Google it: Online giant buys Chelsea Market building for $2.5 billion

The Chelsea Market building on the morning of Wed., Feb. 7 — the 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 building’s largest tenant, having previously leased about 400,000 square feet of space. After all, it’s conveniently located right across the street from the search giant’s New York headquarters at 111 Eighth Ave., which it 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, it has aggressively acquired office space at the location whenever a lease expired. In October 2012, Google added 94,000 square feet to the 1.2 million square feet it was already leasing at Chelsea Market, then leased another 84,000 square feet at the location in 2013.

The deal is expected to close within the next two months. Once it does, Jamestown will make a huge profit from its original investment of $225 million in 2011. This is the first billion-dollar-plus real-estate sale 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 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 Save Chelsea member David Holowka said that the group strongly opposed granting Jamestown the right to add oa tower atop Chelsea Market that would cast shadows over the High Line, a public park.

“It sounded like bulls— then, and it still does,” Holowka said. “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. 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.”

“It is so transparent that they are looking to cash in on the views up and down the High Line and Hudson River,” he said. “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. 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.”

Similarly, Bill Borock, President of the Council of Chelsea Block Associations, said, “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 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 existing market. At that time, Michael Philips, then managing director of Jamestown, said the company had no plans to sell, pointing to its long-term $380 million mortgage as evidence of its long-term commitment.

A design rendering of Chelsea Market, viewed from the West Side Highway, depicting a vertical expansion that has yet to happen. File image courtesy Jamestown

Waterfront activist Bob Trentlyon predicted at the 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 Building and 1290 Avenue of the Americas — solely for the short-term maximization of return for its investors, selling the properties in an average of five years.

C.B. 4 Chairperson Burt Lazarin was resigned to the fact that Google could undertake the vertical expansion that Jamestown had secured.

“It’s approved,” he said, “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,” Lazarin added. “Eventually, they move out. 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 a.k.a. The Chelsea Local, what the impact will be on upstairs tenants — including the Food Network and Major League Baseball, which has a lease through 2022 — is still unknown.

It’s also unclear how the sale will affect the community “gets” that Jamestown previously negotiated with C.B. 4, including a one-time capital improvements payment of $17 million to Friends of the High Line, promised hotel jobs and a passel of community programs — some of which Jamestown has already fulfilled. Friends of the High Line declined comment.

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

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 public-art displays on the Chelsea Market concourse, sponsoring Fulton Houses’ holiday party and several $10,000 Thanksgiving turkey giveaways. Jamestown’s donations include $100,000 to the James Beard Foundation, $36,000 to the Wellness in the Schools program, $1,500 to P.S. 11’s Annual Gala, $1,000 to the Corlears School and $50,000 to Friends of the High Line.

Paul Groncki, president of the 100 W. 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 [at 14th St. and Sixth Ave.]. What will happen with that? There’s a lot more questions than answers about the implication of this sale.

“I would also say it’s disappointing,” Groncki said, “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. Now to find them flipping and selling and walking away from Chelsea is very disappointing.”

Jamestown and Google did not immediately respond to requests for comment.

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