By Daniel Geiger
A year after 17 State Street slipped into special servicing, the building’s owner RFR Realty appears to have staged a turnaround.
With its distinct curving facade, which offers panning views of the surrounding Lower Manhattan waterfront including Battery Park, the Statue of Liberty and Governors Island, RFR has long sought to position the building as an upper tier property in the Financial District.
During the recession that strategy seemed to be on the rocks. But the firm called in one of its chief in-house leasing dealmakers, Steve Morrows, who had previously focused only on the company’s midtown assets, including the trophy buildings it owns along Park Avenue, Lever House and the Seagram Building.
Morrows says that about a dozen deals totaling 100,000 s/f have been done in the 42-story, 525,000 s/f building over the last 12 months and that another six leases are pending that will account for another 40,000 s/f of space. A number of the deals, particularly the more recent transactions and those that have yet to close, are for rents at or above $50 per s/f Morrows said.
“The $50 per s/f mark downtown is like hitting $100 per s/f in midtown,” Morrows said.
The activity has appeared to put the building back on track.
Properties with securitized mortgages enter special servicing when the asset’s owners either defaults on its mortgage or appears in danger of doing so. Morrows would only say that the process at 17 State Street was initiated to restructure the building’s debt and that the issues have since been resolved. Because of technical rules that determine how securitized mortgages are administered, borrowers can only negotiate the terms of a loan when the property enters special servicing and during the downturn many owners hence allowed properties to fall into distress purposely to trigger this dialogue.
While the market downtown has begun to rebound, RFR has also marketed 17 State Street well. The company converted a handful of floors in the property, which are about 15,000 s/f in size apiece, into prebuilt office units. Morrows boasted that the spaces feature the same high end materials and design that RFR employs at the Seagram Building, a property that is considered one of the most exclusive in the city.
The quality of the building combined with a growing buzz about downtown has lured tenants, many of them from midtown. With the redevelopment of the World Trade Center site and a multibillion dollar overhaul of the surrounding transit infrastructure beginning to take shape, more tenants are starting to seriously consider lower Manhattan according to brokers. Conde Nast, the publishing giant, also boosted the area’s popularity when in recent months it signed a 1.1 million s/f lease to anchor 1 World Trade Center. Brokers say that Conde’s decision immediately bolstered the area’s image as a neighborhood for major corporate users and tenants in creative industries.
Morrows said that 17 State Street’s performance has been the result of a team effort and that junior brokers AJ Cahmi and Ryan Silverman have played a major role at the property. His salesmanship though hasn’t hurt either. Giving Real Estate Weekly a tour of the building earlier this month, Morrows initiated a moment of silence just as the elevator doors opened to an empty floor high in the tower, creating a dramatic first impression of the building’s sweeping views.
“For $50 per s/f you could be in a Class B building in midtown or you could have this,” Morrows said.
