[NYguy]

https://www.bloomberg.com/news/artic...-building-boom

NYC Reaping Hudson Yards Dividends After Luxury Building Boom


By Martin Z Braun
October 18, 2021

Hudson Yards, a 45-square block district of office towers, luxury apartments and upscale shops on Manhattan’s far West Side, is paying down its tab with New York City’s taxpayers.

The Hudson Yards Infrastructure Corp., created by the city to finance the redevelopment, has transferred about $663 million in surplus property tax and other revenue to the city since 2017, 80% of which was in the last three years, according to an offering document for a bond sale this week.

The distribution is more than the $360 million the city spent to subsidize the interest payments on $2.7 billion of debt sold by the infrastructure corporation to finance the extension of the No. 7 subway line and a boulevard-lined park. It’s also more than enough to cover $230 million in cost overruns and future planned spending for the new neighborhood.

The city estimates existing and future development in Hudson Yards will generate $27.1 billion from the current fiscal year through 2047, six times more than debt service for the corporation’s bonds.

“Hudson Yards is a financial win for the city of New York,” said Mitch Schwartz, a spokesman for Mayor Bill de Blasio in an email.

Hudson Yards got off to a slow start because of the Great Recession, requiring the city to step in and cover some of the bond payments until building progressed. But in the last decade developers have built or renovated seven offices buildings with three more towers under construction. Ernst & Young LLP, KKR & Co and Tapestry Inc. have already moved into the neighborhood, while BlackRock Inc., Pfizer Inc., and Facebook Inc. have leased space in office towers under construction.

In addition, almost 10,000 rental and condominium units and 8,500 hotel rooms have been built, with more than 25 million square feet of a planned 53 million square feet of construction completed. The district encompasses Related Cos.’ branded Hudson Yards project as well as Brookfield Properties’ Manhattan West.

Asking office rents in Hudson Yards average $118.54 per square foot, the highest in New York City, according to Cushman & Wakefield, a commercial real estate services firm that prepared a development and revenue report for this week’s bond sale. Taxable assessed values of four completed towers in Hudson Yards fell less than 1% this year, compared with almost 12% for commercial real estate overall. Occupancy rates in the completed office buildings range from 72.2% to 100%.

To be sure, the pandemic did claim Neiman Marcus, the anchor of Hudson Yards’ tony mall, which filed for bankruptcy in May 2020. Still, the mall makes up about 3% of the overall development. The residential market is still recovering and hotels are struggling.

However, the district’s amenities, eco-friendly buildings with open floor plans, and proximity to the new Moynihan Train Hall and Pennsylvania Station, which is under renovation, have proved attractive to workers and companies, said Nora Wittstruck, an S&P analyst.

“There’s a lot of synergy around” Hudson Yards, said Wittstruck.