Chelsea Market Poised to Flip in $2B+ Sale to Google - Manhattan Express | Manhattan Express

Chelsea Market Poised to Flip in $2B+ Sale to Google

Chelsea Market on the snowy morning of Wed., Feb. 7 — one day after news broke that Google is its likely new owner. | Photo by Christian Miles

BY WINNIE McCROY | After years of local residents wondering about the future of the Chelsea Market, it now appears that Google will purchase the famous food hall from its current owner, Jamestown, for nearly $2.5 billion — in excess of $1,600 per square foot. In fact, Google Maps already lists 75 Ninth Ave. between 15th and 16th Sts. as the “Google Building.”

On Tues., Feb. 6, The Real Deal reported that the tech giant was in negotiations to purchase the 1.2 million-square-foot complex. Google is currently the largest tenant in the building, having previously leased about 400,000 square feet of space. After all, it’s conveniently located right across the street from their New York headquarters at 111 Eighth Ave., which they purchased in 2010 for $1.8 billion.

This move makes sense when looking at Google’s history at the Chelsea Market; for the past seven years, they have aggressively acquired office space at the location whenever a lease expired. In October 2012, they added 94,000 square feet to their 1.2 million-square-foot holdings at Chelsea Market, then leased another 84,000 square feet at the location in 2013.

Preservationists’ prediction comes to pass

The deal is expected to close within the next two months. Once it does, Jamestown will make a huge profit from their original investment of $225 million in 2011. This is the first billion-dollar-plus trade to go under contract this year in New York, and it is expected to give an early boost to the city’s investment-sales market.

Back in 2011, members of Save Chelsea (savechelseany.org) expressed concerns that Jamestown, an Atlanta-based German company, had planned to obtain the necessary zoning variances for the building only to sell it. Longtime member David Holowka said that the group strongly opposed granting Jamestown the right to vertically expand to build a tower that would cast shadows over the High Line, a public park.

“It sounded like bullshit then, and it still does. We all suspected that Jamestown, originally a retirement fund investment, was only interested in increasing the value of their property so they could cash out on that increased valuation,” said Holowka. “And the fact that they haven’t built vertically shows that they were only after additional profit. I suspect that they always had Google in mind.”

This rendering of Chelsea Market (middle building) depicts a vertical expansion that has yet to happen. | File image courtesy Jamestown

Holowka argued that if Jamestown needed to vertically expand the building simply to accommodate their workforce, it should be done at the Ninth Ave. side, which is closer to the subway and Google’s current building, rather than construct a huge tower on 10th Ave., which will cause shadows to loom over the High Line.

“It is so transparent that they are looking to cash in on the views up and down the High Line and Hudson River. And what irks me is that the value of the air rights above Chelsea Market at that end were enhanced by public money intended for a park,” said Holowka. “Also, Chelsea Market is listed on the National Register of Historic Places. You don’t lightly change zoning to allow buildings to be built on top of historic places. But all these things came to pass. The local community board got behind their proposal, and I hope they don’t feel like fools now.”

Bill Borock, president of the Council of Chelsea Block Associations (CCBA), echoed this sentiment, saying, “This is exactly what we told the Community Board that Jamestown would do, but they felt if they didn’t compromise and approve it with stipulations, they would get it anyway.”

By 2012, Community Board 4 (CB4) had indeed approved Jamestown’s plan to add Chelsea Market to the Special West Chelsea District as a mechanism to permit building up to 250 feet above the market. At that time, Michael Philips, then managing director of Jamestown, said they had no plans to sell, pointing to their long-term, $380 million mortgage as evidence of their long-term commitment.

Waterfront activist Bob Trentlyon predicted at that time, “I do not believe they are going to get the rights to build the building and then not sell to someone else. Their history is to only stay a few years, then flip it.”

Jamestown has a track record of purchasing notable commercial properties (including the General Motors Buildings and 1290 Avenue of the Americas) solely for the short-term maximization of return for its investors, selling the property in an average of five years.

Ownership by Google calls into question the future of Chelsea Market’s retail tenants. CB4 Chair Burt Lazarin said their elimination “would be a pretty stupid public relations move.” | Photo by Christian Miles

But CB4 Chair Burt Lazarin was nonplussed that Google could undertake the vertical expansion Jamestown had secured, saying, “It’s approved, so I wouldn’t be surprised that they did. If I was in real estate that’s one reason I would want to buy that building, because you don’t have to go through the rezoning process. It was done four years ago, and was very controversial at the time.”

“Everybody in Manhattan plays real estate; they don’t keep it for the rest of their lives. Eventually they move out,” added Lazarin. “And Jamestown is a German company. I don’t care if it’s based in Atlanta, they’re only here to make money. I don’t know if this move will be for the better or worse, but I would like Google to honor their community commitments. And I assume they will keep the retail portion. It would be a pretty stupid public relations move to eliminate the Chelsea Market.”

While Google is expected to keep things running as they are in the retail portion of Chelsea Market and the recently-renovated lower level (aka the Chelsea Local), it is unclear yet as to how this will affect upstairs tenants, including the Food Network and Major League Baseball, which has a lease through 2022.

It’s also unclear as to how this will affect the community “gets” that Jamestown had previously negotiated with CB4, among them a one-time capital improvements payment of $17 million to Friends of the High Line (who declined to comment on the matter), promised hotel jobs, and a passel of community programs — some of which Jamestown has already fulfilled.

Said Borock, “It will be interesting to see if the High Line says, ‘We’ll take the $17 million, and we’ll take the shadows.’ ”

In the past seven years, Jamestown has made significant financial contributions to at least a dozen local projects — including a food worker training program in Long Island City, a food incubator space, a nutritional program at two local schools, landscaping and displaying public artwork on the Chelsea Market concourse, sponsoring Fulton Houses’ holiday party and several $10,000 Thanksgiving turkey giveaways. Their donations include $100,000 to the James Beard Foundation, $36,000 to the Wellness in the Schools program, $1,500 to PS11’s Annual Gala, $1,000 to the Corlears School, and $50,000 to Friends of the High Line.

And in 2016, Jamestown did launch their promised TechUp program, a bi-weekly, seven-month technology literacy program for youth aged 16–24 at Elliot Chelsea Houses and Fulton Houses, which teaches skills to work in marketing, publishing, non-profit, and media. The program was a partnership between Hudson Guild and The LAMP, and fulfills Jamestown Properties’ goodwill promise to provide educational resources for area teens. Perhaps ironically in hindsight, the program received generous assistance from Google, which reportedly paid for all of the technology in the center, including computers and smart boards.

Looking Downtown, a view of Ninth Ave. sees Google’s current building on the left and Chelsea Market on the right. | Photo by Christian Miles

Now, Chelsea residents are left wondering if these programs will continue. Paul Groncki, president of the 100 West 16th Block Association, said, “They’re supposed to give money to the High Line. And there’s the TechUp center at Hudson Guild — does this sale put that in danger? Also, Jamestown was involved in helping save the mural from Greenwich Savings Bank. What will happen with that? There’s a lot more questions than answers about the implication of this sale.”

The CCBA’s Borock said that while an influx of Google workers could establish Chelsea as a tech sector and be good for area businesses, the move to permit vertical expansion “wasn’t good in terms of protecting a historic district that the community fought for years to protect.”

“I would also say it’s disappointing because since the big fights the community had in 2011 about expansion of the Chelsea Market, Jamestown has actually been very proactive about their role in the community in positive ways, and redeemed itself a bit in the eyes of the community,” said Groncki. “Now to find them flipping and selling and walking away from Chelsea is very disappointing.”

NYC Community Media reached out to Jamestown and Google for comment, and will keep readers apprised as to developments in this deal.

 

 

Photo by Christian Miles

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