Magazine article American Banker

Banks Welcome N.Y. Agency's Realty Subsidy

Magazine article American Banker

Banks Welcome N.Y. Agency's Realty Subsidy

Article excerpt

The Economic Development Corp. has not only provided a wealth of job opportunities for New Yorkers but also given banks plenty to do.

The agency has kept marquee tenants like Conde Nast publishing company, the New York Mercantile Exchange, Marriott Corp., and Bear, Stearns & Co. in New York City by offering them tax incentives to stay and create job opportunities.

So far, the city has granted 33 tax abatements worth a total of $600 million.

The corporate retention program has been well received by bankers because it has generated sizable real estate construction projects that they are eager to finance, although similar projects stung them with losses just a few years ago.

Reports recently emerged that Reuters and the Rudin Organization, a New York developer, were in talks with the Economic Development Corp. to build an 844,000-square-foot project at Times Square. The $340 million project would be on property controlled by Prudential Insurance Co.

Prudential's Capital Group is said to be making a $250 million construction loan to finance the project.

A spokeswoman for the project said no agreement has been signed between Prudential and Reuters, though things are "moving in that direction." Arrangements for the loan are "even more preliminary," she added.

Earlier this year Bank of New York Co. led a $340 million loan to finance construction of 4 Times Square, a 1.6 million-square-foot office space being developed by Douglas Durst. Conde Nast publishing company got a $10.75 million tax incentive from the development agency to move into the building.

"I think that the support of the tax abatement programs, such as provided by the EDC, are very important to commercial real estate construction in New York," said Robert J. Mueller, chief credit officer at Bank of New York.

"Generally speaking, the rents that commercial office space commands in New York are somewhat below what it needs to be for a new building to be economic," Mr. …

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