Post-Tropical Storm Sandy

Prepare They Did, Yet Property Owners Hit Hard by Sandy

In Lower Manhattan, Brookfield, Silverstein Properties, take hit from storm. Uptown, Gehry-designed IAC Building remains empty, could be weeks before Daily Beast, Newsweek, College Humor allowed to return.

In the face of one of the worst natural disasters in the city’s history, commercial real estate landlords braced for Hurricane Sandy, employing every measure possible to hold property damage to a minimum and keep tenants safe.

But not even prophetic foresight could have allowed the city’s landlords—or New York City as a whole—to prevent much of the destruction that the mammoth storm wreaked across the five boroughs.

The road to recovery, especially in low-lying coastal areas like Staten Island, Coney Island and the Rockaways, will take months, if not years. Lower Manhattan went dark for days, with many companies largely shutting down due to power outages and salt water flooding, which is especially corrosive to mechanical equipment.

“It’s—It’s—It’s just a mess,” said Jordan Barowitz, a spokesman for the Durst Organization, who struggled to find words to describe the destruction in Lower Manhattan.

2012 11 05 12 05 44 Prepare They Did, Yet Property Owners Hit Hard by Sandy

Inside IAC Building lobby, after Hurricane Sandy.

While the impact on most of the company’s 8 million square feet of property was minimal, its Historic Front Street residential and retail complex, a joint venture located in mandatory evacuation Zone A near the Financial District, was all but destroyed.

“It was a very violent scene, with cars and refrigerators floating down the street,” Mr. Barowitz explained, recalling what wide-eyed colleagues told him after arriving there post-storm.

Much of the buildings’ mechanical systems had been removed from basements and brought to ground level in an effort to stave off damage, but the ground floors themselves were flooded with six feet of ocean water.

“The mechanical systems were severely compromised or destroyed,” Mr. Barowitz said.

Construction ground to a halt across the city as the storm approached. Onlookers watched with unease as a crane boom dangled atop One57 at 157 West 57th Street (Extell Development Company did not return calls seeking comment).

Luckily the crane was secured on Sunday—one nugget of good news to emerge after the storm. But elsewhere, destruction was widespread

At the IAC Building, an iceberg-like 10-story structure designed by Frank Gehry at 555 West 18th Street, home to College Humor, Newsweek and The Daily Beast, management shut the property down through at least next week due to flood damage.

Workers filled the ground-floor lobby with sandbags to absorb floodwater, but despite the preparations, several employees who work in the building said, the first floor and an underground parking garage were ravaged by a tidal surge that destroyed most of the drywall.

“Full restoration of street power to the HQ remains weeks away but we believe we will be able to get full power to the building using a generator soon,” wrote Jason Stewart, chief administrative officer with building owner InterActiveCorp, in an email obtained by The Commercial Observer that was sent to all building tenants on Sunday.

“We still have more work to do this week getting other critical systems running that are required for occupancy so we can’t invite you back quite yet, but we’re hoping to make this the last week you will need to work remotely or from temporary offices,” the email continues.

To make matters worse, said one Daily Beast employee, the ground-floor lobby has been a frequent source of revenue, with deep-pocketed companies like Target regularly renting space for social events. It is unclear how soon that space, which has extensive water damage, will be fully repaired.

“It clearly wasn’t designed for any sort of flooding whatsoever,” said the person, who spoke on condition of anonymity because employees and building managers are both prohibited from speaking publicly about the damages. “It’s surprising because you’d think a Gehry building like that would be more heavily fortified.  They obviously weren’t expecting as much water as they got.”

At Brookfield Properties 1 New York Plaza, at the tip of Manhattan, water was pumped out from lower floors through the weekend, and company spokesperson Melissa Coley said it would be weeks before damages were fully assessed and tenants would be let back in.

Luckily, the World Financial Center, in the midst of the $250 million redevelopment, was spared:  “It was amazing to be on water and not suffer any damage,” she said.

At the World Trade Center development site, full construction resumed this week on all towers, a source close to developer Silverstein Properties said, calling it “a testament to the fact that the design is very robust.”

Very little mechanical or electrical equipment at the Trade Center was impacted, with any flooding occurring within underground parking garage levels; most electrical equipment and generators, both at 1 World Trade Center (managed by the Port Authority) and 7 World Trade Center, are situated on floors four and above.

“The human toll is huge,” the source said, adding that damage to the city’s buildings had much to do with building age and elevation.

To that point, Silverstein—which has $10 billion of development in the pipeline, including three of the new World Trade Center office towers—was working through Monday of this week to get 120 Wall Street, built in 1930 just off the East River, back into action as a result of more extensive damage caused by flooding.

The developer offered workspace at its 41-story, 921-luxury-unit River Place at 650 West 42nd Street for tenants to house employees during the storm. Credit rating and financial research company Moody’s, 7 World Trade Center’s anchor tenant, was among them.

In other cases, operations fell into the hands of data center and collocation services, which continue to assist clients impacted by the storm.

Power was restored to nearly all of Lower Manhattan on Saturday, but some landlords continued to rely on remote data service providers to run IT needs and, in some cases, even house their employees.

“We managed to assist a number of Lower Manhattan clients without disruption,” said Michael Wright, president of MFX, which provides data center and collocation services for a range of clients in Lower Manhattan. “One of the things we definitely didn’t anticipate was their needing our office space.”

While the data centers performed as expected, housing clients’ employees at the company’s Ridgefield Park, N.J., facility (owned by Kushner Companies, which owns The Commercial Observer) was not in the cards—but an offer was extended, and about half of the 40 employees taken in remained at the facility on Monday, said Raymond Roy, the company’s chairman.

“They took us up on it and that was nice, to be able to help in that way.”