Steel on the Rise at SJP Properties' 11 Times Square

A few weeks ago, Real Estate Weekly reported that SJP Properties was close to securing the French bank Natixis as an anchor tenant for its 40-story, 1.1 million-square-foot speculative 11 Times Square project at the corner of 42nd Street and 8th Avenue, which will seek a LEED Gold rating from USGBC. Yesterday, the developer announced (with some degree of fanfare) that it has started erection of the $1.1 billion building's 7,000 tons of structural steel. In a prepared statement, SJP CFO David Welch said that "[t]he arrival and implementation of the steel phase will allow interior core and floor framing for the structure to take shape. We remain ahead of schedule and will deliver the building for tenant occupancy by late 2009." Designed by FXFOWLE, the tower will feature a concrete core enclosing its elevator banks and utility risers, which allows tenant floors to remain column-free and insulates them from noise emanating from the concrete-enclosed mechanical rooms.

As you'll recall, as recently as January industry insiders had speculated that the 11 Times Square project might be in trouble. SJP boss Steven Pozycki has been quick to refute those rumors, and consistently maintained that the project will move forward despite ongoing market turmoil. In February, he told REW that he expected the tower to be half-filled with tenants by summer (Natixis?) and that “[t]here’s just not many of these new green buildings that are being built in the city.” He noted the lack of available space in new green towers from the Times, Hearst, Bank of America, and also pointed to Boston Properties' 250 West 55th Street. "Tenants will come to [11 Times Square]," he said. Should Natixis indeed finalize its 250,000-square-foot lease as the tower's superstructure gets out of the ground, it appears that fears regarding the project's progress were indeed unfounded, just as Mr. Pozycki predicted.

Last year, gbNYC presented 11 Times Square in the context of the subprime lending meltdown and noted several elements that might shield it from a real estate market downturn. First, SJP, and its financing partner Prudential Financial, have thirty-five percent equity in the project, which is higher than normal, and its loan terms are fixed-rate rather than adjustable-rate (from a group of seven banks including PNC Bank and Bank of America), thus shielding the project from the higher interest rates that the current tight lending climate would command. Second, tenants are still paying top dollar for Class A space in new green buildings. Last summer, we noted that the upper floors of neighboring New York Times Tower (similarly speculative space) inked tenants in the upper $90s/square foot, while the recent law firm leases at 250 West 55th Street have reportedly been well into the triple digits. While it's unclear whether those factors are linked to sustainable design features, it is significant that a trophy green building in Midtown has, apparently, weathered considerable market adversity and will proceed ahead of schedule.

• Spec Tower Moves One Step Ahead (GlobeSt.com)
• French Bank May Say Oui to Gold (gbNYC)
• 11 Times Square Moving Forward Through Tighter Market (gbNYC)
• 11 Times Square and the Subprime Lending Meltdown (gbNYC)