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REAL ESTATE
Help in time of need
Nonprofit groups find lifesaver in lower rents
BY MIRIAM KREININ SOUCCAR
In the last year,
staffers at The Momentum Project at 155 W. 23,d St. have been robbed four times,
stuck in the elevator repeatedly and subjected to 25 days without heat.
That is all about to change. This month, the organization is moving into
attractive, well maintained offices with full time security at 322 Eighth Ave.
Better yet, Momentum will pay only $16 per square foot for all that, allowing it
to cut its current monthly rent of $14,000 down to 9,000. To top it off, Corbis
Corp., the sublessor of the new space, threw in $60,000 for the buildout of the
office.
"I'm just amazed," says Dawn Bryan, president and chief executive of Momentum,
who has been carefully picking out colors and shopping for used furniture. "It's
like a dream come true."
Such a deal would have been unheard of even a year ago. But in the face of
rising vacancy rates, landlords are actively wooing any tenants with money to
spend--even the nonprofits that landlords traditionally shunned because they
thought too much work was required. Today, they are besieging those same
nonprofit, with offers of free buildouts, cut rate rents, and even multimonth
rent holidays.
"A few years back, nonprofits were practically being forced out as landlords
tried to capitalize on the dot com boom," says Carri Lyon, director of
Insignia/ESG Inc., who found the new space for Momentum. Now, they are being
courted."
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Fast movers
The nonprofits---many of which have been hit hard by
government, corporate and individual funding cutbacks--have been quick to seize
their opportunities. They are signing new leases to cut costs and are upgrading
their offices. Starting last year, some organizations began moving downtown to
take advantage of cheap rents there (Crain’s, Jan. 13). Some are
continuing in that direction, but many others are finding the best deals in the
garment district.
New York Cares, best known far its winter cost drive, is part of the trend.
It just signed a 10 year lease at 214 W. 29th St. The building, owner, Walter &
Samuel, Inc., won a bidding war for the nonprofit with a rent in the midteens
per square foot and the promise of a free buildout of the 10,000 square-foot
space. Had New York Cares stayed in
its offices at 116 E. 16th St., it would have had to take
more space on another floor, steeply increasing its building fee. |
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Real estate brokers are amazed at the lengths landlords
are going to
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Others moving into the garment center include Doctors Without Borders, which
,sends medical professionals to war torn countries. It is moving in May into
22,000-square foot offices at 333 Seventh Ave., between 28th and 29th streets.
The reasonable rentof $25 per square feet--not to mention the $1 million
buildout that owner Samco Properties Inc. threw in allowed the nonprofit to
abandon its cramped 8,000 square foot office at 6 E. 39th St.
For groups, like Momentum, the savings on rent are especially welcome. Momentum,
which offers meals and other help to homeless people with AIDS at nine sites
throughout the city, lost about $400,000 in donations in the last year. With a
$3.5 million annual budget, the organization was forced to close two sites and
cut the number of meals it offers people each week to four from 11 previously.
Its new lease will mean rent savings of $60,000 a year.
The League for the Hard
of Hearing, the largest hearing rehabilitation agency in the world, will do even
better. It will save $200,000 a year in rent and other expenses when it moves
into its new downtown offices at 50 Broadway in August.
The agency was able to lock in a 20 year lease in newly renovated space with
rent starting at $22 a square foot. The new rental rates are a lifesaver to the
league, which had to cut its, $6 million budget by $500,000 in the last year
because of funding declines.
Joseph Brown, the leagues co-executive director, says he expected to receive the
cold shoulder from landlords because of the leagues 23,000 clients who traipse
in and out. Instead, "it was an open door" Mr. Brown says.. "Not one person said
they didn't want to talk to us."
Even real estate brokers are amazed at the lengths landlords are going to in
order to win business. Andrew Peretz, senior managing director at Insignia,
recently brokered a deal in lower Manhattan for a nonprofit that still had 22
months left on its lease. The landlord, who was trying to unload a brand new
space that had been abandoned by a dot com, gave the non-profit a 22 month rent
abatement on its new space so it could move in right away.
Plum deals like this are even enticing nonprofits that own their own buildings
to sell and switch into the rental market. The Board of Jewish Education of
Greater New York recently sold the building on West 58th Street that had been
its headquarters for the past 50 years.
Major windfall
In
May, the group will move into 26,000 square feet at 520 Eighth Ave., where it
will pay just over $21 per square foot. The education board would not say how
much it sold its building for, but executives there say the deal allowed them to
move into nicer and more modem facilities.
Brokers, though, are warning their nonprofit clients that their window of
opportunity may be short lived. When the economy revs up again, they predict,
real estate prices will resume their rise. "Then the pendulum will swing back
again, and not for profits will be less desired," says Tara Stacom, executive
vice president at Cushman & Wakefield Inc.
For landlords and sublessors, that day can't come soon enough. Corbis Corp., the
stock photography firm that sublet its space to Momentum, says it did everything
possible to unload the space quickly. In fact, Momentums monthly payments cover
only half of Corbis’ rent on the space.
"We took a major loss," says Corbis agent, Daniel Levine, an associate at
Newmark & Co. Real Estate Inc. "You have to in this market."g
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