Related Cos. signed two tenants for the first tower of Hudson Yards, the 26-acre complex planned on Manhattan’s west side, and said it lined up financing for the project as construction advances.
L’Oreal SA (OR), the Paris-based cosmetics company, will take 402,000 square feet (37,300 square meters) at the south tower for its U.S. headquarters, Related said in a statement today. German software company SAP AG (SAP) agreed to lease 115,000 square feet on the top four floors. The developer also completed deals for $1.4 billion in financing for Hudson Yards, including a construction loan led by Starwood Property Trust Inc. (STWD)
Related, the New York-based company founded by Stephen Ross, is planning to build a 13.3 million-square-foot complex including offices, retail space and residences in what Mayor Michael Bloomberg called one of the largest private developments ever undertaken in the country. The south tower will rise 895 feet (273 meters) at the corner of 30th Street and 10th Avenue and is slated for occupancy in 2015. Coach Inc. (COH) purchased about 740,000 square feet for its global headquarters.
“The Hudson Yards area is well on its way to becoming a top-tier destination,” Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg LP, said in the statement. “These commitments from leading corporations L’Oreal USA, SAP and Coach represent an important vote of confidence in our city’s future.”
Coach, the largest U.S. luxury-handbag maker, said its new headquarters will cost about $750 million over the next three years. The company intends to finance the purchase with cash, borrowings from its credit line and proceeds from the $130 million sale of its current building on West 34th Street, according to a regulatory filing today. That building is being sold to an entity called ERY 34th Street Acquisition LLC, a consortium that includes Related and Oxford Properties Group, its partner on Hudson Yards.
Coach’s purchase came three years after its initial meetings with the developer, according to Gregory Tosko, a vice chairman at brokerage CBRE Group Inc. who represented Coach. Office occupancies rarely take that long to negotiate, he said.
“It was a pretty complicated deal in terms of just the Coach deal itself,” Tosko said. Then “a lot of things had to come together at one time,” including the L’Oreal and SAP agreements, financing and leases on the land.
Coach, whose offices have been on the west side for about 70 years, remained “resolute” in pursuing the purchase even as longtime Chief Executive Officer Lew Frankfort decided to give up that job and remain as executive chairman, and it faced increasing competition from Michael Kors Holdings Ltd. (KORS) and Ralph Lauren Corp. (RL), Tosko said.
SAP is transferring employees to Hudson Yards from two New York locations -- a marketing office in the West Village and the Midtown home of Sybase Inc., a software company it bought in 2010, said Jim Dever, an SAP spokesman. Its space on the top floors of the south tower will offer sweeping views of the city and the Hudson River waterfront and include “places where we can showcase SAP technology” to customers, he said.
The company will keep its North American headquarters in Newtown Square, Pennsylvania, a Philadelphia suburb, Dever said.
Starwood Property, the Greenwich, Connecticut-based real estate investment trust founded by Barry Sternlicht, is leading a syndicate of lenders for the 1.7 million-square-foot south tower. The group includes Oxford and affiliates of the United Brotherhood of Carpenters and Joiners, according to Related’s statement.
Debt on the portion of the building that Coach isn’t purchasing will total $475 million, with $350 million of that coming from Starwood, the company said in a statement. Oxford and the carpenters fund are covering the rest. Oxford is the Toronto-based real estate arm of Ontario Municipal Employees Retirement System.
Starwood’s loan will mature in four years, with an option to extend for a fifth year.
A unit of JPMorgan Chase & Co. (JPM) is providing about $100 million of the $380 million of equity being invested, said a person with knowledge of the deal, who asked not to be named because the details are private. An unidentified sovereign wealth fund is providing $240 million and Related and Oxford are providing about $40 million combined, the person said.
Darin Oduyoye, a JPMorgan spokesman, said he had no immediate comment.
Unidentified “selected investors are also making equity investments” in a residential tower to be built on 30th Street and 11th Avenue, Related said in its statement.
New York’s Metropolitan Transportation Authority, which owns the Hudson Yards land, also today announced that Related had completed a $1 billion, 99-year lease of the eastern portion of the site, where the south tower will be built.
Some of the structures planned for the site require a platform over the Long Island Rail Road yards that dominate the property. The south tower and the residential building would be constructed on areas that don’t require decking.
To contact the editor responsible for this story: Kara Wetzel at email@example.com