In another sign of life in the real estate market, a New York developer is expressing confidence he can arrange bank financing for the construction of an 800,000-square-foot midtown office tower.
"There seems to be a willingness" on the part of banks to lend the money, provided tenants sign up in advance for a substantial amount of the space, said Larry Wyman, managing director of HRO International Ltd., an organization controlled by Howard Ronson.
The planned building, geared to financial and trading firms with costly electrical and mechanical requirements, could cost $300 million to build and require rental rates of $50 per square foot, market sources said.
$57M Purchase Price
lt would be the first major office construction project to break ground in midtown Manhattan since the building boom in the late 1980s that left the city oversaturated with office space - and banks saddled with hundreds of millions of dollars of bad loans.
HRO has agreed to purchase the site at 383 Madison Ave. for a reported $57 million from. a partnership controlled by CS First Boston. The plan is to tear down an outmoded building and build the new one on the existing foundation, which straddles various train tracks leading to Grand Central Station.
Although plans are still being drawn up, Mr. Wyman said he has been marketing the space to prospective tenants for several weeks, and has found "significant" interest.
Despite what you hear about an over supply of office space in the city, he said, new buildings with large floors and high ceilings required by the big financial companies are unavailable. The building "is being built into a complete monopoly," he said.
Mr. Wyman said HRO ran into problems like every Other developer in the late 1980s, and had to work out some of its loans. But he said the organization was able to maintain good relations with the banks by being forthright about the problems as they developed.
Chances Seen Good
William R. Hedman, a senior managing director at Edward S. Gordon Co. who represented HRO in the purchase of the property, said the project's chances of success are good, given the lack of comparable space in the neighborhood.
"They've done a fine job in space like that in the past. I think, as a result, this building will be in demand," Mr. Hedman said.
"The market is fairly strong," he said, noting that space in midtown has been leased faster than it has become available for three straight years.
New space is especially rare, he said, along the Fifth Avenue/ Madison Avenue corridor where the HRO project would be built.
In one sign of strength in the leasing market, the former Chemical Banking Corp. headquarters on nearby Park Avenue, that had seemed to pose huge problems for the landlord, has been nearly fully leased since the bank moved across the street upon merging with Manufacturers Hanover Corp.
Among tenants signed up for space there are Sumitomo Bank and S.G. Warburg & Co. Donaldson Lufkin & Jenrette is said to be negotiating for space in the same building.
Mr. Hedman said rents, too, are beginning to firm up. Although average rental rates are well below the amount contemplated by HRO, he said, firms are already willing to pay in the $50 range for space that offers "something special," like a view of Central Park.