February 6, 2009 - Boston Properties - 250 West 55th Street, New York NY

Developer pulls plug on 2nd midtown tower

Boston Properties Inc. has suspended construction of another Manhattan skyscraper. Work at 250 West 55th Street was stopped after a law firm pulled out of a planned lease, the company announced Friday.

Developer pulls plug on 2nd midtown tower

Boston Properties suspends work on W. 55th St. after big tenant balks.

Boston Properties Inc. has suspended construction of another Manhattan skyscraper. Work at 250 West 55th Street was stopped after a law firm pulled out of a planned lease, the company announced Friday. The move came less than two weeks after Boston Properties pulled the plug on another tower, on West 46th Street.

The developer had been negotiating with the law firm of Proskauer Rose for 500,000 square feet for at least $100 a square foot at the West 55th Street tower, according to sources. The project, a 1 million square foot office building, had already broken ground and was scheduled for completion in 2011. It is unclear what this suspension will mean for the law firm of Gibson Dunn, which had agreed to take 250,000 square feet in the same building.

Boston Properties, Proskauer Rose and Gibson Dunn did not return calls for immediate comment.

"The news is telling what everyone already knows which is that the market slowed up quite a bit," said Barry Gosin, CEO of Newmark Knight Frank. "Financing is an issue. It is hard for everyone to get money."

Tenants are in short supply. Last year, leasing activity fell 19% to 19 million square feet from 2007—its lowest level since 2001 when 18.9 million square feet was rented.

Mr. Gosin notes that Boston Properties’ decision to stall another project may actually help the market by easing the supply of new space hitting the market. "Now they'll be one less building looking for tenants," he said.

“I wish I could say I'm surprised," said Dan Fasulo, managing director of Real Capital Analytics. "The market has changed."

Boston Properties expects to reduce its capital commitments through 2011 by about $450 million as a result of the recent suspension. It is evaluating the financial impact of tower project and will update earnings guidance for fiscal 2009.

The developer, which ranks as the nation’s largest landlord, said in a press statement that the “construction of foundations was well underway at the site and it intends to complete them to facilitate a restart of construction when it deems it propitious to do so.”

Just last week, the developer revealed that it has stalled plans to build an office tower at Eighth Avenue and West 46th Street. Boston Properties and The Related Co. began filing with the New York City Department of Planning for development rights in October. As a result of that suspension, Boston Properties reported a charge of $23 million, which stems from forfeited contract, pre-development and other costs.

Original Story - Crains New York