Architectural rendering of 124 E. 14th St. development which will house the tech hub.
NEW YORK CITY—Demolition of the building which a PC Richard & Son store occupied at 124 E. 14th St. will begin immediately followed by construction of a 21-story, mixed-use office building that will house the new Union Square tech hub. Suffolk Construction will be the project's general contractor.
RAL Development Services in a joint venture with Junius Real Estate Partners closed a $120 million construction loan from Bank OZK. Junius is a real estate investment unit of J.P. Morgan Private Bank, a division of J.P. Morgan Asset Management. Its focus is high yielding real estate equity and debt investments.
The developers also signed a 99-year ground lease with the New York City Economic Development Corporation. The New York Post reported the joint venture has agreed to the following arrangements: It made an up-front payment of $5 million and will not pay rent for the first three years during construction and lease-up. Afterwards the annual base rent will be $2.3 million for the first five years. The rent will then increase by 2% every year through the 30th year. Following this period, the rent will be subject to fair market resets. A spokesperson for RAL confirmed these financing terms with GlobeSt.com.
Last year, the city council approved the tech hub following New York City's ULURP process. The steps were required to increase the as-of-right building height from 14 floors to 21 stories.
For 25 years, RAL will lease six of the floors to the non-profit Civic Hall, which will create a digital training center, a tech incubator, co-working spaces, event spaces and an urban food hall. RAL will lease the top 14 floors of the 21-story building at market rate. According to the RFP issued by NYCEDC, the tech hub is expected to create over 500 jobs in Union Square.
Josh Wein, financial director of RAL, says, “In addition to the multitude of benefits this development provides for the City and its workforce, which have been designed to promote job creation and growth in the technology sector, we'll be creating the finest modern office building in Midtown South.”
Brokers from JLL who will be negotiating leasing for the market-rate offices say they will be state-of-the-art. “There is an incredible demand for high quality office space in the epicenter of Midtown South and this building will offer something that does not exist in that market. The interconnection with the building's amenities, programming, and access to a highly sought-after labor pool will enhance the desirability of this project,” says JLL's Mitch Konsker. He'll be working on the office leasing with his colleagues, Benjamin Bass, Dan Turkewitz and Kristen Morgan.
NYCEDC and the developers met with local elected officials and over 40 community organizations for input to help the project address the city's needs. They note the center will feature programs from organizations such as Per Scholas, FEDCAP, CUNY and Mouse and will provide training opportunities.
Community groups including the Greenwich Village Society for Historic Preservation (now named Village Preservation) advocated for neighborhood protections to accompany approval of the tech hub. They supported the educational and public goals of the project but protested its development without inclusion of rezoning for surrounding neighborhood streets. They requested limited heights for new developments, removal of current incentives for hotel and dorm development, and the inclusion of affordable housing with new construction for a limited area around the center.
The neighborhood organizations expressed they were concerned about an eventual destruction of the unique character the Village—starting with its now being referred to as Midtown South.
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Betsy Kim
Betsy Kim was the bureau chief, East Coast, and New York City reporter for Real Estate Forum and GlobeSt.com. As a lawyer and journalist, Betsy has worked as the director of editorial and content for LexisNexis Lawyers.com, a TV/multi-media journalist for NBC and CBS affiliated TV stations in the Midwest, and an associate producer at Court TV.
