Former Verizon Buildings Sold for Conversions
Former Verizon Buildings Sold for Conversions.
In the merry-go-round of redevelopment projects in New York — where office buildings turn into apartment houses, and factories into offices, and so on — a utility company has become a timely and reliable source of real estate.
Verizon Communications, the telecom giant, has over the last few years been selling many of its buildings across the city, from humble garages to elegant Art Deco towers — and some windowless hulks considered eyesores.
Rapidly changing technology has significantly shrunk Verizon’s space needs.
Far less equipment is now needed to allow people to make calls, as customers continue to switch from landlines to cellphones, and that freed-up space, industry analysts say, is proving a boon for developers in an airtight market.
“Their locations are such that they can be repurposed into much higher and better uses,” said James Murphy, an executive managing director of Colliers International, the commercial real estate brokerage firm, and a building-sales specialist.
The top 21 floors of 140 West Street are being converted into residential condominiums. Credit Chester Higgins Jr./The New York Times
In the last decade, Verizon has sold more than $1 billion in buildings across the country, with the lion’s share trading in New York, where about 10 properties of its approximately 60 have changed hands, according to company officials. Most of those 60 are fortresslike brick high-rises.
And Verizon, with the permission of state regulators that must approve every transaction, has pocketed the proceeds from the sales rather than return them to customers in the possible form of lower rates.
Typically located in Manhattan, most of the buildings that were sold have been turned into residential condominiums, resulting in perhaps the starkest transformations, as luxury homes have been carved from floors where operators once plugged cables into switchboards.
The team of JDS Development Group and Property Markets Group seems to have taken these design challenges in stride. At two of its conversions — Walker Tower on West 18th Street in Chelsea, and Stella Tower on West 50th Street in Hell’s Kitchen — long lines of windows have been added to brick facades, so apartments receive sufficient light.
And the results have appealed to buyers. At Walker, sale prices attained about a hefty $4,000 a square foot in the initial sellout; in January, a penthouse closed for $51 million, setting a downtown record.
For developers eager to shoulder their way into prime neighborhoods, sites like these can often provide a way of sidestepping restrictive zoning rules, as they are often far larger than what could be built today, brokers say. Walker Tower, at 24 stories, and Stella, at 18, loom over their low-slung neighborhoods, offering the sweeping views that intensify sales, they add.
Verizon is not totally walking away from these projects, or others like it, however. It has retained floors for offices and equipment in the Walker and Stella towers, as well as at 140 West Street in the Financial District, a 31-story Art Deco building facing One World Trade Center that is also being turned into condos.
Last year, the developers Magnum Real Estate Group and CIM Group paid Verizon $274 million for the structure’s 21 top stories, where they are now adding 161 units, in a project called Barclay Square.
Verizon will keep the nine floors below the residences — bundled as a commercial condo — for a scaled-down version of its facilities. In a first for former Verizon real estate in the city, the ground floor of the full-block building, which is lined with arched windows, is now being marketed as retail storefront, said John M. Vazquez, the senior vice president for global real estate at Verizon.
The World Trade Center, and tourist and commuter traffic, help give the block “every ingredient you could possibly want for a prime retail development,” Mr. Vazquez said.
At the same time, Verizon is moving its main office from 140 West to 1095 Avenue of the Americas in Midtown, a 1970s high-rise constructed for New York Telephone that Verizon knows well: It served as the company’s headquarters until 2005, when Verizon sold it to Equity Office Properties Trust for $505 million before relocating downtown.
And though the company was once the sole tenant in the 41-story building, it will now have just two floors, where fewer than 100 employees will work, while four other floors will be for equipment.
Bedrooms and shops are not the only things being installed in former Verizon buildings. In some cases, they are being redesigned for medical offices, like at 240 East 38th Street and 227 East 30th Street, both of which are now largely controlled by New York University’s Langone Medical Center, whose main hospital is nearby.
Its Ambulatory Care Center encompasses 300,000 square feet across 15 floors at East 38th Street, a 24-story building whose angled glass walls jut like the prow of a ship. The facility, which constructed a driveway for drop-offs, is set to be completed this fall, a spokeswoman said.
Four of the eight floors of the midblock red brick 1922 building on East 30th Street have been turned into the Translational Research Building, a brightly lit 70,000-square-foot facility completed in 2012, a spokeswoman said.
Other uses are being found as well. A massive early-20th-century brick Verizon property at 230 West 36th Street in the garment district is now being marketed as a hotel; a developer would purchase the top two floors of the nine-story building, while also constructing additional floors above the roof, thanks to unused development rights at the site, Mr. Vazquez said. A buyer should be picked in the next two months, he added.
Besides their immense size, phone buildings, like some other industrial relics, usually have just a single tenant, which means they can easily be delivered vacant, said Bob Knakal, chairman of Massey Knakal Realty Services, which focuses on building sales.
It is common for New York buildings to have several identities over their lifetimes, Mr. Knakal said, adding that one sold by his firm on East 44th Street had been an apartment house, an office building and a hotel. “Buildings here kind of reincarnate themselves,” he said.
Verizon buildings have attracted interest in neighborhoods outside Manhattan as well.
In 2012, JJ Operating and Houlihan-Parnes Realtors purchased six of eight floors at 1775 Grand Concourse in the Bronx, a full-block beige brick edifice near the Cross Bronx Expressway.
That commercial condo cost $7 million, according to documents filed with the state’s Public Service Commission, which regulates the sale of real estate by utilities, to make sure they are not unduly profiting at the expense of taxpayers.
Those documents also shed light on how Verizon is trimming its portfolio. With No. 1775, the real estate firm now known as Newmark Grubb Knight Frank was enlisted to market the property to 4,963 potential buyers, though that list was later whittled to 13.
To win approval for the deal, Verizon argued that selling the building would save it more than $2 million in annual expenses, documents show, and those savings, plus sale proceeds, would be reinvested to “continue its commitment to service quality, network reliability and security,” the documents show.
And regulators, worried that Verizon faced stiff competition from other telecoms, agreed, according to the documents, even if customers did not see lower rates as a result.
Today, after a $20 million renovation, which included adding a 100-car parking garage, No. 1775 is 80 percent leased to tenants like Bronx-Lebanon Hospital Center, as well as Abbott House, which treats abused children, according to a spokesman for JJ Operating. Asking rents are $30 a square foot.
While phone buildings may be enjoying newfound popularity, some have been slower to come around.
A plan from last decade to convert 375 Pearl Street, a 32-story 1975 monolith near the Brooklyn Bridge that some have called the city’s ugliest building, never came to fruition. It was supposed to gain a glass facade and become an office tower.
The current owner, the Sabey Corporation, a Seattle company, is trying again to reinvent the tower, but is targeting only seven floors near the top of the building, where windows will be added, a spokesman said. Much of the rest of the building will house large-scale data-storage computer equipment. Verizon has kept three floors.
The reuse trend may have other limits. The layouts of some phone buildings don’t allow for easy subdivisions, Verizon officials say, or they are located in neighborhoods where zoning would limit conversions.
Still, “we have been very good at monetizing these properties,” Mr. Vazquez said. “We’ve been very happy with the way our strategy has worked.”
By C. J. Hughes, The New York Times
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