The landlord for Gov. Andrew Cuomo’s office in Midtown Manhattan is putting 10 floors in the building up for sale — at twice the price it paid to buy the space from the state just five years ago.
Time Equities paid $103 million — or about $540 a square foot — in November 2006 to buy the top 10 floors of 633 Third Ave. from the Empire State Development Corp., a state agency that was moving downtown. The executive chamber, which had occupied the state-owned space since the first Pataki administration, stayed behind as a tenant.
The space is now for sale at $1,075 a square foot, says Time Equities’ director of office leasing and sales, Brandon Medeiros. “There’s been a lot of interest so far,” said Medeiros, “but no offers yet.”
State officials confirmed that the governor’s office is aware of a potential sale. The governor’s lease expires in June 2013.
The building spans the block between 40th and 41st streets in a prime district near Grand Central Terminal. Cuomo’s office pays Time Equities $85.24 per square foot each year for its 40,000 feet of space on the 38th and 39th floors, records from the state Office of General Services show.
The $3.4 million annual rent bill is by far the highest price per square foot that state government pays to rent space anywhere in New York — and almost double what another state office pays for space in the same building.
State Comptroller Tom DiNapoli’s office occupies the 31st floor but pays just $43 a square foot, under a 10-year lease it signed in 2003 with ESDC and continued with Time Equities.
At least two private tenants pay less than the governor for offices on the floors formerly owned by the state. Last year, the Bank of Israel and World Zionist Organization signed a three-year lease with Time Equities for space on the 32nd floor, which had an asking rent of $53 a square foot.
Office space brokers say the governor’s rent is on the high side but not outrageous for prime space like his, with sweeping views and a desirable location.
Cuomo’s office referred calls to the Office of General Services, whose spokeswoman Heather Groll said the differing prices reflect vacillations in the Manhattan office leasing market. The comptroller’s deal was reached in 2003, at a down time for the real estate market, she said, while rents had rebounded by the time the governor’s office signed its lease in 2006.
Groll said plans for the governor’s space are still to be determined. The state employee phone directory lists 40 staff in the Executive Chamber at the Manhattan location, but it is unclear how often they are there or in Albany.
Gov. Andrew Cuomo spotlighted the cost of state real estate last year, after audits by his administration found state agencies leased more than 1 million square feet of vacant office space. His administration promised to lower the state’s rent bill by consolidating the space across New York.
The Office of General Services is now assessing all leases in the state and looking for opportunities to consolidate agencies’ space as leases come up for renewal, with projected savings of $9 million a year.
New York City is next on its list for review, and the Daily News reported this week that the state is now considering selling its downtown Brooklyn office building.
ESDC’s decision to sell its space in 633 Third Ave. was controversial from the start. It sold the property in November 2006, signing the deed the day after Democratic Gov. Eliot Spitzer was elected to succeed Republican Gov. George Pataki. At the time, ESDC was run by Charles Gargano, a major Republican donor and Pataki appointee.
On the same day, ESDC paid Time Equities $52.5 million to buy space at 125 Maiden Lane. That prompted an investigation by then-Assemblyman Richard Brodsky (D-Westchester), who subpoenaed documents from ESDC and held a public hearing of his Corporations, Authorities and Commissions committee in the waning days of the Pataki administration.
At the hearing, Gargano acknowledged the Third Avenue property had been sold to Time Equities without an appraisal, while Eileen Mildenberger, the agency chief operating officer who had signed off on the sale, confirmed Time Equities had not made the highest offer among the six bidders for the property – theirs trailed by about $900,000, according to Brodsky.
Mildenberger said at the hearing that one benefit of selecting Time Equities was that it proposed a lower rent for the state offices than did other bidders for the properties. She contended the two Time Equities transactions on the same day were unrelated.
Brodsky left the Assembly in 2010 for an unsuccessful run for state attorney general, and is now a City & State columnist and a senior fellow at the policy group Demos and at NYU’s Wagner School for Public Service.
“This is just another example of how a state economic development program has benefited a large corporation and not the economy of the state,” Brodsky said. “There is no reason in the world for this company to have a subsidized transaction and not have to share or to repay that subsidy once they make a profit.”