Weekly Market Report - May 26, 2026
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- 7 min read
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The redevelopment of Penn Station has gained momentum with Penn Transformation Partners selected as the master developer. This joint venture includes Halmer, Skanska, and Vornado Realty Trust, which owns significant land nearby. The plan envisions a spacious, well-lit station, enhancing commuter experiences and opening opportunities for more retailers. Madison Square Garden's exterior will be revamped, while a new glass entrance on Eighth Avenue will replace the Theater at The Garden.
Commuters will benefit from expanded track capacity, reducing train turnaround times. Transportation Secretary Sean Duffy emphasized the end of cramped conditions and broken infrastructure. The Federal Railroad Administration will allocate $200 million for design and permitting, with an $8 billion commitment to the project, while New York will not provide funds, following the Trump administration's changes to the Metropolitan Transportation Authority's role.
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Mayor Zohran Mamdani plans to exempt certain New York City landlords from a proposed rent freeze this year to assist distressed rent-stabilized property owners. Landlords with empty units will be able to impose a one-time rent increase, with amounts varying on a case-by-case basis, potentially reaching hundreds of dollars. His proposal also includes measures to ease financing for property improvements, secure tax exemptions, and address housing-code violations. A $5 million loan program will help landlords cover tenants' overdue rent and prevent evictions, potentially benefiting tens of thousands of affordable apartments.
Approximately 300,000 city-financed apartments could qualify for these changes. There are strict income caps for rent increases, ensuring affordability remains. The package aligns with Mamdani’s housing plan, which aims to build and preserve 200,000 residences while enhancing tenant protections. Having campaigned on a rent-freeze promise, Mamdani faces challenges from landlords concerned about their financial viability amid rising operational costs.
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The First Real Estate Investment Trust (FREIT) of New Jersey, incorporated in 1961, is ending its operations by voluntarily liquidating its assets. This decision was unanimously approved by its board of directors. Currently, FREIT’s portfolio includes six apartment complexes, five shopping centers, and three parcels of vacant land in New Jersey, as well as The Regency Club in Middletown, New York. The liquidation process will entail selling all assets, with net proceeds distributed to stockholders after settling any liabilities, expected to yield payouts of $24.44 to $30.03 per share, surpassing the pre-announcement closing price of $15.25.
Following the announcement, FREIT’s stock price rose over 50% to $23 per share. CEO Robert Hekemian emphasized the company’s successful history and commitment to returning capital to stockholders. FREIT reported an increase in funds from operations to $7M in 2025. A stockholder meeting will be held this fall to finalize the liquidation. Other public real estate companies are similarly opting for liquidation amid market challenges.
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Charles Cohen faces legal troubles concerning the property at 222 E. 59th St., where the landowner has accused him of defaulting on over $500,000 in ground rent and threatened property seizure. Cohen claims the landowner, Eve Hart Rice, breached an agreement to lower the rent. According to his lawsuit, he believes the rent should have remained at $45,000 monthly, rather than increasing to $65,000. This situation has hindered Cohen from refinancing the building's $7.5 million mortgage, leading U.S. Bank to file a foreclosure lawsuit against him.
Cohen has historically been a significant player in the Midtown real estate market, managing over 10 million square feet of commercial space. However, he is currently selling off properties to manage a substantial debt of approximately $135 million. Recent property sales include two buildings to Vornado, following the foreclosure of his headquarters building, which went for a mere $1,000. Cohen is under pressure to finalize the sale of another undisclosed property by June 19, which would help settle his debts and cover legal fees.
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REI will permanently close its SoHo store at the Puck Building on July 23, resulting in the loss of 72 jobs, per a state Department of Labor filing. The company, based in Washington, had previously announced the closure due to declining sales, but details about layoffs remained undisclosed until now. REI expressed gratitude to its team and the community, emphasizing the need to adapt to changing markets. The store, which opened in 2011, spans 35,000 square feet and features distinctive architectural elements. Its rent details are unclear, but the space may attract new tenants, including large retailers, due to its size. Previous tenants included New York University, which vacated in 2024. REI has noted a significant sales decline, with a drop from $3.8 billion to $3.5 billion, leading to the closure of several locations, including in Boston and New Jersey, totaling 400 job cuts. REI will continue to operate other regional stores.
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Coach's Fifth Avenue store has entered special servicing due to mortgage default concerns. The brand plans to relocate next year from 685 to 645 Fifth Ave., moving into a 13,000 square foot space, 35% smaller than its current location. Leases for smaller tenants at 685 Fifth are expiring soon, raising questions about filling the 24,000-square-foot vacancy. Despite Fifth Avenue's prestige, servicer concerns about high rent challenges prompted the mortgage's transfer to special servicing, despite it not being delinquent and due until 2028. Brookfield's subsidiary GGP deems this action unwarranted, asserting the loan is performing well. The current retail space availability rate on Fifth Avenue is around 15%, with average rents exceeding $2,400 per square foot.
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New York hotel owners have enlisted a former federal prosecutor to investigate whistleblower allegations of corruption within the hotel workers union. The investigation occurs as hotel occupancy and rates decline, amid the ratification of an eight-year contract for 27,000 workers. The whistleblower's claims include misconduct by union President Richard Maroko, violating the Racketeer Influenced and Corrupt Organizations Act, receiving gifts from hotel executives, and defrauding UNITE HERE Local 6. The union denied the allegations, labeling them as attempts to disrupt contract negotiations. Despite these claims, the new contract ensures substantial wage increases and benefits for workers during a challenging hospitality industry period.
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A newly completed Class A office tower on Billionaires Row has received a $321 million refinancing, with JPMorgan Chase as the senior lender and Hudson Bay Capital as the mezzanine lender. The 30-story tower at 125 W. 57th St. was financed by Walker & Dunlop for owners Cain International and Alchemy-ABR Investment Partners, who acquired it for $130 million in June 2021.
The building spans approximately 260,000 square feet and is around 53% occupied, housing tenants like Eldridge Industries and Jadian Capital. Asking rents range from $84 to $103, and Ten Five Hospitality plans to open a restaurant on the ground floor. Despite challenges in the Manhattan office market post-pandemic, Schwartz highlighted the tower as one of the few remaining Class A spaces in Midtown, amid limited new office construction projected in the next five years.
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The Chambers Hotel, previously managed by failed hospitality firm Sonder, has been sold for $66.2 million by BD Hotels to the Toronto-based Hennick Group. The sale, recorded in the city register, occurred after the hotel went into contract on March 21 and closed on May 5, with Jory Hennick signing the deed. The hotel has 77 rooms and is located at 15 W. 56th St. between Fifth and Sixth Avenues, with a history dating back to 2001 and a former restaurant space once occupied by David Chang's Ma Peche. Sonder's management of the Chambers began around August 2024 before their partnership with Marriott International was terminated due to alleged defaults, leading to Sonder's bankruptcy filing.
The Chambers' closure resulted in seven job losses. Richard Born of BD Hotels stated that the sale was a strategic decision rather than a direct response to Sonder's collapse. BD Hotels had previously co-acquired the property in 1998, starting as a parking lot, before developing the hotel. The property's subsequent restaurant spaces have undergone changes, with Felice 56 currently in operation. The Hennick Group, controlled by billionaire Jay Hennick, has been active in Manhattan real estate acquisitions.
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Tishman Speyer has reached a modification agreement on a $425 million mortgage for The JACX, a 1.2 million-square-foot office complex in Long Island City, Queens. This includes a $20 million cash injection, resulting in an extension of up to four and a half years on the loan originally due in September. The mortgage was sent to special servicing in March due to high vacancy rates. Despite challenges in leasing Class A space amid a 20% office vacancy in Manhattan, Tishman emphasized The JACX's quality and its role in the area's transformation. Developed in 2019 for $650 million, its value has dropped to $480 million following tenant changes post-pandemic.
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A tentative eight-year contract agreement between the Hotel and Gaming Trades Council and New York City hotels promises significant wage increases for nearly 30,000 workers at over 250 hotels. Announced ahead of a contract expiration, the deal offers the largest pay increases in the union’s history, raising wages by over 50 percent on average. Non-tipped workers will receive an extra $21.20 per hour by 2034, while housekeepers’ wages are projected to rise from around $40 to over $61 per hour, potentially exceeding $100,000 annually by the sixth year.
This agreement comes amid rising operational costs from the Safe Hotels Act and challenges in new hotel construction due to restrictive permitting. Although the contract awaits ratification and participation from all hotels, industry leaders, like Richard Born of BD Hotels, express optimism for approval. The deal aims to prevent labor disputes ahead of the lucrative 2026 FIFA World Cup. Hotel consultant Daniel Lesser anticipates potential increases in room rates as owners adapt to the financial impacts of the agreement, while Vijay Dandapani from the Hotel Association underscores the industry's ongoing financial challenges amid inflation and labor costs.
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