ML: Credit Crunch Taking Bite out of Manhattan LEED Buildings

Two of New York City’s highest profile green building projects are on the ropes thanks to the ongoing credit crisis.

Two of Manhattan’s highest profile LEED projects took blows on the chin last week. After announcing in July that it would likely reduce the tower’s size by nearly a third, Vornado’s plans for Harlem’s first office tower in thirty years appear to be on the ropes. Despite generous tax incentives from both the city and state, Vornado has had difficulty obtaining financing for the Swanke Hayden Connell-designed Harlem Tower, even after planning to invest nearly 30 percent ($127.5 million) of the project’s total cost. Instead, the developer recently sought an additional $15 per square foot from planned anchor tenant MLB Network ($2 million annually) and, alternatively, also proposed building a five-story building exclusively for the network. The Times reports that both strokes “infuriated” MLB executives, who “wanted to be in a marquee tower on 125th Street.” MLB Network now appears to be staying put in Secaucus through 2011, where it has been leasing temporary space at MSNBC’s former studios.

Meanwhile, downtown, 2008 Pritzker Prize winner Jean Nouvel’s LEED-hopeful 100 Eleventh Avenue is currently $50 million over budget and close to a year behind schedule. The Wall Street Journal reports that developer Cape Advisors is attempting to refinance its construction loan for the project or work may stop next month. I-Star Financial, which issued the $110 million construction loan and whose stock has been battered during the course of the credit crisis, is asking the developer for a $6 million processing fee for the refinance, which would be at twice the initial interest rate. The Journal also reports extensive cost overruns, from the intricate curtain wall to foundations, concrete, and architects’ fees from numerous design changes. We won’t speculate on whether any of the project’s green design features- other than the curtain wall- contributed to the cost escalations, which have boosted the total construction cost from an anticipated $151 million to $205 million. Still, 70 percent of the tower’s units have already been sold at an average of $2,300 per square foot (for a total of $190 million), and the developer is telling purchasers that their units will be ready for summer 2009 occupancy.

Manhattan real estate may be unique but commercial projects are certainly not proving immune to the credit crisis- whether theyr’e applying for a LEED rating or not. While 100 Eleventh Avenue will undoubtedly get built, albeit at a significant premium than expected, it’s truly a shame that the Harlem Tower seems destined to be a high-profile casualty of the crisis. While we noted the community’s concerns previously, we also pointed out that, provided they were addressed, “MLB needs to increase its presence in the African-American community and Swanke’s design for the tower could turn into an extremely important piece of architecture.” Here’s hoping that the project proves to be an exception, and other important green designs both on the drawing board and under construction don’t meet a similar fate.

ML is short for our weekly Monday LEEDoff™ column, which typically profiles a different LEED project generally in (but not limited to) the New York City area. You can access an archive of profiled projects via this link.

about gbNYC

gbNYC is a multi-disciplinary consulting and real estate services firm. In addition to representing office tenants and commercial buyers in leasing and acquisitions, we also provide innovative consulting solutions from a unique, green building perspective. We advise on green building financial incentives, comment on proposed green building marketing strategies, author white papers, treatises, and market analyses, organize seminars on the LEED process and professional accreditation, and provide advice and analysis on green building risk management and the overall state of green real estate, leasing, and construction, in New York City and beyond.

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