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Paramount Group, a Midtown office-tower owner, is facing a 33% drop in rental income for 2025 due to tenants leaving the company's buildings faster than they are entering. Despite the strong Manhattan office market in 2024, Paramount leased only 109,000 square feet of space last quarter, its third consecutive quarterly decline. The shortfall is attributed to a deal at 1301 Sixth Ave. falling through at the last minute. Shareholders have washed their hands of Paramount, and lenders are becoming more wary.
Paramount pledged to borrow no more than $200 million from its $750 million credit facility in exchange for a 45% stake in 900 Third Ave. This sale added $100 million to Paramount's bank account and could help refinance 1301 Sixth Ave.'s $860 million mortgage and 31 W. 52nd St.'s $500 million loan next year. Paramount is ready to sell more pieces of its buildings if the right price is found, but this depends on finding another party who agrees the stock market has misvalued Paramount's properties.
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Midtown West tower to see $900M in debt mature by 2026
Brookfield Asset Management, which owns a significant portion of the New York Times Building in Midtown West, has been downgraded by Fitch Ratings to "negative" due to the debt backing its part of the building. The building is divided into two portions, with the New York Times owning the lower half and Brookfield owning 740,000 square feet. Brookfield took out a $635 million mortgage to refinance its part of the building in 2018, provided by Deutsche Bank, Bank of America, Barclays Capital Real Estate Inc., and Citi Real Estate Funding Inc. The building generates only 66% of the cash needed for Brookfield to service its debt, which the landlord has already extended five times since 2020. Brookfield declined to comment on the Fitch downgrade. The investment firm has seen an exodus of tenants in recent years, including law firms Goodwin Proctor, Osler Hoskin & Harcourt, and asset manager ClearBridge Investments. In September, law firm Covington & Burling is expected to leave 200,000 square feet behind as it moves to Hudson Yards, leaving an even bigger hole for Brookfield to fill.
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Eden Gallery, a contemporary art retailer, opened at 645 Fifth Ave. a year ago, filling a 20,000 square-foot hole created when Armani Exchange moved out. The arrival of Eden, along with apparel store Skims and soon watch-shop Hublot, underscores the recovery underway along Fifth Avenue, which was once seeing retailers flee and those who set up shop extract rent discounts of 75% or more. Fitch Ratings said performance is stabilizing at 645 Fifth, also known as Olympic Tower, with retail storefronts fully leased and average in-place rents rising 7% in the past year. Improved tourist traffic and excitement over plans to double the width of the avenue's sidewalks, create outdoor seating, and reduce car lanes are key reasons for Fifth Avenue's recovery.
However, the avenue's recovery is far from complete, with several larger storefronts remaining vacant between 53rd and 55th streets. Retail rents remain 14% below pre-pandemic levels at 645 Fifth, and the building's financial outlook remains "negative" due to its heavy reliance on retail. Average asking rents between 49th and 60th streets were 5% lower in the fourth quarter than the prior-year period, indicating tenants still hold the balance of bargaining power. Talks are underway between landlords and prospective tenants to fill nearly all the vacancies, with Hublot expected to open soon at 645 Fifth in space subleased from Furla, the handbag merchant.
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Manhattan's 10 Grand Central, a 36-story tower, has seen its fortunes shift due to its new address, which was previously 708 Third Ave. The change came in 2018 after owner Marx Realty renovated the building and moved the entrance to East 44th Street. The new name has resulted in an average rent of $92 a square foot and a doubled revenue of $40 million a year. This is the latest in Manhattan to change its address, with rents rising by 25% since 1250 Broadway was renamed NoMad Tower in 2017. Changing a building's address typically requires approval from the borough president, which costs $11,000 to secure. Some building owners have chosen to bask in the refracted glory of Bryant Park, while others have changed their addresses to distance themselves from the craziness in Times Square. The city's aim is to prevent cases like 1325 Sixth Ave., a tower developed in 1989 that is actually on West 53rd Street and closer to Seventh Avenue than Sixth.
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RFR recapitalizes 475 Fifth Avenue with $160M loan
Aby Rosen has started 2025 on a financing hot streak after facing a foreclosure threat from its lenders. RFR Holding recapitalized 475 Fifth Avenue in Midtown Manhattan after a three-year, $160 million loan and an equity infusion from unnamed partners. JPMorgan Chase and Citigroup provided the financing, replacing a $180 million existing mortgage. RFR teamed up with Penske Media Corporation to purchase 475 Fifth Avenue in 2022 for $290 million, with Penske contributing 50% of the equity. The purchase from Nuveen Real Estate was financed by a $260 million loan. The property is 90% occupied, and Rosen teased additional deals at the building in the near future. RFR has been facing a wave of foreclosures and an eviction at the Chrysler Building. The firm also secured a $1.2 billion CMBS loan to refinance the Seagram Building at 375 Park Avenue. Rosen's firm also secured a three-year extension on 17 State Street and a five-year extension to pay off a loan tied to 150 East 72nd Street.
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The District of Columbia’s office market has been one of the hardest hit in the country
The Trump administration's decision to terminate millions of square feet of federal leases and sell government buildings could weaken the US office market, from California to Washington, D.C. Elon Musk's Department of Government Efficiency has targeted nearly 100 leases at government agency offices for termination or consolidation. The Trump administration is also considering selling two-thirds of the federally owned office buildings that are empty or underused. Washington, D.C. faces the greatest number of closures, with 11 leases totaling 1.4 million square feet. The District's office market has been one of the hardest hit in the country, with a vacancy rate peaking at nearly 23% last year.
The federal government leases about 150 million square feet of office space and owns over 450 million square feet. DOGE is focusing on leases with near expirations or those that include options to get out of leases early, giving the government the ability to negotiate a more immediate departure. The closures are expected to have an outsize effect in cities with a notable federal-government presence. The Trump administration's termination of leases this year alone would have negative impacts in the New York, Los Angeles, Atlanta, Hagerstown, Md., and Martinsburg, W.Va. regions, as well as Ohio, which has the second-highest concentration with 10 leases.
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Extell Development is planning to demolish the former Disney/ABC campus on the Upper West Side, which was purchased from Silverstein Properties in 2022 for $931 million. The property, which spans 288,000 square feet and stands 22 stories and 292 feet tall, is part of a property between Columbus Avenue and Central Park West. Extell purchased the campus from Disney in 2018 for $980 million. In late 2021, Extell filed plans for residential buildings at two other sites on the campus, including a 9-story, 90-foot-tall tower at 30 W. 67th St. and a 7-story, 90-foot-tall tower at 7 W. 66th St., both of which would have 31 residential units. It is unclear if Extell's latest demolition plans are intended to make way for another residential building on the campus. The company has been one of the city's more prominent developers, recently buying an office building at 15 W. 46th St. and selling a retail condo on Billionaires Row for $25 million. It is also planning a mixed-use tower at 655 Madison Ave. and a tower to contain Manhattan's first Ikea at 574 Fifth Ave.
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BIllionaire loses appeal to block collection after $534M default
Charles Cohen, the billionaire owner of Cohen Brothers Realty, has been unable to pay back on a massive personal guarantee after a half-a-billion-dollar default. The Appellate Division denied Cohen's appeal, putting him on the hook for the $187 million guarantee. The decision has left Cohen on the hook as his real estate empire crumbles and his escape routes dwindle. Cohen has already lost the properties that backed the $534 million loan, which Fortress took back in the largest UCC foreclosure ever.
The lender made a $148 million credit bid for the hodgepodge of deals, which include a U.K. movie theater chain, a Design Center in Dania Beach, Florida, and a Westchester development site. Fortress alleged that Cohen was shuffling around other assets to shield them from his lender, such as transferring ownership of his $20 million Greenwich mansion into a trust in his wife Clo's name and transferring ownership of four luxury boats valued at $50 million. Fortress will likely challenge those asset transfers as fraudulent. The lender is now waiting for a lower court judge to sign and enter the $187 million judgment. The lender can now start collecting either cash or assets.
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$217M loan transferred to special servicing in December after maturity default
Lloyd Goldman has agreed to pay $9.4 million to extend the Gurney's Montauk Resort and Seawater Spa loan, a $217M mortgage that defaulted late last year. The paydown helps Goldman reach the deal's debt yield hurdle, a measure of asset health that weighs revenue against the loan amount. The $3 million is an extra cushion, allowing Goldman's lender to pursue him personally if income slips and Goldman cannot meet the benchmark. The loan now comes due in December 2025, and Goldman has funded additional reserves as part of the workout. The 20-acre property is thriving, but loan data provided by Morningstar and Trepp shows cracks in the foundation. Trepp's Commercial Real Estate Direct said the asset had "substantially underperformed expectations." The Montauk Resort, a seasonal retreat, is subject to winter doldrums, but even performance data from June showed revenue covering less than half of monthly mortgage payments on the floating-rate loan, compared to 2.6 times when the mortgage was made.
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New York-based Namdar and partners have acquired 10 buildings for more than $480 million since 2021
Namdar Realty Group, a New York-based investor known for buying office buildings in major markets, has acquired 10 office buildings for over $480 million since 2021 in prime locations across Chicago, Cleveland, and New York City. The company bought the properties at significant discounts to their pre-pandemic worth, betting their values would rise as workers returned to the office. Namdar is also trying to slash expenses at its office buildings, echoing the extreme cost-cutting approach it deploys at the dozens of enclosed malls it owns.
Namdar's core business is retail, and the company has bought dozens of failing shopping centers at rock-bottom prices, extracting cash by cutting costs to the bone. In September, Namdar reported a gross profit of $148.3 million, a nearly 10% increase from the same month a year earlier. Namdar's labor problems flared up when the firm tried to squeeze costs, particularly with the unionized cleaning staff, who are paid $30 an hour and receive high-quality benefits. Some believe Namdar is turning a corner, with its Fifth Avenue building in Manhattan nearly fully leased after upgrading the lobby and amenity space.
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Private equity firm AllianceBernstein has acquired over two dozen office condominium units across the street from the United Nations headquarters in Manhattan. The Carlyle Group executed a deed transfer of 29 office condos at 866 United Nations Plaza to an AllianceBernstein affiliate, valuing the units at a collective $60.8M. A separate AllianceBernstein affiliate holds a mortgage tied to the properties, valued at $160M, which has been assigned to the AllianceBernstein entity that acquired the deed in a transfer dated February 18. Carlyle bought 471K SF of office space at the base of the two-tower 866 U.N. Plaza building in 2017 for $217.5M from Meadow Partners, which had divided it into 96 office condo units. The acquisition was funded by a $168M loan from Deutsche Bank, which Carlyle replaced with a $160M loan from AllianceBernstein a year later. The transfer to AllianceBernstein indicates the auction didn't lead to a sale, and the Nashville-based lender amended its $160M loan last May, listing 31 properties in mortgage documents as collateral for the debt. Carlyle has sold off some of the condos in the buildings over the years, including a $59.2M deal for four units on the sixth floor to Saudi Arabia in 2019.
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Kushner Cos. has acquired a nearly 40% stake in a Lincoln Square school building for just over $10 million, according to city records. The Fifth Avenue-based firm, currently led by CEO Laurent Morali, purchased a 17.9% stake in 227 W. 61st St. for $6 million from longtime landlord David Berley of Walter & Samuels. The company made both transactions under a limited liability company named Sixty One Associates. The 3-story, roughly 75,000-square-foot building is occupied by West End Secondary School, a city public school. The property has an estimated market value of about $30 million. Kushner Cos. bought the site for $31.2 million in 2005 with vague plans for a residential development.
There are no permits on file with the Department of Buildings indicating more recent plans for a residential development, but an unrelated permit submitted this week references the development of Amsterdam apartments and a 6-story residential building. The 22,525-square-foot lot is also zoned for residential and comes with 160,000 square feet of buildable space. Kushner Cos. was previously helmed by Jared Kushner, husband to Trump's daughter Ivanka Trump, until he stepped down in 2017 to become an advisor to the current and former commander-in-chief. The acquisition comes as the company has unloaded about a third of its portfolio of three-dozen properties in Lower Manhattan and made a point in recent years of venturing into the Southeast and Sunbelt regions of the country.
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Crafts retailer’s assets auctioned off to GA Group last week
Ohio-based craft retailer Joann is set to close all of its 800-plus stores as it goes through bankruptcy. The closure comes just weeks after the company announced the closure of 500 stores. Joann's assets were auctioned off as part of its second bankruptcy process within a year, with financial services company GA Group winning the auction to acquire virtually all of the company's assets. GA Group intends to wind down operations and have going-out-of-business sales at stores across the country, though the bankruptcy court will need to approve the plan. The timeline for the closure of Joann's portfolio, which spans 49 states, is yet to be determined. The retailer's struggles have been ongoing, with Joann filing for bankruptcy in March 2024 to reduce its debt and exiting bankruptcy protection in August. Joann blamed its recent financial woes on inventory shortages and sluggish consumer demand. The loss of Joann may present an opportunity for big-box retailers looking to find new spaces, similar to last year's Bed Bath & Beyond shutdown.
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