About 20 percent of the office space now goes begging as the economy has soured. Many of its buildings have not kept pace with what businesses want. And one of its largest tenants is a corporate giant a year away from pulling up stakes and moving to Connecticut, taking with it 800 jobs.
The “Platinum Mile” or Westchester Avenue corridor stretching east from White Plains and Harrison to Rye Brook along Interstate 287 has its share of problems, two of its most accomplished building owners and three real estate professionals agreed in recent interviews.
But they also agreed the corridor still has cache with businesses, let alone developers, which with more tenants and the right buildings to attract them can bounce back whenever the economy recovers.
“The bottom line is that the buildings that have the best location, which Platinum Mile is, and that have been upgraded, and with a high number of amenities, those buildings do very well,” said Carl Austin, president of Austin Corporate Properties in Rye Brook, and a real estate professional going back to the 1960s.
“If they have only location, without the upgrade and without the amenities, I think they have suffered to a degree, and not necessarily even just on 287.”
Austin”™s firm is seeking a buyer or tenant for all of the vacant 118,000-square-foot 104 Corporate Park Drive in Harrison, owned by Allan V. Rose”™s AVR Realty Co. L.L.C. of Yonkers. The building has been vacant since sole tenant Malcolm Pirnie earlier this year relocated its offices and about 325 employees to the downtown White Plains office building Westchester One (44 S. Broadway). AVR won”™t disclose its asking price or asking rents.
During Pirnie”™s 10-year lease, which ended Sept. 30, AVR renovated the building”™s interior and re-clad the exterior. “The building shows well, although with this market in the doldrums, and with the amount of space available, it”™s a challenge to net lease it for 118,000 square feet. There are few users or tenants that have that requirement,” Austin said.
Lower rents are luring tenants
Among Platinum Mile”™s successes over the past decade have been the conversion and successful lease-up of two single-user corporate buildings by Robert Weisz”™ RPW Group Inc.
RPW”™s 532,680-square-foot 800 Westchester Ave. in Rye Brook, completed in 1983 for General Foods is now home to tenants ranging from Ameriprise and Judicial Title Insurance, to Mutual of Omaha, RNN and since 2006, the real estate pioneer who developed much of the Platinum Mile, Lowell M. Schulman. (See story on page 2.)
Weisz”™s 620,000-square-foot 1133 Westchester Ave. in White Plains, completed for IBM, now houses tenants that range from the Westchester County Association to corporate giants like ITT Corp., which moved across the street from GHP Office Realty”™s Red Oak Corporate Park in 2008; and Starwood Hotels & Resorts Worldwide Inc.
Starwood is a about a year away from vacating its 118,700 square feet at 1133 Westchester, plus its 205,000 square feet of subleased space at adjacent 1111 Westchester Ave. The hotel giant jolted Westchester officials and business leaders last year when it agreed to lease 250,000 square feet 15 miles east of White Plains in Stamford, Conn., at the Harbor Point campus under development by Building and Land Technology.
Starwood is set to move out in February 2012. In return for relocating its 800 jobs, Starwood won a $90 million package of incentives from Stamford and the state of Connecticut.
“We have to keep things in perspective. It”™s not a great economy. It”™s a difficult time in general,” said Weisz. “However, we have started to see signs of a turnaround. Companies are taking advantage of the fact that rents are lower, and they”™re looking for longer-term leases.
“We”™ve seen an improvement in activity over the last four to five months,” he added, in part as healthy companies seek to take advantage of the market by locking in lower rents through earlier lease renewals.
That should continue, Weisz said, even once Starwood”™s space empties out in 2012: “We are very confident that (Starwood”™s) space is going to move.”
Keeping pace with the times
Also hoping to benefit from that activity is Platinum Mile”™s other large landlord, Normandy Real Estate Partners, which controls 14 Schulman-built buildings totaling about 1.5 million square feet, a Westchester portfolio the firm is marketing as “The Exchange.”
By the time Starwood pulls out, “the market will have stabilized with continued improved economic conditions. Between now and then there is much opportunity to take advantage of market leasing opportunities,” predicts Brian Carcaterra, principal with Newmark Knight Frank, leasing agent for The Exchange.
Weisz saw Chubb Insurance move into 16,000 square feet and Phoenix Investments, about 5,000 square feet at his 1133 Westchester. But a much bigger deal took place just outside the Platinum Mile, though within the same sub-market, when Diversified Investment Advisors left its longtime home at 4 Manhattanville Road at The Centre at Purchase for 120,000 square feet at Weisz”™ 440 Mamaroneck Ave. in Harrison.
Platinum Mile”™s most successful buildings, Austin said, are those that have kept pace with the times through renovations and amenities. At RPW”™s 800 Westchester Ave. and 1133 Westchester, tenants can wash their cars on premises, eat in executive dining rooms, work out at fitness centers and take shuttle buses to nearby Metro-North stations. 1133 has a daycare center, while 800 has an indoor garage.
Normandy lists among its amenities a daycare center, six cafeterias, two conference facilities, sundry shops and even a barber shop. Over the past 18 months, the real estate private equity firm headquartered in Morristown, N.J., upgraded the heating, ventilation and air-conditioning systems at 2700 Westchester Ave. and 106 and 108 Corporate Park Drive; replaced the landscaping and mechanical infrastructure at 707 and 709 Westchester Ave.; opened a new sundry and flower shop at 108 Corporate Park Drive; and improved common areas at 709 and 1025 Westchester Ave.
“Normandy undertook a multimillion-dollar capital campaign that included common area improvements and infrastructure enhancements to the benefit of tenant comfort,” said Paul Teti, vice president with Normandy Real Estate Partners.
Between 2005 and last year, the Normandy buildings changed hands from EastRidge Properties, to Reckson Associates, to RexCorp, to RXR ”“ which ceded control to its mezzanine lender Normandy a few months after the Wall Street meltdown of late 2008. Talk in real estate circles has Normandy selling off at least its older Corporate Park Drive buildings, but the firm isn”™t confirming those or other plans: “We are continuing the repositioning efforts of The Exchange. As a normal course of business, it is prudent to evaluate all options and respond appropriately to opportunities in the marketplace,” Teti said.
Weisz has approvals from White Plains officials to build within 1133”™s property a 160-room hotel and about 300,000 extra square feet of offices. While market conditions had not warranted breaking ground until now, he added: “Recently we started having conversations” with a prospective hotel developer.
The office space, on the other hand, “is definitely going to be a project for later on,” Weisz said.
Normandy, like RPW, has also cited an uptick in leasing. According to Carcaterra, said the firm has leased 324,312 square feet ”“ including 185,392 square feet of new deals ”“ since April 2009.
“This represents about 25 percent of the total leasing in the (eastern Westchester)-287 market during the same period. Our ”˜fair share”™ is approximately 14 percent,” he said.
That activity included several new but small leases: 4,996 square feet by the law firm Ansa Assuncao L.L.P., and 4,311 square feet by Bank of America at 707 Westchester Ave.; as well as 2,289 square feet by long/short equity hedge fund 360 Global Capital L.L.C. at 711 Westchester Ave.
New owners on the scene
Normandy and Weisz dominate a sub-market that has attracted several new owners in recent years. Three additional Schulman buildings ”“ 3 Gannett Drive, home of the Business Journal, and companions 2 and 4 Gannett Drive ”“ are now owned by an affiliate of George T. Constantin”™s Heritage Realty Services in New York City. Last month, Heritage announced a “multimillion-dollar” capital improvement program for its Gannett Office Park, on top of the $3 million it said it has spent on renovations since the buildings were bought in 2005.
Further east, New Rochelle developer Joseph Simone owns the 135,000-square-foot Harrison Executive Park consisting of 3000, 3010 and 3020 Westchester Ave. To the west, ProMed Properties of North Miami Beach, Fla., owns five medical buildings, including the Schulman-built 244 Westchester Ave., acquired in 2008 for $53.5 million.
At the western edge of the Platinum Mile another New York developer, Cohen Brothers Realty Corp., owns 333 Westchester Ave., built for General Foods more than a half-century ago. And two other class-A buildings, RiverView at Purchase (287 Bowman Ave.) and 2900 Westchester Ave., are the only Platinum Mile assets of their respective managers, FMB Asset Management and Silverette Realty Management Group.
“We”™ve always grown with a little bit of internal growth, a little bit of companies coming out of New York and a little bit of companies coming over the border from Connecticut,” said Glenn Walsh, senior director with Cushman & Wakefield, which is marketing Weisz”™ properties. “We”™re not getting the New York companies lately. We”™re not getting the Connecticut companies lately. And the internal growth has been stalled with what”™s happened in the economy.”
Weisz said rents at 1133 now “fluctuate around $30” per square foot, down from well in the $30 range before the market downturn. Rents within the corridor average in the mid- to upper $20s per-square-foot, according to a consensus of online ads and brokers. Carcaterra said Normandy”™s asking rents range from $23.50 to $25.50 per square foot.
The recession has made traditional business tenants harder to come by, prompting several property owners to sell or lease to users not traditionally drawn to Platinum Mile. Fordham University has established a new campus at 400 Westchester Ave., previously occupied by Verizon along with adjacent 500 Westchester Ave., which was snapped up by Memorial Sloan Kettering Cancer Center.
Memorial Sloan Kettering plans to open a cancer outpatient treatment center there in two years. It joins a growing number of medical users, from the doctors within the ProMed portfolio to another practice, WestMed, which occupies 210 Westchester Ave.
It”™s a far cry from the corporate users Schulman had in mind when he developed all those office buildings a generation ago.
“That”™s progress. That”™s all I can say,” Schulman said.
