Katz mulls hotel, office plans for Hudson Yards site

Real Estate Weekly,  Oct 17, 2007  

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Sherwood Equities, the owner of two large properties l in the red-hot Hudson Yards section of Manhattan, will develop either a hotel or an office complex on one site and an apartment house on the other, announced Jeffrey Katz, Sherwood's chief executive officer. The multi-family residence will occupy a site on 10th Avenue between 35th and 36th Streets, where Katz is planning a 35-story building with 200 rental apartments.

The other parcel, on the western side of 10th Avenue between 34th and 35th Streets, will contain either a 2,500-room hotel or a 2.5-million square-foot office complex with parking.

The properties are situated in an area so bursting with potential that it will evolve in size and scope as the equivalent of London's extraordinary Canary Wharf, said the Sherwood CEO. In time, he believes, it will simply merge with midtown Manhattan.

"Hudson Yards is the hottest development area in New York City," Katz pointed out. Already, h noted, developers have announced plans to erect a wide variety of office, residential and hotel properties, which will bring millions of much-needed square footage to the West Side of Manhattan.

"On my 10th Avenue and 34th Street site, it's hard to go wrong with either of the options--the hotel or the office building--given the location. Each addresses a growing market need in an area that is clearly ready for prime-time."

The 34th Street property, bought by Sherwood in 1986, currently encompasses a warehouse and a parking garage.

"If we build a hotel, it will contain 2,500 rooms--a greater capacity than that of a nearby site now attracting bidders like Starwood and other major hotel companies," said Katz. "New York suffers from a shortage of hotels, and this newcomer would be well-situated near the Javits Center."

But the office complex also makes a lot of sense, he points out. "As the area's development proceeds, New York's center of gravity, which is arguably Mid-Town West, will move further west. Accordingly, we expect that many companies will want a footprint here, especially since the plans include a parking facility. The site itself is larger than the Time Warner Center, and I anticipate that floor-plates will be 60,000 square feet."

Sherwood bought the two sites more than 15 years ago.

"Even back then, we believed that Hudson Yards had great potential," said Katz. "It's exciting to finally proceed with the development of these properties, knowing that whatever paths we take, we can expect textbook cases of high return on investment."

The boom at Hudson Yards stems from several factors, including major zoning changes, a very tight commercial market and robust economy, and significant upgrading of the infrastructure, including the post office, Madison Square Garden and the extension of the number 7 subway line.

In addition, Katz's own sites benefit in three other important ways: they are both outside the subway extension area, so they will not be impacted by MTA construction; they both can be developed completely "as of right"--i.e., without requiring any variances; and neither site entails displacing any long-term or residential tenants.

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