By: Serach Nissim

There is no question that office towers in Midtown Manhattan are struggling with issues including higher vacancies, lower cash flows, and uncertainty pertaining to loans coming due which will need to be renewed at higher interest rates.  The mystery lies in whether Hudson Yards shares those same woes.

As per a recent article in Crain’s NY, the 18 million-square-feet of space in towers on the Far West Side were privately developed and owned by developer The Related Cos.  As a privately owned company, it has no obligation to share financial information in the way that most publicly traded developers like Vornado or SL Green need to do, to let investors into the loop.  Thus, almost no one knows how the massive developments are actually faring, and if Hudson Yards shares the same struggles as Midtown Manhattan.

Recently, though, independent bond-rating firm KBRA delved deep into one of the glass towers in the area– 55 Hudson Yards.

With 51-stories, the building is one of the smallest in Hudson Yards. With approximately 1.4 million square feet, 55 Hudson Yards was meant to appeal to “service-type tenants,” like law firms, a Related rep had told The Wall Street Journal when construction began in 2015. Completed in 2019, the building was about 96% leased out last June, KBRA said.  It had been 100% leased before Meta  Platforms moved out, consolidating into space at neighboring 50 Hudson Yards.  KKR took on Meta’s space. KBRA said 55 Hudson Yards “has generally exhibited stable performance.”  “It goes with the narrative of flight to quality,” KBRA senior managing director  Roy Chun said.

Per Crain’s, since 2019, net cash flow at the tower has risen by 1.5%, to $93 million, KBRA said. Though this hardly sounds  impressive, in comparison the city’s largest landlord, SL Green, has taken a 29% hit to operations due to rising vacancies and higher costs since 2019.

Tenants at 55 Hudson Yards enjoy floor-to-ceiling windows and plenty of natural light, super-fast elevators, balconies on some  floors, and large blocks of contiguous, column-free space.  Amenities include a 5-acre plaza featuring gardens, public art, retail, restaurants, and a gourmet food market.  The commute is ideal, and brokers told Crain’s that the building is enjoying good demand.

The largest tenant at 55 Hudson Yards is Steve Cohen’s Point72 Asset Management.  The company is leasing 330,000 square feet, paying $95 per square foot in base rent, per KBRA data.  This is considered a good price, as the average price at the building is $102 per square foot. Point72 declined to comment.  The highest paying rent at the building is $137 per foot, paid for the top three floors, which is occupied by Third Point, the hedge fund run by Dan Loeb.

Other tenants include law firm Cooley, which pays  $116 a square foot, and private equity firm Silver Lake, which pays $111, per KBRA data. Milbank Tweed has taken on space at floors 30th through 39th since 2019, paying $90 per square foot. Tenants who signed on earlier or occupy lower floors pay less, including  Boies Schiller & Flexner, which pays $85per square foot.

Per Crain’s, Related also has the advantage of not worrying about higher interest rates or refinancing.  It has no significant  leases expiring till 2029. The $1.25 billion mortgage at 55 Hudson Yards is not due till 2029, and is enjoying a fixed rate of 2.95%.