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Weekly Market Report - August 12, 2025

  • Writer: Broker Support
    Broker Support
  • Aug 18
  • 12 min read

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Ground lease allows developer to add 350 units at 135 East 57th, thanks to tax break


TF Cornerstone is set to convert 135 East 57th Street into a 350-unit residential complex in Midtown, where Charles Cohen once ruled. The real estate firm has signed a ground lease with the Wallace family, who will take control of the 32-story office building. The project aims to tap into the state's 467m tax exemption program, which facilitates office building conversions to residential properties. The property has a "very properly dimensioned floorplate for residential" use, and TF Cornerstone plans to wrap the project by 2028.


The curved tower on Billionaires' Row was put on the market last year following a lengthy fight between Cohen and the Wallace clan. William Wallace sued to evict Cohen after allegedly defaulting on the lease and skipping out on paying city property taxes. Cohen pushed back on the eviction attempt, citing office vacancies and low demand. TF Cornerstone and Dune Real Estate Partners created a $1 billion venture to advance office-to-residential conversions across the country last year, with the former completing 15 commercial-to-residential conversions spanning 5 million square feet, including a 318-unit development at 95 Horatio Street in Manhattan's Meatpacking District.


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In the 1960s, Seymour Durst, a second-generation developer, began buying property in Times Square with the ambition of building a new Rockefeller Center. However, New York's fiscal crisis stifled his private-funded buildings from competing with those developed with subsidies. His son Douglas inherited the family business in 1994 and built a new tower on West 42nd Street, 151 W. 42nd St., which served as Conde Nast's headquarters and is home to H&M's U.S. flagship store.


The Durst real estate dynasty is now extracting nearly $150 million in cash as part of a $1.3 billion refinancing of 151 W. 42nd St.'s mortgage, according to a report from S&P Global. The Dursts own 13 million square feet of commercial property, including 1 Bryant Park and 1133 Sixth Ave. They own 4,000 apartments and have invested about $150 million in refashioning the building into 151 W. 42nd, which is LEED Gold certified, 92% occupied, and generates $125 million in annual net operating income. The largest tenant at 151 W. 42nd is TikTok, whose owner ByteDance had to put up a $50 million security deposit in case it gets shut down by the Trump administration.


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RXR's Midtown office tower has secured a new tenant, Latham & Watkins, a global law firm. The firm has signed a 12-year lease for two full floors at 1285 Sixth Ave., a total of 120,000 square feet. This expansion of Latham & Watkins' New York City footprint is a significant move, as it will keep its larger space at nearby 1271 Sixth Ave. The firm plans to move into 1285 Sixth Ave. in 2026, bringing the property to 100% leased. This move is another example of law firms supporting office leasing activity in the city. Other recent law firm deals include Davis Polk & Wardwell expanding to 700,000 square feet at 450 Lexington Ave., Mayer Brown expanding to over 330,000 square feet at 1221 Sixth Ave., and King & Spalding leasing 175,000 square feet at 1290 Sixth Ave. The office tower spans 1.6 million square feet.


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New York City is implementing a zoning plan to designate commercial areas for residential construction in Midtown South, causing opposition from small businesses, nonprofits, and labor unions in the Garment District. The Midtown South Mixed-Use Plan (MSMX) would designate 42 blocks between West 23rd and 40th Streets and Fifth and Eighth Avenues for housing development, allowing the city to repurpose office spaces to build around 9,700 new homes. The Garment District Alliance, a business improvement district (BID), supports the plan, arguing that rezoning the area would bring much-needed foot traffic.


The New York Fashion Workforce Development Coalition (NYFWDC), which advocates for local businesses and nonprofits in the area, is leading the campaign against MSDX, alongside local unions. Advocates claim the plan would eliminate 779 businesses and harm over 5,300 workers. The coalition proposes targeted revisions to the plan, including prioritizing strengthening businesses, establishing a relief fund for displaced workers, and offering tax relief for fashion-related local businesses. The MSMX plan has already passed review by the City Planning Commission and faces a vote before the entire City Council.


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Milford Entities wired PILOT fees to scammers posing as Battery Park City Authority


Manhattan's luxury landlord, Milford Entities, may have lost nearly $19 million due to a phishing email. The company, which owns and manages upscale buildings in Battery Park City, mistakenly wired the large sum to cybercriminals posing as the Battery Park City Authority. The July incident involved quarterly PILOT and ground-lease payments collected from condo owners, which typically pass through building management to the BPCA. The Department of Homeland Security is leading a multi-agency probe.


The scam targeted the automated infrastructure of PILOT payments, a quasi-property tax structure unique to Battery Park City. Milford, which oversees at least nine buildings and more than 2,000 units in the neighborhood, serves as an intermediary for a sizable share of those payments. The BPCA said it never received the payment and was not affected. However, fallout from the scam has rippled through the neighborhood, with one condo board reporting $3.5 million of its dues vanished in the transfer. The BPC Homeowners Coalition warned residents that the attack, likely the first of its kind in the area, would not be the last, urging buildings to review cybersecurity protocols.


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In the Class A fields where her company plays, rents are escalating and space is dwindling — two reasons why BXP is building big


BXP, the largest Class A office owner in the country, is expanding its portfolio of 53.7 million square feet across 186 properties in New York City with three development sites underway. Executive vice president of the New York region for the real estate investment trust, Hilary Spann, highlighted the need for high-quality, premier workplace space in Midtown as the reason for these new developments, particularly 343 Madison. BXP has started vertical construction at 343 Madison, a 46-story, 930,000-square-foot tower with offices, dining spaces, terraces, and numerous amenities.


The REIT has signed a letter of intent with a prestigious financial institution to anchor and occupy nearly 30% of the building, which is significant for the property. BXP is developing Site K, a residential project with 1,349 apartments and potentially a 400-key hotel, with The Moinian Group and BRP. All of these developments come on the heels of a strong second quarter for BXP, which reported revenue of $868.5 million, compared to $850.5 million during the same three months last year. The construction market is currently experiencing a moment-in-time opportunity, with prices coming under budgeted due to the completion of major projects.


The company is confident about its position from both leasing demand and construction cost perspectives. They are also working on the construction of 290 Coles Street in Jersey City and Site K, which will consist of 1,300 residential units and a 400-key hotel. The site at 3 Hudson Boulevard has broken ground due to Amtrak cutting a corner and the need for a construction loan. The company is working on a meaningful pre-lease before committing to one vertical.


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‘If you can vent it, you can rent it,’ landlords and brokers boast


Restaurant space demand in New York City is on the rise, boosting the retail real-estate market's recovery. The city's retail real-estate recovery is driven by the increasing spending on restaurants, with Americans spending more time and money at restaurants. The restaurant boom is attributed to the popularity of quick-service restaurants, such as Cava, Naya, and Joe and the Juice, and experience-based restaurants where customers can easily post on social media. In the first quarter of 2025, total consumer spending from five popular food delivery apps reached over $120 million.


For the last decade, food and beverage tenants have surpassed all other retail sectors in leasing, accounting for at least 35% of New York City's total leased square footage. Specialty food shops with large social-media followings draw some of the biggest crowds, with prices for signature cocktails ranging from $23 to $43. The Agriculture Department's Economic Research Service reports that every year since 2020 has seen more spending on food away from home, per capita. Total eating- and drinking-place sales are expected to reach $1.5 trillion this year, up $400 billion from 2024. Despite the high demand, rents for New York restaurant space remain lower than before the pandemic.


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Paramount Group, an office REIT that paid millions to its CEO's companies, is under investigation by the Securities and Exchange Commission (SEC). The SEC is looking at the adequacy of its disclosures for executive compensation, conflicts of interest, transactions with related parties, perks, and the use of corporate assets. The REIT is cooperating with the investigation and does not expect the results to have a "material adverse effect" on its business. Paramount disclosed it made at least $4M in payments for services retained by CEO Albert Behler, including more than $3M to a jet chartering company Behler co-owns and $214K for one of the REIT's consultants to retain his wife's design firm over the past three years. The REIT also paid more than $900K for Behler's personal accounting services over the past three years. In May, the REIT announced it had replaced two high-level executives and was undergoing a "review and evaluation of strategic alternatives."


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Steven Roth, the chairman and CEO of Vornado Realty Trust, has expressed interest in offloading assets that make up the remaining 10% of the company's portfolio. He mentioned owning a large building in Chicago, The Mart, and a complex of 555 California St., the No. 1 building in San Francisco. The Mart, a 3.7M SF office complex, was the centerpiece of a $625M deal between Vornado and the Kennedy family in 1998. The complex generated $25M in net operating income during the second quarter, up from $16M a year before. complex generated more than $17M of NOI in Q2.


Roth said that the properties are not sacred and that nothing is sacred. The company has also attempted to alter its ownership of the San Francisco office, but failed to do so. The company's Q2 earnings were boosted by Verizon's $1.6B master lease, the $350M sale of Uniqlo's Fifth Avenue flagship, and a ground rent reset at Penn 1. The REIT signed 1.5M SF of office and 57K SF of retail leases in New York over the quarter.


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Blackstone has reopened its office in Manhattan following a mass shooting that killed four people, including a senior executive on its real estate team. Staff were notified that they can return to their desks at the alternative asset manager's headquarters at 345 Park Ave. starting Monday, with the option to continue working remotely this week. Starting Monday, Aug. 11, Blackstone will return to its regular schedule, with most employees expected to be in the office five days a week. Accommodations will be provided for those who are not comfortable returning. The firm is also offering counseling to employees.


The shooting occurred on July 28, killing Blackstone Real Estate Income Trust CEO Wesley LePatner, a police officer, and a security guard. The lone gunman was identified as 27-year-old Shane Tamura, of Las Vegas. Blackstone has been working with Rudin, the New York Police Department, and outside security contractors to enhance its security measures at 345 Park and its other offices globally. The company has been based out of 345 Park since 1988 and has invested $20M in coronavirus-related safety precautions.


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Nathan Berman's post-war Financial District office building, 180 Water St., has been refinanced and is now 98% occupied, according to Moody's. The building secured a new five-year $280 million mortgage at a fixed 6.4% rate after receiving a $40 million cash infusion from a new investor, 60 Guilders and Sentry Realty. The building has been refinanced and is doing well, with Berman retaining an ownership stake. The building faced difficulties a year ago when credit-rating agencies questioned whether Berman could pay off the property's $265 million mortgage and a $100 million mezzanine loan. 60 Guilders and Sentry Capital stepped up, purchasing the mezzanine loan for $80 million and pumped $40 million of cash into the building. Tens of thousands of apartments are being carved out of obsolete office space due to incentives from the state and city.


Berman believes conversions are the fastest way to deliver meaningful amounts of affordable housing, as a popular affordable-housing incentive program, 485-x, imposes a $40-per-hour minimum wage requirement on all projects with 100 or more units. The state approved a property-tax exemption aimed at conversions called 467-m, which requires developers to set aside 25% of apartments for families earning 80% of area median income and be rent-stabilized in perpetuity. City Comptroller Brad Lander's office determined Manhattan buildings that may be eligible for 467-m benefits in the program's first phase could yield 3,600 affordable apartments and a total of 17,400.


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Real estate firms Capstone Equities and Republic Investment Co. have purchased the Smyth Tribeca hotel in Manhattan for about $40 million. The hotel was previously owned by family-owned real estate company Korman Communities, which had purchased the site in 2017 for $72.2 million. Developer Vanbarton Group appears to have bought at least a stake in the hotel after Korman's 2017 purchase and signed the deed on behalf of the seller in the recent deal. Room rates at the Smyth range from $351 per night for a unit with one queen-size bed to $2,747 per night for a penthouse terrace suite.


Several hotels traded hands at similar large discounts during the pandemic, which decimated the city's tourism industry. Capstone Equities, based in Midtown, has a portfolio that includes the Whale Building in Sunset Park and once owned the Maxwell, a 697-room hotel in Midtown that closed during the pandemic but lost control to Yellowstone Real Estate Investments late last year after a foreclosure fight. The company has partnered with Beverly Hills-based Republic Investment Co. before, taking over Manhattan's Renwick hotel in 2022 in a $16 million deal.


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Long Island City has awarded a $65.8 million contract to Destination Tomorrow, a nonprofit organization, to operate a 125-room Paper Factory hotel as a conventional homeless shelter for single adults through June 2030. The hotel, which was converted into an emergency shelter for asylum-seekers in 2023, was sold for $36 million by The Collective, a hospitality group, to a Brooklyn-based LLC. The contract stands out as an exception to the general trend for the city's migrant shelters, as most of the 150 hotels converted to temporary lodgings are expected to revert back to their former hotel uses.


The use of over 15,000 rooms to shelter migrants swelled the city's occupancy rate, driving up prices and helping hoteliers recover from the Covid-19 pandemic. The hotel's future is now a major question, as there were fewer than 37,000 migrants in the city's care by early July, driven partly by stricter federal immigration policies. The Long Island City hotel, based in a former paper factory, opened in 2013 and included a coworking space, a ground-floor restaurant, and a 24-hour gym.


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Developer Ben Ashkenazy is launching a $750 million real estate shopping spree by buying the Shops at Atlas Park in Glendale, Queens. The property, which was previously owned by former owners who paid $54 million for the 370,000-square-foot property in a 2011 foreclosure sale, is 97% leased and is set to be upgraded into a best-in-class lifestyle center. The transaction marks the first from a $750 million pool of capital assembled by Ashkenazy using his own money and funds from unidentified partners.


Ashkenazy has previously sold properties to overleveraged owners who are unable to refinance loans and would be forced to part with them at steep discounts. His 15 million-square-foot portfolio includes The Plaza hotel, the former Barneys flagship store, Beverly Connection, and Bay Harbour Mall in Lawrence, Long Island. The Shops at Atlas Park was sold by California-based Macerich Co., which was looking to sell the mall as part of a $2 billion debt-reduction plan. Macerich owns Queens Center in Elmhurst and Kings Plaza Shopping Center in Brooklyn.


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Coworking giant takes 55k sf lease at Moinian Group’s 245 Fifth Avenue


WeWork has secured a 55,000-square-foot lease at Moinian Group's 245 Fifth Avenue in NoMad, New York, slated to open in mid-2026. The new location will span four floors of the 24-story office building and will replace an expiring lease at Williams Equities' 79 Madison Avenue. The deal comes as WeWork moves to streamline operations and focus on high-demand areas under CEO John Santora. Foot traffic at WeWork's NoMad locations has increased by nearly 11% from January to June. The company has 35 locations in New York City.


WeWork exited bankruptcy proceedings last year, slashing $4 billion in debt, adding an equity partner in Yardi Systems, and revamping its C-suite with Cushman & Wakefield . The company plans to invest between $80 million and $100 million into its spaces in 2025. The Fifth Avenue lease follows a 60,000-square-foot lease at 250 Broadway, the company's first new lease in the city since 2019. WeWork has also inked two recent Big Apple deals on behalf of Amazon – a 304,000-square-foot lease at Vornado's 330 West 34th Street and a 112,000-square-foot sublease at Brookfield Properties' 5 Manhattan West.


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Trio of notes issued by Flagstar Bank


Rialto Management Group and Hines have acquired a trio of loans in Manhattan, each secured by an office property owned by the same company. The Midtown office debt totaling $99.8 million was acquired by the two companies, which were originally issued by Flagstar Bank and backed by 185 Madison Avenue, 5 West 37th Street, and 349 Lexington Avenue. The largest note, $35.2 million, is secured by the 71,00-square-foot building at 349 Lexington Avenue in Murray Hill. The second note, $34.5 million, is tied to 185 Madison Avenue, an 80,000-square-foot office property, and the third note, $30 million, is backed by the 83,000-square-foot building at Five West 37th Street. The deal closed on June 27 and was recorded on August 1. The two companies did not immediately respond to requests for comment from The Real Deal. The latest debt acquisition comes as Manhattan's office sector continues to face elevated vacancy and limited refinancing options.

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