Ric Clark: Brookfield Has Made Around $500M On 5 Manhattan West So Far
Brookfield Property Partners’ ambitious, pricey makeover of a 1960s office building on the Far West Side of Manhattan has already paid off.
The building now known as 5 Manhattan West has so far reeled in around half a billion dollars, according to estimates by the company's chairman, Ric Clark.
“We’ve done really well in New York buying older properties and renovating them and bringing them up to market,” Clark said during Brookfield’s first-quarter earnings call Friday. “Just with the rough math, we’ve probably made half a billion dollars over time on that investment, so it’s been a terrific investment for us.”
Brookfield refinanced the building with a $1.1B loan from Landesbank Baden-Wurttemberg in the quarter after finishing its $350M renovation on the building. The loft-style office building is fully leased with JPMorgan Chase, Amazon and Whole Foods as tenants.
Clark said the first ground-up tower at the Manhattan West project is 90% leased, and the company's attention is now turning to the south tower, where it is in “active” discussions over leasing.
“I think our building is positioned well compared to other offerings in the neighborhood,” Clark said. “I think our floor plates are more appealing to law firms and the like … the others are sort of bunched up with larger floor plate buildings.”
In total, Brookfield’s funds from operations jumped 12% year over year to hit $268M, according to its quarterly earnings report. The occupancy in its core office portfolio finished the quarter at almost 93%, and new leases were signed at average rents around 17% higher than leases that expired during the quarter.
Meanwhile, occupancy of the company's core retail assets was at 94% at the end of the quarter.
In New York City, landlords are offering concessions at record rates in an attempt to compete and fill space.
As a result, net effective rents have been pushed further down. Office leasing slowed in the first quarter across Manhattan, although there were some big leases signed last month like Pfizer’s 800K SF deal at the Spiral in Hudson Yards and Latham & Watkins 407K SF lease at 1271 Sixth Ave.
“TI capital rates is increasing … This is really in response to all that the newer buildings like Manhattan West and Hudson Yards, One Vanderbilt and World Trade Center have achieved,” Clark said, adding the average age of a Class-A office property in the city is 70 years old.
“They have infrastructure issues that have to be addressed so TIs are creeping up on those properties," he said. "But that’s not really our issue, because our properties are much more modern.”