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Landlord, Facing Loss of a Big Tenant, Pins Hopes on Amazon HQ2




The owners of a sliding office tower in the Long Island City area of ​​Queens are in a tough place. Your best hope may be Amazon.

Savannah, a real estate agent in New York, faces a threatening, million-square-foot hole in One Court Square, the 53-storey property that many New Yorkers know best as the tower of the Citi sign staring out over the East River.

The investment firm is in advanced discussions with

Amazon.com

to rent a lot or all free space, if the online store giant decides to put some of his HQ2 operations in New York, according to people familiar with the case.

Amazon is negotiating with a list of cities including New York for two new headquarters, each of which could have 25,000 employees and could potentially bring billions of dollars in investments over the years to host cities, according to people familiar with the situation. Two winners are expected to be named soon, they said.

Primed for Amazon?

Owners of One Court Square in Long Island City negotiate with Amazon for an HQ2 site.

Citigroup

Leads All 42 Floors; currently has 30 floors covering 1 million square meters; The remaining floors are sublet or available

If Long Island City is one of the pick, Amazon would need office space in addition to Savanna's 1.4 million square foot building. The negotiator is in talks with other companies for buildings and development sites, people familiar with the discussions said.

For Savanna, an agreement with Amazon would contribute to the One Court Square work.

Citigroup
-2.98%

The principal leader since 1989 has indicated that there are plans to relocate most of its employees by 2020, relocating one million square meters. The bank has the opportunity to occupy the remaining 400,000 square meters after 2020, but has not indicated whether it will do so, according to a person familiar with the discussions.

The property company bought One Court Square, also known as the Citigroup Building, for an unknown amount in 2014. Citigroup at that time did not say whether it intended to renew the rent. The possibility that Citi would leave scared away many other real estate investors who were worried that an owner could struggle to fill up so much space.

"This was definitely a calculated risk," said Adelaide Polsinelli, a nest chair at Real Estate Services Company Compass.

Savanna realized although the bank decided to leave the building, just a short metro ride to Manhattan, was a good effort. Few other landlords could offer a business client who had a lot of space near the city, according to people who were informed about Savannah's thinking at the time.

  Commuters pass through the court square during the morning rush hour.

Commuters passing through the Court Square Passage during the morning rush hour.


Photo:

Erin Lefevre for the Wall Street Journal

By 2015, Savanna had other thoughts. The company appeared to sell One Court Square and employee

Cushman & Wakefield

to market the property to commercial landlords and to developers who would consider converting it for private use. Savanna asked more than 800 million dollars, a person familiar with that process said. There was little interest.

"Buyers were afraid Citi would not go" and block their plans to convert to apartments, "said Mitchell Arkin, Managing Director of Brokerage Services at Cushman & Wakefield. "Commercial real estate buyers feared that Citi would go."

Amazon wants to deliver everything you want your doorstep, anywhere in the world. But the e-commerce giant faces several challenges in terms of a global empire. WSJ's Karan Deep Singh breaks up the basics using an Amazon delivery box.

As no sales materialized, Savanna refinanced the property. The company secured a $ 315 million loan from Natixis Real Estate Capital LLC, which subsequently eradicated several commercial mortgage-based security agreements, according to financial applications.

Basically, One Court Square was developed for Citigroup Inc. and was completed in 1989 At that time, the neighborhood was known for industrial operations in low-rise buildings. Skidmore, Owings and Merrill-designed towers were the neighborhood's rare office skyscrapers. Around the development was slow to germinate.

"What you see now happens, then, and it did not," says Alan Suna, chief of Silvercup Properties, who owns property in Long Island City. The tower "was lonely for a long time."

One Court Square, with a valuation of $ 640 million, has an outstanding $ 315 million claim, according to Trepp. The loans will expire in September 2020.

Write to Keiko Morris at Keiko.Morris@wsj.com and Craig Karmin at craig.karmin@wsj.com



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