will have no indebtedness. About $20 million will come from the operating account and another $23 million plus from a surety bond issued by Aetna that will also go into the pot over the next year while the pension fund is ready to put in at least $21 million if no one subscribes to buy the shares.

The bankruptcy filing will have no impact on the building's current tenants and operations or payments to vendors.

Although area brokers have expressed concern in the past that the building's large floor plates -- somewhere around 90,000 square feet -- will not be attractive to today's tenants, the new owners are sensitive to the problems and are planning to install a marketing and or asset manager as soon as the plan is confirmed.

"The original concept of back office trading floors is not really where the world is today," noted Ross. "The property is in need of restoration."

Bruce Mosler, chairman of Galbreath Riverbank Realty, said it is still a terrific building and could succeed if the new owners come out with a strong marketing program.

"The building has to be repositioned and remarketed," Milne agreed. The 52-story building is 38 percent vacant including the two top floors. "Hopefully we will attract a strong tenant that will be very visible," he sighed, to take "those wonderful floors."

Citing its proximity to the South Street Seaport, a racquet club, supermarkets and the Fulton Fishmarket with its 24-hour operations, Ross predicted advertising firms will become part of the new tenancy that he believes will not be confined to traditional Wall Street firms.

He calls the large blocks of vacant space an advantage for any tenant looking at the few large spaces available. "The $50 million sitting in our blue jeans and no debt is a true resource," he said, that will attract the large, sophisticated tenants who will feel confident of the new owner and its ability to pay for tenant improvements. Additionally, the Retirement Systems of Alabama has approximately $12 billion in assets and 225,000 members.

The new owners will also look to the city for refunds of prior property tax payments and to reduce its tentative Fiscal 94 payment of about $17.55 million. It also could be eligible for ICIP benefits.

Any new tenants would join Citibank, the Depository Trust Company, which has 472,000 square feet that comes due in April of 1997, Manny, Hanny -- now part of Chemical Corp. -- and Chemical itself, with a block of 1.2 million square feet in a 'small' adjacent structure that expires in 2002.

"We want to make them comfortable that they have a strong owner," Milne explained. That will be one of the initial focuses of the real estate advisor."
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Title Annotation:office building at 55 Water Street, New York, New York
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:May 26, 1993
Previous Article:Architects now entering construction management.
Next Article:Historic 'eyesores' become vital buildings.

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