Lawsuit Seeks to Halt Office-to-Residential Transformation in FiDi
A suit filed in State Supreme Court aims to derail plans to convert the office tower known as the New York Technology Center, at 55 Broad Street (corner of Beaver Street), into apartments. In a story first reported by the property industry newsletter, The Real Deal, one of the business tenants in the building alleges their lease contains a binding guaranty that a “demolition clause” (allowing the owners to empty the structure if it is redeveloped) will not be invoked within the first ten years of their tenancy.
That renter, Solstice Residential Group moved into the building in 2019. This implies that they cannot be forced to move until at least 2029.
“Plaintiff chose to move its offices to the Building in 2019 based upon representations by 55 Broad and its agents that it was, and would remain, for at least ten years, a ‘first-class office building,’” Solstice argues in court filings.
The same legal brief quotes the original lease between Solstice and the 55 Broad Street landlord as promising that, “notwithstanding the foregoing, Owner agrees that in no event shall the Demolition Lease Termination Date occur prior to the day preceding the ten (10) year anniversary of the Commencement Date.”
This became an issue last June, when then-owner of 55 Broad Street, Rudin Management Company, agreed to sell the building for $180 million to a partnership of developers who subsequently announced plans to adapt it for residential use. Work on this conversion was slated to have begun by last month, but has been delayed, although it is now believed to be imminent. The litigation commenced by Solstice seeks a ruling “permanently enjoining Defendants from commencing and engaging in their plan to convert the Building to residential use during the term of Plaintiff’s Lease for the Subject Premises.”
The new owners, Larry Silverstein and Nathan Herman, plan for the entire structure to house market-rate apartments, with no provisions for any affordable units. The 571 apartments planned for 55 Broad Street appear likely to bring more than 1,150 new residents to the community, based on 2020 census data, which indicates that the typical size of a Lower Manhattan household is now 2.02 persons.
Mr. Silverstein has been a prominent real estate player in Lower Manhattan for decades, best known for acquiring a long-term lease on the World Trade Center complex shortly prior to the terrorist attacks off September 11, 2001, and leading the rebuilding process there. He is also the developer behind 30 Park Place and the owner of 120 Broadway. Mr. Silverstein also recently acquired the former office tower (converted to residential use in 2013) at 116 John Street, from Mr. Berman.
Mr. Berman has been transforming Lower Manhattan office towers into residential use for decades. Among the local properties he has converted are 63 Wall Street, 67 Wall Street, 20 Exchange Place, 70 Pine Street, 443 Greenwich Street, 180 Water Street, and 20 Broad Street.
The venture by Mr. Silverstein and Mr. Berman appears to be the leading edge of a wave of new conversions of Downtown office buildings, acquired at distressed prices (driven by the remote-work trend inaugurated by the Covid pandemic) to be repurposed into apartments. This is a tide that has washed over Lower Manhattan at least twice before—once in the 1990s, and again in the years following the destruction of the World Trade Center. That last wave of conversions was mostly halted by the real estate crisis of 2008, which left multiple buildings (some of them only half-finished) in foreclosure, while other development sites have languished as empty lots for more than a decade. That slowdown was deepened by the economic recession unleashed by the pandemic, starting in 2020.
Just two blocks from 55 Broad, another such plan is now underway at 25 Water Street, with plans to redevelop the massive office building once known as Four New York Plaza, into 1,300 apartments. This project, also led by Mr. Berman, is slated to be the largest such conversion in the City’s history.