Case Study

Cravath Swaine & Moore

Anchoring New Construction in Hudson Yards

December 1, 2019

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Overview

Saddled with 650,000 RSF of space and paying an above-market rent in a building they had occupied since its completion in 1989 (and which was currently owned by a joint venture, within which each partner had different objectives and a different cost basis), Cravath retained CBRE six years in advance of its lease expiration to develop a long-term NYC occupancy strategy.

CBRE worked with Cravath, its architect and its engineer to determine the basis upon which a renovation in place could be undertaken, as well as the building upgrades that would be required by the landlord. Despite Cravath’s size, the joint owners were convinced that with a lease expiring six years in the future, the threat of a relocation was limited. The existing landlord’s initial renewal proposal (and subsequent proposals) were not compelling.

  • 481,000

    Total Square Feet

  • Anchor

    Tenant

  • 30%

    Reduction In Annual Run Rate

  • Signage

    Prominent in Lobby

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Cravath lobby desk signage at 2 Manhattan West. Rendering courtesy of Brookfield Properties.
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1 Manhattan West (right) and 2 Manhattan West (left).  Rendering courtesy of Brookfield Properties.
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Lobby at 2 Manhattan West from plaza. Rendering courtesy of Brookfield Properties.
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2 Manhattan West (foreground). Rendering courtesy of Brookfield Properties.
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Manhattan West plaza. Rendering courtesy of Brookfield Properties.
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Southern views from 2 Manhattan West. Rendering courtesy of Brookfield Properties.
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Lobby at 2 Manhattan West. Rendering courtesy of Brookfield Properties.

The Solution & Result

  • With more than 6 million square feet of new development slated for delivery between 2021-2023, CBRE focused Cravath on 3 buildings in Hudson Yards and 1 building Downtown.  CBRE leveraged the strength of Cravath's credit and the number of new developments seeking a large tenant to create a “competitive auction” for Cravath's tenancy.
  • The implementation of new workplace strategies coupled with the efficiency of new construction allowed for a 10% reduction in space relative to a renewal with a complete renovation.
  • After negotiating full term sheets with one alternative each in Hudson Yards and Downtown, Cravath once again pressed all of the landlords to stretch even further. And they did!  While Cravath's current landlord reduced its "best and final" by more than $10 per RSF in a 24-hour period, the economics were still not as compelling as a move to new construction.
  • Cravath negotiated a 20-year lease at 2 Manhattan West with anchor tenant terms and highly- attractive lease rights, and with Brookfield committing to build the building based solely on Cravath's commitment (33% of the building size). The lease affords Cravath significant expansion and contraction rights, a dedicated elevator bank, signage, tax protection when the PILOT program expires, attractive overtime HVAC charges and significant amenities (including daycare); at the same time, it provides Cravath with 14.5 foot slab-to-slab heights, floor-to-ceiling windows and minimal penetrations on the core to allow for the construction of interior offices. 
  • The economics negotiated coupled with the reduction in square footage will result in more than a 30% decrease in Cravath's annual run rate (including the cost of capital depreciation).

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