Marathon Asset Management, the highflying investment firm that took 76,000 square feet at the beginning of 2007 for big rents in the new office tower One Bryant Park will be subleasing part of its space for even higher rates.
The firm has completed a 5-year deal to give just under 10,000 square feet of its space on the 39th floor to the Korean financial company Mirae Asset for $150 per square foot. That’s well above the $115 per square foot rent that Marathon agreed to pay when it took the 54-story building’s entire 38th and 39th floors in February 2007.
Even though the leasing market in the city has slowed due to a cooling economy and as a result of tumult in the financial sector, the city’s biggest space using industry, One Bryant Park has attracted a flurry of deals at premium rents that have brought the tower to near full occupancy.
Last summer the hedge fund HBK Investments took the 40th floor for $135 per square foot. Just before that, in May 2007, Apex Capital Management took a 7,300 square foot space on the 37th floor for $160 per square foot. The deal with Mirae shows that the market for premium spaces in the city’s best buildings hasn’t receded much despite what appears to be an overall slowdown in demand from tenants.
One Bryant Park, which is being developed by the Durst Organization and will be anchored by Bank of America, is considered one of midtown’s best buildings and is among a very short list of new, large trophy towers being developed along Manhattan’s prime corridors. With its soaring mast, it is the second tallest building in the city behind the Empire State Building and has environmentally friendly systems like rainwater collectors and air purifiers as well as floor to ceiling glass windows and sweeping views.
Sources say that Marathon’s impulse to do the deal wasn’t a symptom of the times. Rocked by a tumultuous economy, including heavy write-downs on bad mortgage securities, a sinking stock market and troubled capital markets, financial firms both large and small have begun to give up space around the city.
Just across 42nd Street at 1095 Avenue of the Americas, the mortgage REIT iStar seemed to get a serious case of buyer’s remorse after it leased a little over 100,000 square feet last summer for rents that began at $130 per square foot. After taking losses at the end of 2007, the firm decided to remain in its current offices in the nearby Grace Building and has put the entire space it has at 1095 Avenue of the Americas up for sublease. MetLife, 1095 Avenue of the America’s largest tenant, also has decided to sublease over 100,000 square feet of the roughly 400,000 square feet it has in the building.
Although those deals are examples of tenants doing an about face with regard to their space needs in light of the tougher times, Marathon had probably always planned to sublease a portion of its offices sources say. The firm had contemplated taking a floor and a half in One Bryant Park, but the CB Richard Ellis team that repped the firm in its deal urged it to take more space than it needed to accommodate for potential growth.
That strategy paid off because One Bryant Park is now full, leaving the firm without other expansion options. Now the company can have time to grow into its space while profiting on the deal in the meantime. The deal is also sweet for the building’s landlord, the Durst Organization. Due to a provision in Marathon’s leasing agreement however, the Durst Organization, the real estate firm run by the Durst family, gets to keep half of the profits it will reap from the higher sublease rent.