APPRAISAL REPORT
MARKET RENT ANALYSIS
FOR
RETAIL SPACE IN BUILDING
Located at
233 WEST STREET
On Pier 26 in Hudson River Park
NEW YORK, NY 10013
AS OF
JUNE 18, 2015
FOR
HUDSON RIVER PARK TRUST
PIER 40, 2ND FLOOR
353 WEST STREET
NEW YORK, NY 10014
BY
PATJO APPRAISAL SERVICES, INC.
245 PARK AVENUE, 39th FLOOR
NEW YORK, NY 10167
TEL: 800-977-2856 / FAX: 732-297-7220
PatjoAppraisal@aol.com / www.PATJO.com
FILE#CM052-0615
Your Contract # G4670
233 West Street-Pier 26 in Hudson River Park, New York, NY
PHOTOGRAPH OF SUBJECT BUILDING
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
September 9, 2015
Hudson River Park Trust
Pier 40, 2nd Floor
353 West Street
New York, New York 10014
Re:
Market Rental Study for Retail Space located in the building at
233 West Street on Pier 26 in Hudson River Park, New York, NY 10013.
Dear Sir/Madam,
In keeping with your request, we have conducted a market rental study for the retail space
in the building located at 233 West Street – on Pier 26 in Hudson River Park – on the
western waterfront of Downtown Manhattan, City and State of New York. The subject
building is a single-story metal and glass contemporary structure situated on one of the
revitalized piers projecting into the Hudson River and constitutes part of the Hudson River
Park. Pier #26 is situated on the west side of the West Side Highway (West Street),
between Hubert Street and North Moore Street in the Tribeca neighborhood of Lower
Manhattan. Based on our calculations, the subject building contains 9,364± square feet of
gross area at ground level and 570± square feet at second floor (penthouse) level. It also
has 5,293± square feet of outdoor patio space, 5,342± square feet of roof terrace and a
separate utility building close by containing 1,277± square feet. Approximately 57% of the
main building is currently occupied by a boathouse and the vacant portion (approximately
43%) is intended for restaurant use. Based on our calculations, the gross area to be leased
for restaurant use comprises of 4,052± square feet at ground floor level and 570± square
feet at second floor (penthouse level) for a total of 4,622± square feet. The building was
constructed in 2012-2013 at a cost of approximately $7.5 million and the vacant interior
space is still not yet completely finished. We have been informed that a Certificate of
Occupancy for the building has not yet been issued. The land area exclusively associated
with the subject building is approximately 19, 200 square feet. The remainder of dock/pier
land area is public space – part of the Hudson River Park.
Documents provided by the client indicate that the space to be leased for restaurant use
contains 3,735± square feet (3,135 sf of prime space and 600 sf of storage/utility space at
ground level), 460± square feet at second floor (penthouse) level, 3,500± square feet of
outdoor patio space and 4,460± square feet of roof terrace.
This report has been prepared in conformity with the Uniform Standards of Professional
Appraisal Practice (USPAP) and the Code of Professional Ethics & Standards of Professional
Appraisal Practice of the Appraisal Institute.
/Continues
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
Page 2/
Letter of Transmittal/
Based on our research and analysis, and based on the terms of the proposed lease, we
conclude that the annual market rental value for the subject space proposed to be leased,
as of June 18, 2015 is;
Three Hundred and Forty Thousand Dollars ($340,000) per annum.
Proposed lease of 3,135± sf of Retail Space @ $108.45/SF per annum = $340,000
The proposed lease calls for the Fixed Minimum Rent to be abated by one-third in the first
three years due to expected business disruption to be caused by proposed construction on
Pier 26. The Fair Market Rent estimate in this report does not take into consideration
the expected business disruption since it will be temporary in nature.
It was a pleasure serving you.
Respectfully Submitted,
PATJO Appraisal Services, Inc.
.....................................................................................…..
Patrick A. Josephs, M.S., MRICS, MAI, AI-GRS
NYS CREA # 46000007968
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
TABLE OF CONTENTS
PART ONE: INTRODUCTION
01.
02.
03.
05.
06.
08.
10.
10.
11.
11.
11.
11.
13.
Title page
Photograph of Subject Property
Letter of transmittal
Table of Contents
Certification
Assumptions and limiting conditions
Extraordinary Assumptions
Hypothetical Conditions
Purpose of the Appraisal
Intended User and Intended Use of Report
Definition of Value and Date of Value
Ownership History of Subject Property
Scope of Market Rental Survey
PART TWO: THE SUBJECT PROPERTY
14.
18.
20.
22.
23.
24.
27.
31.
Neighborhood Analysis
Regional Map & County Map
Neighborhood Maps
Tax Map of Subject Property
Aerial Photograph of Subject Property
Site and Improvement Description
Layout Plans of Subject Space
Photographs of Subject Property
PART THREE: MARKET AND COMPARABLE RENTAL ANALYSIS
34.
39.
40.
42.
48.
Retail Market Demand/Supply Analysis
Summary of Proposed Lease
Retail Market Rental Survey
Summary of Comparable Rentals
Analysis of Comparable Rentals
PART FOUR: RECONCILIATION
53.
Final Rental Value Opinion
54.
PART FIVE: ADDENDUM
Engagement Contract
Lease Abstract
Qualification of Appraiser
Appraiser’s License
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233 West Street-Pier 26 in Hudson River Park, New York, NY
CERTIFICATION
I (Patrick A. Josephs) certify that, to the best of my knowledge and belief:

The statements of fact contained in this report are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions and are my personal, impartial, and unbiased
professional analyses, opinions, and conclusions.

I have no present or prospective interest in the property that is the subject of this
report and no personal interest with respect to the parties involved.

I have no bias with respect to the property that is the subject of this report or to the
parties involved with this assignment.

My engagement in this assignment was not contingent upon developing or reporting
predetermined results.

My compensation for completing this assignment is not contingent upon the
development or reporting of a predetermined value or direction in value that favors
the cause of the client, the amount of the value opinion, the attainment of a
stipulated result, or the occurrence of a subsequent event directly related to the
intended use of this appraisal.

The reported analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Code of Professional
Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute.

The reported analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice.

The use of this report is subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives.

I have made a personal inspection of the property that is the subject of this report.

No one provided significant real property appraisal assistance to the person signing
this certification.

I have performed no services, as an appraiser or in any other capacity, regarding the
property that is the subject of this report within the three-year period immediately
preceding acceptance of this assignment.
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY

As of the date of this report, I (Patrick A. Josephs) have completed the continuing
education program of the Appraisal Institute.
...................................................................................
Patrick A. Josephs, MS, MRICS, MAI, AI-GRS
PATJO Appraisal Services, Inc.
September 9, 2015
………………………………
Date
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233 West Street-Pier 26 in Hudson River Park, New York, NY
ASSUMPTIONS AND LIMITING CONDITION
1. Ownership information and legal description were obtained from sources generally
considered reliable. Title to the property is assumed to be good and marketable unless
otherwise stated.
2. We have relied on various sources for economic and demographic data and other market
information. These sources are considered to be reliable and the information utilized is
believed to be accurate. However, no warranty is given for its accuracy.
3. A personal inspection of the property was made and some measurements were taken on
site. Area calculations and dimensions are based on these measurements. Plot sizes were
obtained from Tax Assessor’s record. Maps and sketches included in this report, if any, are
meant to assist the reader in visualizing the property. We have made no survey of the
property and assume no responsibility for the accuracy of any plans, maps or charts
supplied to us that have been included herein or relied upon.
4. It is assumed that there is full compliance with all-applicable federal, state and local
building and housing regulations and laws unless non-compliance is stated, defined and
considered in this report.
5. All the facts, conclusions and observations contained herein are consistent with
information available as of the effective date of this analysis. Forecasts are based on our
analysis and interpretation of market trends, economic conditions and historic operating
data for the subject property and other similar properties. No guarantee or representation
is made that forecasts made will materialize and we assume no liability for any unforeseen
precipitous change in the real estate market, the local, state or national economy.
6. The Bylaws and Regulations of the Appraisal Institute govern disclosure of the contents
of this report. Neither all nor part of the contents of this report shall be disseminated to the
public without the prior written consent and approval of the author.
7. The liability of PATJO Appraisal Services, Inc. and employees is limited to the fee
collected for this assignment and the analyst shall not be held liable in any cause of action
resulting in litigation for any dollar amount, which exceeds the total fee collected. There
shall be no liability to any third party.
8. We have no obligation to automatically update this report for events and circumstances
occurring after its effective date.
9. This report should be read and used in its entirety and not in parts. Separation of any
section or page from the main body of the report is expressly forbidden and invalidates the
conclusions/recommendation contained herein.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
10. The use of this report implies that all the limiting conditions stated in 1 through 9 above
have been read, fully understood and accepted by the user.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
EXTRAORDINARY ASSUMPTIONS
The Uniform Standards of Professional Appraisal Practice (2014-2015 Edition) defines
Extraordinary Assumption as follows;
An assumption, directly related to a specific assignment, as of the effective date of the
assignment results, which, if found to be false, could alter the appraiser's opinions or
conclusions.
UAPAP also has the following comment: Extraordinary assumptions presume as fact
otherwise uncertain information about physical, legal, or economic characteristics of the
subject property; or about conditions external to the property, such as market conditions or
trends; or about the integrity of data used in an analysis.1
We have made the following extraordinary assumptions:
1. That the Rentable Area provided by the client is correct. The rent will be calculated
using the Rentable Area provided by the client.
2. That the proposed use of the subject space as a restaurant is legally permissible
under New York City building and zoning codes.
3. That no percentage rent is due and payable for the duration of the lease.
4. That the tenant will spend the required minimum of $1,100,000 on improvement
work to the subject building and that all the proposed work will be completed prior
to the rent commencement date of May 1, 2016.
5. That the proposed lease terms are final and that the proposed lease will take effect
on the date of inspection, June 18, 2015.
HYPOTHETICAL CONDITIONS
The Uniform Standards of Professional Appraisal Practice (2014-2015 Edition) defines
Hypothetical Condition as follows;
A condition, directly related to a specific assignment, which is contrary to what is known by
the appraiser to exist on the effective date of the assignment results, but is used for the
purpose of the analysis.
USPAP also has the following comment: Hypothetical Conditions are contrary to know facts
about physical, legal, or economic characteristics of the subject property; or about conditions
external to the property, such as market conditions or trends; or about the integrity of data
used in an analysis.2
We have inferred the following hypothetical conditions:
1. None.
1
2
USPAP (2014-2015), The Appraisal Foundation, Page U-3.
ibid 1, Page U-3.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to determine the market rental value of the subject space in
the building located at 233 West Street on Pier 26 in Hudson River Park in Manhattan to be
leased for Restaurant Use. The tenant proposes to take a 10-year Lease with one 5-year
renewal option.
INTENDED USER AND INTENDED USE OF REPORT
The intended user of this report is Hudson River Park Trust. Hudson River Park Trust is a
New York State Public Benefit Corporation responsible for developing, operating and
maintaining Hudson River Park between 59th Street and Battery Park City on the west side
of Manhattan. The intended use of the appraisal report is to provide information in
connection with a potential disposition of the Trust’s leasehold interest under the
proposed lease. The use of this report is restricted to the client and its representatives for
the purpose specified herein. The use of this report by any other and for any other purpose
is unauthorized.
DEFINITION OF VALUE AND DATE OF VALUE
The objective of this assignment is to determine market rental value. Market rent is
defined by the Appraisal Institute3 as follows;
The most probable rent that a property should bring in a competitive and open market reflecting
all conditions and restrictions of the lease agreement, including permitted uses, use restrictions,
expense obligations, term, concessions, renewals, purchase options, and tenant improvements
(TIs).
The effective date of this value opinion is June 18, 2015. The property was inspected on
June 18, 2015. Data collection, analysis and the preparation of this report took place in the
days immediately subsequent to the inspection date.
OWNERSHIP HISTORY OF SUBJECT PROPERTY
Based on the public record, the fee simple interest in the land is owned by The State of New
York. However, the State of New York has appropriated partial interests in the land to
various other New York State and New York City agencies.
The property is subject to a long term ground lease between the State of New York, by and
through its Office of Parks, Recreation and Historic Preservation and its Department of
3
Appraisal Institute (2010) – The Dictionary of Real Estate Appraisal (Fifth Edition); Page 121.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
Environmental Conservation, and the Hudson River Park Trust, dated April 3, 1999 as
amended, conveying a possessory interest in the property pursuant to the Hudson River
Park Act approved and enacted as of September 8, 1998.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
SCOPE OF MARKET RENTAL STUDY
Formal instruction was received from Mr. Daniel P. Kurtz, CFO/EVP Finance & Real Estate
for the Hudson River Park Trust. The subject property was inspected on June 18, 2015 by
Patrick A. Josephs and Dustin Tenenbaum of PATJO Appraisal Services, Inc. in the company
of Mr. Daniel Kurtz and Ms. Nicole Dooskin (AVP – Planning & Real Estate) of the Trust.
The proposal is for the client to negotiate a 10-year lease with one 5-year renewal option
for the subject space.
To perform this appraisal, we took the following steps to gather, confirm and analyze
relevant data.

Physically inspected the interior and exterior of the subject building and the
surrounding area and take photographs.

Researched comparable rentals, inspected the exterior of the comparable properties
and took photographs.

Reviewed client-provided documents such as lease abstract (proposed lease terms),
site plans, building floor plans, Landlord and Tenant Scope of Work (where
applicable) and public records pertaining to the subject property.

Collected physical, economic and demographic information about the subject
neighborhood and the surrounding market area and confirm the information with
various sources.

Analyzed market information and developed indication of market rental value.
We have researched comparable rentals using various sources and we have confirmed the
details of these transactions to the best of our ability. Data sources include RealQuest,
CoStar, Real Estate Professionals (Brokers & Appraisers) and participants in the local real
estate market. Our research for rentals was limited to the Borough of Manhattan.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
NEIGHBORHOOD ANALYSIS
The subject property is located in Lower Manhattan, also known as Downtown Manhattan, in
the neighborhood referred to as Tribeca. Downtown Manhattan is the southernmost part of
the island of Manhattan, the main island and center of business and government of the City of
New York. The area is defined most commonly as the area delineated on the north by 14th
Street, on the east by the East River, on the south by New York Harbor, also knows as Upper
New York Bay and on the west by the Hudson River. When referring specifically to the Lower
Manhattan business district and its immediate environs, the northern border is commonly
designated as Chambers Street from near the Hudson River east towards the Brooklyn Bridge
entrances and overpass. The Lower Manhattan business district forms the core of the area
below Chambers Street. It includes the Financial District, often referred to as Wall Street, and
the World Trade Center site. City Hall is just to the north of the Financial District.
The subject property is also located in Manhattan Community District #1 which covers 1.5
square miles of the southernmost tip of Manhattan Island, including Ellis Island, Liberty
Island and Governors Island. The area is bordered by Canal Street to the north, the Hudson
River to the west and the East River to the east. It encompasses neighborhoods such as the
Financial District, Battery Park City, City Hall, Tribeca, Chinatown, Civic Center and Two
Bridges. The subject neighborhood is primarily commercial in character where 1-2 family
residences are a very small percentage of total land use accounting for only 0.1%.
Approximately 5.0% of all lots are multi-family residential; 9.2% are mixed-use residential
and 22.9% are commercial/office buildings. The area is quite mature and was built up
primarily in the 1800s.
The 16-acre World Trade Center site is located approximately ten-blocks to the southeast of
the subject property. The destruction of the two WTC office towers and the surrounding
buildings on September 11, 2001 constitutes the most dramatic terrorist attack on the United
States and it had a severe adverse impact on the local real estate market. Approximately 17
million square feet of prime commercial (office/retail) space was destroyed. The attack also
hastened a trend towards financial firms moving to midtown and contributed to the loss of
business on Wall Street, due to temporary and/or permanent relocation to New Jersey and
further decentralization with establishments transferred to cities like Chicago, Denver, and
Boston. On the other hand, this incident also spurred development on a scale never seen
before in Downtown Manhattan. The World Trade Center towers are being rebuilt and
notably the new One World Trade Center, formerly known as the “Freedom Tower”, is the
tallest skyscraper in the Western Hemisphere and the fourth-tallest in the world, at 1,776
feet, was completed in November 2014. Goldman Sachs is building a tower near the former
Trade Center Site. Tax incentives provided by federal, state and local governments
encouraged development. A new World Trade Center complex, centered on Daniel
Liebeskind’s “Memory Foundations” plans is being constructed in phases with several phases
completed. New residential buildings are being built and office space is being converted to
residential units, also benefiting from tax incentives. Wall Street itself was made primarily
pedestrian to guard against vehicular bombings. The area’s economy has rebounded
significantly since then. In October 2012, Hurricane Sandy ravaged portions of Lower
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233 West Street-Pier 26 in Hudson River Park, New York, NY
Manhattan with record-high storm surges from New York Harbor, severe flooding and high
winds causing power outages and disruption of mass transit systems. Again, there have been
extensive redevelopment and restoration activities in Lower Manhattan as a result and today
much of the real estate are being renovated and brought back to the market.
Other important sites in the Downtown Manhattan Area are the World Financial Center with
four office towers, Battery Park City, which is a large residential apartment community, South
Street Seaport, which is a seaside marketplace, and the New York Stock Exchange. Rebuilding
activities on the site and surrounding properties remains a huge tourist attraction as does
several stops within the Financial District itself, including the New York Stock Exchange
Building , the Federal Hall National Memorial, the Woolworth Building, 40 Wall Street
(Trump Building), the Standard Oil Building at 26 Broadway, Trinity Church, and the
American International Building to name a few.
The 2000 population of Community District #1, which covers a 1.5-square mile area, was
34,420 persons. This represented an increase of 35.7% since 1990. In the previous decade
(1980-1990), the population growth was 59.4%. Before September 11, 2001, there were a
number of programs aimed at attracting New Yorkers back to Downtown Manhattan to live.
That effort was dealt a severe blow on September 11, 2001 and immediately after the attack
on the World Trade Center, the State and Local governments unleashed a whole new
incentive package aimed at encouraging businesses and individuals to move to Downtown
Manhattan or to expand existing businesses in the area. Some of those incentive programs
remain in place today and have been successful as reflected in the 77.2% growth in the
population between the 2000 and 2010 Census when the recorded population count was
60,978. Previously, the neighborhood was considered to be primarily a destination for daytime traders and office workers from around New York City and the surrounding areas. The
neighborhood now has a growing number of full-time residents, with a 2008 estimate of
56,000 people living in the Financial District, an increase from the 15,000 to 20,000 people
estimated to be living there in 2001. Many of the buildings in the area are being converted
from office space to apartments and condominiums and New York University (NYU) has
added dormitory residences in the area.
In 2014, approximately 3,671 persons or 6.0% of the population received public assistance.
This figure represents an increase of 11.18% over the 3,302 persons or 9.6% of the
population who were assisted in 2005. This is an indication that the population of
Community District #1 might be getting poorer. Based on income figures, the subject
neighborhood may be described as middle to upper-income neighborhood.
The 2014 Land-use breakdown of Manhattan Community District #1 is as follows;
Residential 1-2 Family
0.1%
Multi-Family Residential
5.4%
Mixed Resid. /Commercial
9.3%
Commercial / Office
22.9%
Industrial
1.0%
Open Space / Recreation
3.7%
Institutions
28.0%
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233 West Street-Pier 26 in Hudson River Park, New York, NY
Other
Vacant Land
28.6%
0.9%
Community District #1 has seven public schools and seven post secondary degree granting
institutions. There are several colleges nearby, including Borough of Manhattan Community
College, New York Law School, Pace University, New York University School of Business and
College of New Rochelle – DC 37 Campus.
The closest hospital to the subject property is New York Downtown Hospital at 170 William
Street, a 300-bed facility.
New York City, like most of the country is enjoying low unemployment and rising real estate
prices and rents. The Manhattan Chambers of Commerce has been actively involved in the
revitalization of the area. According to the 2010 Census, the population of Manhattan
Community District #1 was 60,978 persons in 13,724 households. There were 16,141
housing units of which 13,724 were occupied housing units. Owner-occupation represents
25.0% of all occupied units or 3,278 units and 75.0% of all occupied units are renters. The
median household income was $104,116 in 2008. The American Community Survey 20102012 3-Year estimates reported median household income at $111,579 for community
districts 1 & 2 and median family income at $176,367. The per capita income was reported at
$96,931. The population is highly educated with almost 73.0% of the population having
completed high school and some college and 40.8% completed a Bachelor degree or higher.
Approximately 70.6% of the population in Community District #1 is employed in a
professional or related occupation, while 25.6% are involved in the management, business
and financial operations. 21.7% are employed in sales and office occupations and 5.3% in
Service Occupations. Recreational facilities in Manhattan District #1 include Battery Park (20
acres) at State Street and Whitehall Street, City Hall Park (8.8 acres) at Broadway and
Chambers Street and Foley Square Park (2.5 acres) at Worth Street and Centre Street. The
Staten Island Ferry runs from Battery Park to Staten Island every day of the week and the
terminal recently underwent a comprehensive overhaul.
Lower Manhattan is the fourth largest business district in the United States, after Midtown
Manhattan, the Chicago Loop, and Washington D.C. and will regain the title of third after the
completion of 1 World Trade Center, and the three other skyscrapers at the site. This
neighborhood is home to the New York Stock Exchange and the corporate headquarters of
NASDAQ, representing the world’s largest and second largest stock exchanges, respectively.
Other large companies with headquarters in Lower Manhattan include, Ambac Financial
Group, AOL, EmblemHealth, Standard & Poor, Goldman Sachs, IBT,Media, Nielsen Company,
PRNewswire, and Verizon Communication. Over the last two years, there has been a steady
increase of Technology companies moving into Lower Manhattan.
In conclusion, the subject neighborhood is considered stable. The economic trend of the
Downtown Manhattan neighborhood is encouraging. The flight of individuals and businesses
from Downtown after the World Trade Center attack was much less than anticipated. The
cleanup of the trade center site was completed for the one-year anniversary and the city has
rebuilt the damaged subway system. The rebuilding of the World Trade Center towers are in
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233 West Street-Pier 26 in Hudson River Park, New York, NY
full swing and the space is currently being leased. Access to public transportation is good.
There are several ferry services linking the area with Staten Island, La Guardia Airport, Bay
Ridge in Brooklyn, various points in New Jersey, Ellis Island and the Statue of Liberty.
Commercial support is excellent.
Public services in the area such as police, fire, sanitation and medical are generally as good as
other areas of the Borough. The area has a good mix of residential, commercial and
recreational uses and it has become a magnet for tourist attraction. Occupancy level in
residential and commercial properties appears to be very stable. It is true to say that
Downtown Manhattan has fully recovered from the September 11, 2001 disaster, and
Hurricane Sandy in October 2012, has provided an opportunity for significant renovation and
further building activity in this section of the city.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
REGIONAL MAP
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233 West Street-Pier 26 in Hudson River Park, New York, NY
MAP OF MANHATTAN
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233 West Street-Pier 26 in Hudson River Park, New York, NY
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233 West Street-Pier 26 in Hudson River Park, New York, NY
NEIGHBORHOOD MAP
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233 West Street-Pier 26 in Hudson River Park, New York, NY
TAX MAP OF SUBJECT PROPERTY
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233 West Street-Pier 26 in Hudson River Park, New York, NY
AERIAL PHOTOGRAPH OF SUBJECT PROPERTY
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233 West Street-Pier 26 in Hudson River Park, New York, NY
SITE AND IMPROVEMENT DESCRIPTION
The subject property has a very unusual location. It is part of Pier 26 in Hudson River Park.
Hudson River Park is a reclaimed public space located on the edge of the Hudson River on
the west side of Manhattan and it includes several rehabilitated piers. The West Side
Highway or West Street is the closest street and the adjacent area is called the Tribeca
neighborhood of Manhattan. The subject property has no street frontage but it is identified
as 233 West Street. It is further identified on the New York City Tax Map as Block 184, Lot
8.
THE LAND: The subject building is surrounded by dock space. The dock that projects into
the Hudson River for approximately 950 feet is part of an underwater parcel that is 7.87
acres in size. The site is located on the west side of the West Side Highway (aka West
Street), between N Moore Street and Hubert Street. It has frontage of 344.64-feet along the
Hudson River. The site is rectangular in shape and contains a total of 7.87 acres (342,930±
square feet) of pier, dock, bulkhead and underwater land. We estimate the dock area
dedicated exclusively to the subject building as 19,200± square feet. The remainder of the
dock space is part of the public space called Hudson River Park. The West Side Highway
(aka West Street) is a seven-lane, macadam-paved, tree lined divided roadway running in a
north-south direction and conveying traffic in both directions. It is a well travelled
roadway with access to the George Washington Bridge to the north and the Holland and
Lincoln Tunnels in Downtown and Midtown Manhattan respectively. The property is
located in the M2-3: Manufacturing zoning district.
THE SUBJECT BUILDING: The subject building is a single-story contemporary structure
that was constructed on Pier 26 in 2012-2013 at a cost of approximately $7.5 million. We
have been informed that the intended uses are restaurant and boathouse but an official
Certificate of Occupancy was not yet issued. Part of the structure (±57%) is currently
occupied by a boating business but the section intended for restaurant use (±43%) is still
vacant. The structure is made of a steel frame with metal and glass enclosure. It is irregular
in shape, surrounded by dock space and it has patios and a roof deck suitable for outdoor
recreational activities. Based on a combination of on-site measurements and the review of
building plans, we estimate the area of the various sections as follows;
Gross Area of Main Structure
Gross Area of Boathouse
Gross Area of Restaurant
Outdoor Patio/Terrace to Restaurant
Roof Terrace above Restaurant
Utility Building serving main structure
9,364± square feet (foot print)
570± square feet (penthouse)
5,312± square feet
4,052± square feet
5,293 square feet
5,342 square feet
1,277 square feet
Floor plans provided by the client break down the space in the building as follows;
1. Restaurant
PATJO Appraisal Services, Inc.
1,670 square feet.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
2. Restaurant Toilets
3. Mechanical Room
4. Kitchen
5. Dumbwaiter to concession
6. Office
7. Walk-in refrigerator
8. Trash Room
9. Boathouse
10. Terraces
11. ADA accessible elevator to roof
245 square feet
195 square feet
900 square feet
107 square feet
125 square feet
95 square feet
5,470 square feet
3,200 square feet
195 square feet
The ceiling height in the restaurant is approximately 14 feet. Heat and hot water is fueled
by gas. Air conditioning is fueled by electricity. A utility building (1,277± square feet)
located between the main structure and the West Side Highway, contains the various utility
connections and meters necessary for the efficient operation of the main structure in
addition to storage and waste disposal area. The main building and the utility building are
both located near the eastern end of Pier 26, within 150 feet of the West Side Highway. We
have been informed that the owner (Hudson River Park Trust) has plans to develop Pier 26
further, including the construction of a two-story building at the western end of the Pier.
THE SUBJECT SPACE: According to the client, the space to be leased for use as a restaurant
comprises of 3,135± square feet in the main building at ground level and 460± square feet
at second floor (penthouse) level, 400± square feet in the utility building, 3,500± square
feet of outdoor patio space and 4,460± square feet of roof terrace. The interior of the space
in the main building is unfinished, needing wall, floor and ceiling finishes. The walls are
mostly unfinished concrete blocks and unfinished plasterboard and the floor is concrete
slab. The ceiling is open with exposed metal sheeting and roof trusses. The interior space is
divided among dining room, kitchen, lavatories, administrative office, walk-in refrigeration
room, store room, trash room and mechanical room.
Exterior walls are complete and patios and roof deck is also complete. The passenger
elevator and staircases to the roof deck are also complete. HVAC system is in place.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
SKETCH & AREA CALCULATION OF SUBJECT SPACE
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233 West Street-Pier 26 in Hudson River Park, New York, NY
LOCATION OF SUBJECT BUILDING ON PIER 26
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
LAYOUT OF GROUND FLOOR OF SUBJECT BUILDING
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
LAYOUT OF ROOF TERRACE – SUBJECT BUILDING
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
LAYOUT OF ACCESSORY BUILDING
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233 West Street-Pier 26 in Hudson River Park, New York, NY
PHOTOGRAPHS OF SUBJECT PROPERTY
VIEW N ACROSS WESTSIDE WATERFRONT
EAST ELEVATION OF BUILDING
WEST ELEVATION OF BUILDING
PATIO ON WEST SIDE OF BUILDING
INTERIOR OF RESTAURANT/DINING AREA
KITCHEN/DUMBWAITER & STAIRS TO ROOF
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233 West Street-Pier 26 in Hudson River Park, New York, NY
PHOTOGRAPHS OF SUBJECT PROPERTY
INTERIOR OF RESTAURANT/LAVATORIES
INTERIOR – PROPOSED COLD STORAGE ROOM
FOOD PREP AREA – SECOND FLOOR LEVEL
ROOF TERRACE LOOKING NORTH
PROPOSED CONSTRUCTION SITE ON PIER
VIEW N ALONG BIKE PATH ALONG WEST ST
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233 West Street-Pier 26 in Hudson River Park, New York, NY
PHOTOGRAPHS OF SUBJECT PROPERTY
PARK ON PIER 25 – SOUTH OF SUBJECT
UTILITY BUILDING ON PIER 26
ROOF TERRACE LOOKING SOUTH
PASSENGER ELEVATOR AT ROOF TERRACE
VIEW W ACROSS HUDSON RIVER - NEW JERSEY
VIEW EAST ACROSS WEST SIDE HIGHWAY
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233 West Street-Pier 26 in Hudson River Park, New York, NY
MANHATTAN RETAIL MARKET DEMAND/SUPPLY ANALYSIS
We have conducted research into the New York City (Manhattan) retail rental market in
general and the Downtown Manhattan sub-market in particular.
Overview
According to CoStar4, the New York City (Manhattan) retail market experienced a slight
improvement in market conditions in the first quarter of 2015 (1Q2015). The vacancy
rate went from 3.7% in the 4Q2014 to 3.4% in the 1Q2015. Net absorption was positive
91,271 square feet, and vacant sublease space increased by 14,135 square feet. Quoted
rental rates decreased from 4Q2014 levels, ending at $88.26 per square foot per annum.
One retail building with 24,682 square feet of retail space was delivered to the market in
the 1Q2015, and 958,913 square feet of retail space was still under construction at the end
of the 1Q2015.
Inventory
During 1Q2015, one building totaling 24,682 square feet was completed in the New York
City retail market. Over the previous four quarters, a total of 112,612 square feet of retail
space was built in New York City (Manhattan). Two buildings with 32,433 square feet were
completed in 4Q2014, one building with 55,497 square feet completed in 3Q2014. There
were 958,913 square feet of retail space under construction at the end of 1Q2015. The
space completed in 1Q2015 is now 39% occupied. Total retail inventory in the New York
City market area amounted to 51,089,072 square feet in 4,282 buildings and 11 centers at
the end of 1Q2015. This is broken down into General Retail (1,696,484 square feet); Power
Centers (791,154 square feet) and Shopping Centers (1,483,195 square feet). No statistics
was available for Shopping Malls for the 1Q2015.
The Retail Market in New York City has been experiencing a decline in inventory for the
past four quarters, which has continued to the end of 1Q2015. The inventory reported at
the end of 4Q2014 was 51,161,717 square feet of gross leasable area, a decline of 0.14% in
the inventory of 51,089,072 square feet reported at the end of 1Q2015. This compared to
the 51,296,161 square feet reported at the end of 3Q2014, and 51,307,129 square feet
reported at the end of 2Q2014. The gross leasable area available at the end of 1Q2014 was
51,407,462, a 0.62% or 318,390 square feet decline over the past year.
According to CoStar, the Downtown Manhattan retail market total inventory is 3,697,768
square feet of gross leasable area (GLA) in 370 buildings as at the end of 1Q2015. This is
broken down into 3,636,604 square feet of GLA in the General Retail Market segment; no
Mall Market or Shopping Center Market and 61,164 square feet of space in the Power
Center Market segment of the Downtown Retail Market at the end of 1Q2015. Total retail
inventory in the Tribeca submarket is 876,090 square feet of gross leasable area in 84
buildings as of the end of the 1Q2015, all of it in the General Retail category.5 The subject
4
5
The CoStar Retail Report; New York City Retail Market; First Quarter 2015.
Ibid.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
property is located in the Manhattan neighborhood of Tribeca and the subject space is
classified as General Retail space.
Leasing Activities
Net absorption of retail space was moderate in New York City in the 1Q2015, with positive
91,271 square feet absorbed in the quarter. In 4Q2014, net absorption was negative
155,321 square feet, while in 3Q2014, absorption came in at negative 174,345 square feet.
In 2Q2014, negative 155,105 square feet was absorbed in the market.
Broken down by sub-markets, the retail market shows the following for the past four
quarters;
Sub-markets
Downtown
Midtown
Midtown South
Uptown
1Q2015
7,968 sf
100,786 sf
(13,115) sf
(4,368) sf
Net Absorption
4Q2014
3Q2014
(27,949) sf
(82,020) sf
(118,344) sf (38,212) sf
62,682 sf
(11,964) sf
(71,710) sf
(42,149) sf
2Q2014
(102,442) sf
(10,512) sf
(46,678) sf
4,527 sf
Source: The CoStar Retail Report (First Quarter 2015, New York City).
The Downtown sub-market reported two positive net absorption, 7,968 square feet in the
1Q2015 and positive 3,919 square feet at the end of 1Q2014, a year ago. In the three
quarters prior to 1Q2015, there was declining net absorption of negative 102,442 square
feet in 2Q2014, negative 82,020 square feet in 3Q2014, and negative 27,949 square feet in
4Q2014. The Uptown sub-market reported two positive net absorption 4,527 square feet
at the end of 2Q2014 and 25,580 square feet, a year ago, at the end of 1Q2014. It reported
negative net absorption of 42,149 square feet in 3Q2014, 71,710 square feet at the end of
4Q2014, and 4,368 square feet at the end of 1Q2015. The Midtown Manhattan submarket
reported its first positive net absorption for the last four quarters at the end of 1Q2015
with a reported positive 100,786 square feet absorbed. The reported net absorption for
the four quarters of 2014 has been negative. The Midtown South submarket reported
negative 13,115 square feet at the end of 1Q2015 and negative net absorption for the first
three quarters of 2014. However the year ended with a positive 62,682 square feet net
absorption at the end of 4Q2014. Downtown submarket reported only one positive quarter
(4Q2013), compared to negative 4,774 square feet, 10,826 square feet and 27 square feet at
the end of 3Q2013, 2Q2013 and 1Q2013 respectively. There has been some reported
relocation of companies to space Downtown, following the relocation of office tenants and
increased residential occupancy in this submarket.
Rental Rates
According to CoStar, the average quoted asking rental rate in the New York City retail
market, all classes, is down below the previous quarter, and down from the level four
quarters ago. Average asking rent ended the 1Q2015 at $88.26 per square foot per annum.
That compares to $93.75 per square foot in the 4Q2014, and $93.32 per square foot at the
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233 West Street-Pier 26 in Hudson River Park, New York, NY
end of the 2Q2014. This represents a 5.9% decrease in rental rates in the current quarter,
and a 5.73% decrease from four quarters ago.
The quoted rates for the Manhattan sub-markets at the end of 1Q2015 reveal the following:
the Downtown submarket ended the quarter at $145.71, compared to $92.64 for the
Midtown sub-market, $105.90 for the Midtown South submarket, and $62.67 for the
Uptown submarket.
The quoted rental rates for the submarket over the past four quarters are as follows:
Sub-markets
Downtown
Midtown
Midtown South
Uptown
1Q2015
$145.71
$92.64
$105.90
$62.67
Average Asking Rental rates
4Q2014
3Q2014
2Q2014
$129.37
$126.60
$129.37
$132.47
$135.20
$126.35
$107.29
$104.93
$103.75
$66.88
$68.24
$63.18
Source: The CoStar Retail Report (First Qurter 2015, New York City).
The Downtown submarket shows an increasing trend over the past four quarters with a
dramatic change between the end of 4Q2014 and 1Q2015. The average quoted rental rate
at the end of 4Q2014 was $129.37/SF, indicating an increase of 12.63%. In 3Q2014 the
Downtown rental rate was $126.60/SF indicating a 2.14% decline from the 2Q2014. The
Downtown sub-market is the only sub-market to show an increase in quoted rental rates
over the last quarter as tenant’s desires have shifted into this market due to the migration
of office tenants and the development of residential conversions in this area. The
completion and further development of the World Trade Center buildings and further
conversion of office space into residential units should continue to fuel the demand for
retail space.
Availability Rates
According to CoStar, the New York City (Manhattan) retail vacancy rates fell in the first
quarter of 2015 (1Q2015), ending the quarter at 3.4%. Over the previous four quarters, the
market has seen an overall increase in the vacancy rate, with the rate going from 3.3% in
the 2Q2014 to 3.7% at the end of the 3Q2014, and 4Q2014, to 3.4% in the 1Q2015.
Broken down by Sub-markets, the retail market shows the following:
Sub-markets
Downtown
Midtown
Midtown South
Uptown
1Q2015
6.9%
2.9%
3.2%
3.3%
Vacancy Rates
4Q2014
3Q2014
7.9%
8.9%
3.8%
3.3%
3.0%
3.5%
3.2%
2.9%
2Q2014
6.9%
3.1%
3.4%
2.6%
Source: The CoStar Retail Report (1Q2015, New York City).
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233 West Street-Pier 26 in Hudson River Park, New York, NY
There appears to be some volatility in the New York City retail market especially in the
Downtown sub-market, which appears to be experiencing some revitalization. The vacancy
rate in this sub-market has declined over the past three quarters, but remains higher than
in the other sub-markets. This area was hardest hit by the event of Hurricane Sandy in
October 2012 but, is beginning to show evidence of revitalization and growth. While there
has been the addition of office and residential space to the Downtown Manhattan area,
there has been a slower rate of growth in retail space addition. Demand for space in this
area has been growing to support the growth in business activities.
New York City (Manhattan) Retail Market Statistics
Period
Total
Vacancy Rate Net Absorption
Inventory (sf)
(sf)
1Q2015
51,089,072
3.4%
91,271
4Q2014
51,161,717
3.7%
(155,321)
3Q2014
51,296,161
3.6%
(174,345)
2Q2014
51,307,129
3.3%
(155,105)
Quoted
Rate/sf
$88.26
$93.75
$95.29
$93.32
Source: The CoStar Retail Report (First Quarter 2015, New York City).
New York City (Manhattan) Retail Sub-Market Statistics
Sub-Market
Total Inventory Vacancy Rate Net Absorption
(sf)
YTD (sf)
Downtown
3,697,768
6.9%
7,968
Midtown
16,364,986
2.9%
100,786
Midtown South 16,386,783
3.2%
(13,115)
Uptown
14,639,535
3.3%
(4,368)
TOTALS
51,089,072
3.4%
91,271
Quoted
Rate/sf
$145.71
$92.64
$105.90
$62.67
$99.26
Source: The CoStar Retail Report (First Quarter 2015, New York City).
The General Retail Submarket Statistics for New York City (Manhattan) are as follows;
Sub-Market
Total
Inventory (sf)
City Hall
1,675,380
Financial District
328,602
Greenwich Village
1,945,154
Tribeca
875,090
World Trade Center 350,296
Vacancy Rate
2.2%
34.7%
1.4%
1.4%
0.00%
Net Absorption
YTD (sf)
2,968
8,000
(12,727)
(3,000)
0
Quoted
Rate/sf
$148.57
$0.00
$92.20
$0.00
$132.00
Source: The CoStar Retail Report (First Quarter 2015, New York City).
Real Estate Board of New York (REBNY) Retail Market Report
The Spring 2015 REBNY Retail Report showed ground floor asking rents increasing in all
but one of the corridors surveyed, year over year. The report stated that the physical
characteristics of the space (street/avenue frontage, ceiling height, presence of below or
above grade space) have a significant impact on its rental value.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
Manhattan Average Asking Rent Range: Major Retail Neighborhoods (All Available Space)
Neighborhood
Eastside
Westside
Midtown
Midtown South
Downtown
Upper Manhattan
Manhattan
Spring 2015
$188
$144
$191
$145
$143
$72
$153
Spring 2014
$189
$145
$190
$136
$130
$65
$139
% Change
-1%
-1%
+1%
+7%
+10%
+11%
+10%
Cushman & Wakefield Retail Market Report
According to Cushman and Wakefield6, the average asking retail rent for the area south of
Chambers Street in Lower Manhattan decreased slightly from $406 psf at the close of 2014
(4Q2014) to $394 psf at the end of 1Q2015. However, asking rent was up 57.6% from one
year ago (since 1Q2014). In the past year, the retail space availability rate decreased from
9.1% to 8.6%. New retail leases in the 1Q2015 include restaurant giant Nobu which will
expand into almost 15,000 square feet at 195 Broadway, Open kitchen which committed to
7,700 square feet at 120 Wall Street, and Starbuck’s new lease at 14 Wall Street for 700
square feet. Growth in the demand for retail space Downtown Manhattan has been fueled
by increase in tourist volume and the growth in hotel rooms.
6
Cushman & Wakefield; Market Beat; Retail Snapshot (1Q2015).
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233 West Street-Pier 26 in Hudson River Park, New York, NY
SUMMARY OF PROPOSED LEASE
A summary of the proposed lease for the subject space is as follows;
LANDLORD:
Hudson River Park Trust.
TENANT:
City Vineyard & Wine Garden, LLC.
LOCATION:
Pier 26 in Hudson River Park, 233 West Street, New York, NY
LEASED SPACE:
Ground Floor 3,735± sf Rentable Area
Second Floor 460± sf Rentable Area
TOTAL
4,195± sf Rentable Area
Outdoor Patio
3,500± sf Rentable Area
Outdoor Roof Terrace
4,460± sf Rentable Area
Trash Room in Utility Bldg.
400± sf Rentable Area
LEASE TERM:
10 Years, to expire 12/31/2025 + one 5-year renewal
RENT:
Initial Rent of $18,750 monthly or $225,000 per annum.
($53.63/SF) starting in May 2016. Rent abated by $150,000 in
first three years in-lieu of Tenant Improvement Allowance.
Unabated rent in year 3 will be $300,000 or $71.51/SF.
Plus Percentage rent – 5% of Gross Revenue over $4,000,000.
ESCALATION:
3% per annum.
COMMENT:
The tenant will pay an initial security deposit of $100,000. The
lease calls for the tenant to pay all utilities, maintenance and
repair. Tenant required to spend no less than $1,100,000
($262.22/SF) on Tenant Improvement. The tenant, at his own
cost and expense, will make significant improvements to the
subject space. The subject property pays no Real Estate Taxes.
Fixed Minimum Rent to be abated by one-third in the first
three years due to expected business disruption caused by
proposed construction on Pier 26. Assuming a lease
commencement date of June 2015, the tenant will effectively
enjoy a one year rent free period (June 2015 – May 2016).
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233 West Street-Pier 26 in Hudson River Park, New York, NY
RETAIL MARKET RENTAL SURVEY
We have researched the retail rental market in the subject neighborhood and other similar
neighborhoods in Manhattan for recently rented space and space currently available for
rent that is similar to the subject space. The subject space is rather unique both in terms of
its location on a pier and its physical characteristics (design and layout). The space is new,
it is located in a free standing building, it enjoys spectacular views of the Hudson River, and
it has a large roof terrace and outdoor patios that can be used for outdoor dining on a
seasonal basis.
The following transactions were considered in arriving at a market rental value for the
subject space.
RESULT OF RFP PROCESS FOR SUBJECT SPACE
We have been informed by the client that a Request for Proposal (RFP) was issued in late
2013 for prospective tenants to bid for the leasing of the subject space (Pier 26
Restaurant). The RFP was widely advertised. Three submitted proposals were deemed
compliant with the RFP requirements and each contemplated similar build-out costs. The
respondent with the highest rent offer was conditionally selected in July 2014. Negotiations with
that conditionally selected respondent (Respondent 1) were terminated in February 2015 when
the restaurateur declined to execute the draft lease, citing seasonality and other business risk
concerns at the subject location. The other two finalist RFP respondents were then asked to
update their financial offers in March 2015, which they both did. The RFP respondent with the
next highest offer (Respondent 2) was then selected. The annual rent offers for all three RFP
respondents is depicted below:
Annual Rental Offer Comparison
(as of March 2015)
Year
1
2
3
4
5
6
7
8
9
10
Total
Respondent 1
(declined to execute)
250,000
264,970
281,250
300,000
318,750
337,500
356,250
375,000
393,750
412,500
3,289,970
Respondent 2
(prospective lessee)
225,000
250,000
275,000
300,000
309,000
318,270
327,818
337,653
347,782
358,216
3,048,739
Respondent 3
180,000
184,000
190,344
196,054
201,936
207,994
214,234
220,661
227,281
234,099
2,056,603
Tenant work offsets of approximately $105,000 (total) for Respondent 1 and $150,000 (total) during the first three years for
Respondent 2 and Respondent 3 included in each rent schedule.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
ANALYSIS OF LEASES FOR SIMILAR USES AT OTHER MANHATTAN LOCATIONS
Tenant/Concessionaire:
Location:
Type of Business:
Space Leased:
Lease Date:
Current Rent:
Chef Driven
Union Square Park in Union Square
Restaurant
2,850± sf indoor space; 1,428± sf outdoor space + subway kiosk.
03/26/2012
$318,270 per annum (or $111.67/SF of indoor space).
Tenant/Concessionaire:
Location:
Type of Business:
Space Leased:
Lease Date:
Current Rent:
P.D. Hurley
Pier 84 at 42nd Street – Hudson River Park
Restaurant
2,346± sf of indoor space and 3,100± sf of outdoor space.
02/19/2013
$254,616 per annum (or $108.53/SF of indoor space).
Tenant/Concessionaire:
Location:
Type of Business:
Space Leased:
Lease Date:
Current Rent:
Merchant #2 & #3
Pier 15 at South St Seaport Ferry Terminal – East River Esplanade
Restaurant & Bar
5,548± sf of indoor space and 2,850± sf of outdoor space.
03/01/2012
$358,000 per annum (or $64.53/SF of indoor space).
Tenant/Concessionaire:
Location:
Type of Business:
Space Leased:
Lease Date:
Current Rent:
Merchant #1
Pier 62 at 22nd Street – Chelsea Piers in Hudson River Park
Beer Garden
6,000± sf of outdoor space.
04/14/2014
$220,000 per annum (or $36.67/SF of outdoor space).
It is our opinion that the location of the subject building is inferior to all four properties listed
above.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
RETAIL RENTAL NUMBER ONE
416-424 Washington Street, New York, NY 10013
BUILDING
Type: 5-Sty Mixed-Use Bldg
Monthly Rent: $13,417
Building Size: 66,400± sf
Annual Rent: $115.00/SF
Leased Space: 1,400± sf
Date: October 2014
COMMENT
This property is situated on the southwest corner of Washington Street and Vestry Street in
the Tribeca section of Manhattan. The site is improved with a five-story condominium
apartment building with a penthouse floor and retail space on the ground floor. The site
contains 24,086± square feet. The building was constructed in the early 1900’s. The total
gross building area is 66,400± square feet above grade. The building is called River Lofts.
The building was converted to condominium in 2003. It was reported that some ground
floor retail space was leased in October 2014 to Reines Gallery. The tenant pays all utilities.
The total rentable area at street level is 1,400 sf and the annual rental was $161,000 which
is equivalent to $115.00/SF. The Landlord provided full build-out.
Source: Broker - CoStar -
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233 West Street-Pier 26 in Hudson River Park, New York, NY
RETAIL RENTAL NUMBER TWO
508 Greenwich Street, New York, NY 10013
BUILDING
Type: 4-Sty Mixed Use
Monthly Rent: $15,000
COMMENT
Building Size: 5,800± sf
Annual Rent: $124.14/SF
Leased Space: 1,450± sf
Date: January 2015
This property is situated on the west side of Greenwich Street, between Canal Street and
Spring Street in the SoHo section of Lower Manhattan. The site is improved with a fourstory masonry attached building with commercial space on the ground floor and
apartments above. The site contains 2,000± square feet. The building was constructed in
the 1900’s and extensively renovated in 2005. The total gross building area is 5,800±
square feet above grade. The ground floor commercial space was previously home to the
508 Gastro Brewery, a restaurant and bar that operated in the building for six years. The
space was previously occupied by a restaurant, and is fully fixtured and licensed.
This ground floor space was reportedly leased in January 2015 to Houseman (a Restaurant)
at a rent of $15,000 monthly. The tenant pays electric. The annual rental is equivalent to
$124.14/SF. At the time of inspection, the new restaurant was in operation.
Source: Broker - CoStar
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233 West Street-Pier 26 in Hudson River Park, New York, NY
RETAIL RENTAL NUMBER THREE
77-79 Hudson Street, New York, NY 10013
BUILDING
Type: 6-Sty Mixed-Use
Monthly Rent: $28,000
COMMENT
Building Size: 7,965± sf
Annual Rent: $101.82/SF
Leased Space: 3,300± sf
Date: June 2015
This property is situated on the west side of Hudson Street, between Harrison and Jay
Streets in the Tribeca section of Lower Manhattan. The site is improved with a six-story
masonry attached building with condominium apartments above commercial space on the
ground floor for a total of 7,965± square feet. The leased space comprises of 1,600 square
feet of retail space at street level and finished basement for a total of 3,300 square feet. The
site contains 2,000± square feet. The building was constructed in 1910.
The commercial space on the ground floor and in the basement was rented in June 2015 for
restaurant use. The rent is $28,000 per month. The tenant pays all utilities. The space was
previously occupied by a restaurant, and is fully fixtured and licensed. The annual rental is
equivalent to $101.82/SF.
Source: Broker – Danielle Lacko – 917-826-2809
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
RETAIL RENTAL NUMBER FOUR
152 Franklin Street, New York, NY 10013
BUILDING
Type: 7-Sty Mixed Use
Monthly Rent: $25,000
COMMENT
Building Size: 25,000± sf
Annual Rent: $120.00/SF
Leased Space: 2,500± sf
Date: April 2015
This property is situated on the south side of Franklin Street, between Varick Street and
Hudson Street in the Tribeca section of Lower Manhattan. The site is improved with a
seven-story masonry attached condominium apartment building with commercial space on
the ground floor. The site contains 4,375± square feet. The building was constructed in
1915 and it has been renovated many times over the years. The total gross building area is
25,000± square feet above grade. The ground floor commercial space of 2,500 square feet
comes with finished basement space of 1,300 square feet.
This ground floor and basement was available for leased in April 2015 at a rent of $25,000
monthly. The tenant will pay all utilities and a proportionate share of increases in real
estate taxes over the base year. The annual asking rental is equivalent to $120/SF. It was
reported that a lease is currently pending but not yet signed.
Source: Broker - Herbert Chou – 212-380-2417
PATJO Appraisal Services, Inc.
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233 West Street-Pier 26 in Hudson River Park, New York, NY
RETAIL RENTAL NUMBER FIVE
132 Thompson Street, New York, NY 10012
BUILDING
Type: 6-Sty Mixed Use
Monthly Rent: $9,525
COMMENT
Building Size: 24,522± sf
Annual Rent: $127.00/SF
Leased Space: 900± sf
Date: November 2014
This property is situated on the east side of Thompson Street between Prince Street and
West Houston Street in the SoHo section of Lower Manhattan. The site is improved with a
six-story masonry attached apartment building with commercial space on the ground floor.
The site contains 5,760± square feet. The building was constructed in the 1920s and it
contains 39 apartments and two commercial units. The total gross building area is 24,522±
square feet above grade. The ground floor commercial space comes with unfinished
basement.
This ground floor was reportedly leased in November 2014 to Thompson Chemists at a rent
of $9,525 monthly. The tenant pays electricity. The annual rental is equivalent to
$127.00/SF.
Source: Broker – New York Commercial Real Estate Services – 212-420-9435
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233 West Street-Pier 26 in Hudson River Park, New York, NY
RETAIL RENTAL NUMBER SIX
547-549 Greenwich Street, New York, NY 10013
BUILDING
Type: 6-Sty Mixed Use
Monthly Rent: $18,004
COMMENT
Building Size: 20,068± sf
Annual Rent: $149.00/SF
Leased Space: 1,450± sf
Date: March 2015
This property is situated on the southeast corner of Greenwich Street and Charlton Street in
the SoHo section of Lower Manhattan. The site is improved with a six-story masonry co-op
apartment building with commercial space on the ground floor. The site contains 3,750±
square feet. The building was constructed in the 1900s. The total gross building area is
20,068± square feet above grade. The building contains 11 apartments and ground floor
commercial space.
A section of the ground floor (adjacent to an existing restaurant) was reportedly leased in
March 2015 to Oishi Judo at a rent of $18,004 monthly. It was reported that this is a gross
rent with the Landlord paying all utilities. The annual rental is equivalent to $127.00/SF.
Source: Broker – New York Commercial Real Estate Services – 212-420-9435
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233 West Street-Pier 26 in Hudson River Park, New York, NY
RENTAL ADJUSTMENT GRID
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COMPARABLE RENTAL LOCATION MAP
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ANALYSIS OF COMPARABLE RENTALS
We have researched the market for current listings of rental properties and properties that
have been rented recently. We have analyzed several rental transactions and presented six
of those transactions in this report. Adjustments were made for Expenses, Market
Conditions, Location and Physical Characteristics. It is not practical to make an adjustment
for all the differences in lease terms, some of which are immeasurable. We have made
adjustments for the differences that are recognized by the market.
Real Estate Taxes: The subject property is identified on the Manhattan - New York City
Tax map as Block 184, Lot 8. It is tax exempted because it is owned by the State of New
York. Typically, landlords pay base-year real estate taxes with tenants paying a
proportionate share of the increases in real estate taxes over the life of the lease. In the
case of the proposed lease, we assume that the landlord will pay all real estate taxes and
that the tenant will not be required to pay any increases in real estate taxes over the base
year. The six comparables have the landlord paying real estate taxes, therefore, no
adjustment is necessary to the base rental rate for Real Estate Taxes.
Utilities: This includes energy for lighting, cooking, heating and air-conditioning, water and
sewer. Based on our experience, utility expense for a Manhattan retail building should
amount to between $2.50/SF and $5.00/SF. Typically, in mixed-use buildings landlords pay
for water, sewer and sometimes heat while tenants pay for electricity. However, in free
standing buildings, tenants would normally be required to pay all utilities. The proposed
lease calls for the tenant to pay all utilities. In three of the six rental comparables, the
tenants are paying all utilities. In two of the six comparables (#2 and #5), the tenants are
paying electric for lighting and air-conditioning while the landlord is paying for heat, water
and sewer. In the case of Comparable #6, the landlord is paying all utilities. Adjustments
for utility ranges from -$2.00/SF applied to Comparable #2 and #5 to -$4.50/SF applied to
Comparable #6.
Tenant Improvement (TI): It is customary for landlords of retail space to provide tenants
with built-out space and several of the rental comparables represent built-out space. Not
all Alterations and Improvement work would qualify as Tenant Improvement (TI) and it is
not normal for Landlords to be reimbursed by Tenants for major capital improvement
work disguised as TI. An adjustment is warranted only if the TI Work provided and paid for
by the owner/landlord exceeds what is normal in the marketplace. We are not aware if any
of the comparable rents involved above normal TI work. Based on our survey of building
owners, managers and brokers, Tenant Improvement Allowance (TI) in the Manhattan
retail market ranges from $0 as in the case of renewal leases to $175.00/SF for new long
term leases where the space needs a lot of work to be made ready for occupancy. Typically,
the amount of TI is directly proportional to the length of the lease. Based on the terms of
the proposed lease, all TI work will be provided and paid for by the tenant. The minimum
expenditure required by the lease is $1,100,000 ($262.22/SF) inclusive of all costs (the cost
to finish the interior of the building, the cost of fixtures and fittings, profession and
administrative fees). In-lieu-of the Tenant Improvement work mandated by the proposed
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lease, the Landlord will grant $150,000 ($35.76/SF) in rent rebate spread over the first
three years of the lease. It is not typical for leases to mandate minimum expenditure on TI
work by tenants with a payback penalty for non-compliance. It is our conclusion that the
Landlords contribution to the Tenant Improvement work is below what is typical in the
market place (say $175 - $35.76 = $139.24 below normal). The impact of the below normal
landlord contribution to TI work would be a lower base rent. The annual equivalent of
$139.24/SF over 10 years at 5% is $139.24 x 0.1295 = $18.03/SF. Hence, an adjustment of $18/SF is made to the base rental rate for Tenant Improvement.
Free Rent Period: It is customary for landlords of retail space to provide rent free period
as an inducement for tenants to sign leases, especially in a tenant’s market (lethargic
leasing environment). The length of the rent free period is typically determined by the
length of the lease and the amount of work that is required to make the space ready for
occupancy. Rent free period in the Manhattan market typically ranges from 0 to 6 months.
The effect of the rent free period is to reduce the overall effective rent collected by the
landlord over the life of the lease. Instead of reducing the face rent (nominal rent),
landlords consider it more palatable to grant a rent free period as concession. An
adjustment to the base rental rate is required if and when the rent free period exceeds
what is normal in the market place. The proposed lease calls for the tenant to receive
approximately 12 months rent free. Normally, this would be considered above average in
the market. However, since the subject building was recently constructed and the
owner/landlord has not obtained the Certificate of Occupancy, a 12-month rent free period
is not considered atypical. Hence, no adjustment is necessary to the base rental rate for
Rent Free Period.
Market Condition: Based on various Retail Market Reports, the average asking rental
rates for retail space in Lower Manhattan have been generally increasing over the last year.
According to CoStar, there was an increase of 12.6% in the last quarter (4Q2014 to
1Q2015) and an increase of 26.1% in the last year (1Q2014 to 1Q2015). According to the
REBNY, the increase in the Downtown Manhattan asking rental rate for retail space in the
last year (Spring 2014 to Spring 2015) was 10%.
Based on these numbers, we have applied an average annual growth rate of +12.0% per
annum to all the comparable rentals for changes in market conditions between the date of
the oldest rental (October 2014) and the date of the appraisal (June 2015).
Location: The subject property is located on Pier 26 in Hudson River Park. This is a unique
location which is considered inferior when compared to the location of all the comparables.
The subject location is inferior for the following reasons. First, it has no street access and it
is not in the path of regular pedestrian or vehicular traffic. Second, the hours of operation
of the subject property will be adversely impacted by the hours of operation of the Hudson
River Park. The proposed lease will require that the restaurant be open during the offseason (winter months) and the operator will not have the option of closing during the
periods of slack winter demand as is customary in similar Manhattan waterfront locations.
Third, the property is situated in a flood zone and the proposed lease requires that the
tenant erects and maintains a flood barrier system during periods of extreme weather. In
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addition, the tenant is also required to carry flood insurance for the tenant improvement
and tenant FF&E (furniture, fixture & equipment). This location suffered significant
flooding during hurricane Sandy in October 2012. On the other hand, the subject property
enjoys spectacular views of the Hudson River that would render its location relatively more
desirable. All the comparable rentals have been adjusted between -20% and -30% for
location because they all enjoy more desirable location compared to the subject property.
The proposed lease calls for the Fixed Minimum Rent to be abated by one-third in the first
three years due to expected business disruption to be caused by proposed construction on
Pier 26. The Fair Market Rent estimate in this report does not take into consideration
the expected business disruption since it will be temporary in nature.
Physical Characteristics: The subject building is in good condition as it was constructed
within the last year. It is superior in condition/quality to all the comparable rentals.
Comparable rentals have been adjusted between +5% and +10% for condition/quality.
The size adjustment is for the differences in the amount of space that was leased. Generally,
larger space will fetch a lower price per square foot, all else being equal. The leased space
in Rental Comparable #1, #2 and #6 are smaller than the subject space and they were
adjusted -15% for size. Rental Comparable #5 is significantly smaller than the subject space
and it was adjusted -25%. Comparable rental #4 is only slightly smaller and it was adjusted
-5% for size. Comparable #4 and #6 have been adjusted -15% and -10% respectively for
finished basement space.
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FINAL RENTAL VALUE OPINION
In our analysis, we found that variations in rents depend mostly on location, size and
condition/quality of the space. Before any adjustments, the range of comparable rentals is
from $101.82/SF to $149.00/SF. Asking rents are generally at the higher end of the range
and it is reasonable to expect the negotiated rent to be up to 10% below the asking rent.
Typically, ground floor commercial space at street level rents for significantly more than
below grade space and mezzanine space, all else being equal. In multi-tenant buildings, it is
not unusual for retail tenants to pay CAM in addition to base rent and the Common Area
Maintenance charge usually includes real estate taxes, landlord utilities and other
operating expenses. CAM charges are higher in buildings with large common areas such as
a parking garage. To the best of our knowledge, there will be no CAM charges associated
with the subject space.
After all adjustments, the range of comparable rentals is from $63.22/SF to $68.02/SF with
a mean of $64.89/SF. We have concluded on a market rental rate of $65.00/SF for the
restaurant space inside of the main building. We have also estimated the rent for the
indoor utility/storage space (15% of base rental rate for prime interior space), the outdoor
patio (20% of base rental rate for prime interior space) and the roof terrace (25% of base
rental rate for prime interior space). The per unit rental amount applied to the different
parts of the building is based on the appraisers perception of the relative utility of the
various areas. It was not possible to find rental comparables to match the unique physical
characteristics of the various parts of the subject building. Due to weather conditions,
uncovered outdoor space (patios and roof terrace) can be utilized on a seasonal basis only.
In addition, the use of interior space with pier/waterfront location falls off drastically in the
fall and winter months (October – March) based on information obtained from business
owners/operators.
Assuming that the areas provided by the client are correct, we have calculated the total
rent for the space to be leased as follows;
Prime interior space
Roof Terrace
Outdoor Patio
Indoor Storage/Utility
TOTAL
3,135 sf
4,920 sf
3,500 sf
1,000 sf
12,555 sf
x
x
x
x
1.00
0.25
0.20
0.15
x
x
x
x
$65.00 =
$65.00 =
$65.00 =
$65.00 =
$203,775
$ 79,950
$ 45,500
$ 9,750
$338,975
Based on our research and analysis, and based on the terms of the proposed lease, we
conclude that the annual market rental value for the subject space proposed to be leased,
as of June 18, 2015 is;
Three Hundred and Forty Thousand Dollars ($340,000) per annum.
Proposed lease of 3,135± sf of Retail Space @ $108.45/SF per annum = $340,000
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ADDENDUM
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