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Gary Barnett will demolish office building to erect 193K sf of residential
Gary Barnett's Extell Development has filed plans for a residential tower to replace a Midtown office building. The 193,000-square-foot building at 655 Madison Avenue will include 62 residential units and commercial space. The existing 200,000-square-foot office building will be demolished. Barnett, known for developing luxury condominiums, plans to build "the usual stuff." The property was purchased for nearly $160 million from Williams Equities in October.
The price works out to about $800 per square foot, suggesting Barnett planned to raze the building and build a residential building, possibly with ground-level retail. However, the new building's zoning floor area is only 161,000 square feet, which means he paid about $1,000 per square foot. The 24-story building at 655 Madison was last renovated in 2005 and charged office rents between $54 and $66 per square foot. It is a block from the southeast corner of Central Park, offering Barnett a chance to build apartments with commanding views of the park.
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SL Green has sold an 11% stake in 1 Vanderbilt Ave. to Japan's Mori Building Co., valuing the 73-story tower at $4.7 billion. The sale reduces SL Green's ownership to 60% but allows the developer to raise $200 million in cash to pay down debt. The firm plans to raise an additional $400 million by issuing new shares. The cash infusion could help SL Green take advantage of under-capitalized situations of well-located assets. SL Green officials are also interested in Park Avenue's Seagram Building, which is owned by RFR Realty, which is facing difficulties and could take over the ailing Worldwide Plaza or the Helmsley Building. CEO of Mori Building, Shigo Tsuji, expressed excitement to invest in 1 Vanderbilt, a modern landmark.
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Deal marks biggest investor-led retail purchase in Manhattan since 2021
Blackstone is buying a group of retail buildings in Soho, Manhattan, for around $200 million, marking the largest Manhattan retail deal by an investor in over three years. The private equity firm is buying the four buildings spread across the neighborhood from Maryland-based ASB Real Estate Investments, which paid $204 million over a span of four years starting in 2012. The deal marks a significant return to the normal kind of investing that disappeared when the retail bubble burst in 2016, leading to a years-long drought during which retail was a pariah for most investors.
The market eventually corrected, and leasing and rents have slowly and steadily improved in recent years, sparking renewed demand from property investors. Blackstone is betting it can increase revenue by bringing those spaces up to today's levels. The deal is the largest retail purchase made by an investor since late 2021, when Aurora Capital Associates bought a block-long retail condo at the base of the office building 530 Fifth Avenue for $192 million. ASB Real Estate, a division of ASB Capital Management, bought the properties through its open-ended ASB Allegiance Fund, which invests in core properties.
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Struggling office investor pays $255M in Blackstone-controlled sale
Columbia Property Trust has sold its distressed office building in Greenwich Village for less than what it owed. Savanna acquired 799 Broadway for $255 million, with Blackstone Mortgage Trust administering the all-cash deal. The property was put on the market in August, with a target of $250 million. The deal is about $1,433 per square foot. The deal was all cash, with Greek copper billionaire Telis Mistakidis providing the equity.. The building is 71 percent leased and is in high demand post-Covid. Office values in New York fell by 35% from the end of 2021 to September, prompting more distress sales as landlords struggle to cover costs. Savanna, run by Chris Schlank and Nick Bienstock, has faced struggles with a slew of office buildings it bought in the years leading up to the pandemic.
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Firm defaulted on mezz loan in February, then senior debt at maturity this month
RFR's Grand Central office tower, 285 Madison Avenue, has been in default due to a lack of new debt. Aby Rosen's firm was granted a forbearance to refinance the $219 million senior loan in July, but the CMBS loan is now back in special servicing for imminent maturity default. A New York judge ordered RFR to pay its mezzanine lender on 285 Madison $18 million, as the sponsor defaulted on the building's $205 million in subordinate debt in February. RFR is among borrowers who negotiated short-term loan modifications on office properties with shaky financials.
The building has been underwater since at least 2022, when a reappraisal cut its value from $610 million to $411 million, below the total debt balance. Despite securing an extension through 2024, RFR's net cash flow has fallen more than 50% in six months. It is unclear what interest rate RFR was playing on the mezzanine debt on which it defaulted in February. The senior loan now in special servicing carried an interest rate of just 3.8 percent. Any refinancing would carry a higher rate and likely require an additional equity commitment from RFR. With an $18 million judgment to satisfy and multiple foreclosures underway, RFR wants to make a capital call to investors for 285 Madison.
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Debt on casino-bid tower recently shipped to special servicer
SL Green, the office landlord, has extended and modified a $742.8 million loan to its Midtown Manhattan office tower. The loan's maturity date is being pushed back three years to March 2028, with an interest rate remaining at 3.93 percent. The debt was originated by a group including the Bank of China and an entity tied to Goldman Sachs. Despite the looming maturity date, there were no significant concerns about the property's performance. SL Green is current on mortgage payments and building revenue comfortably covers debt service. The extension is significant for the property's location and size, as well as the future SL Green envisions for the site, which is a Caesar's Palace casino. The $4 billion proposal is part of a crowded field of bids for one of New York's three downstate gaming licenses.
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A 3-year-old office building in Long Island City's Queens neighborhood has been placed into bankruptcy by its owner, Barone Management. The building, which has between $10M and $50M in assets and liabilities, is being marketed for sale by Ripco Realty with an asking price of $31.5M. The tenant roster includes Daikin Industries and Montana Datacom. The building received its certificate of occupancy in March 2021 and was initially planned for a 199-unit hotel. In 2017, Barone Management structured a lease deal with the New York City Industrial Development Agency, leasing the property from its fee owners, John and Michael Koullias, and leasing it back to Barone Management.
The IDA then subleased the property back to Barone Management, who then subleased it to industrial, light manufacturing, and office tenants. Barone Management's struggles at 9-03 44th Road come as many developers in Long Island City struggle to find tenants. Vacancy in Class-A buildings in the area reached 43.1% at the end of 2022, and last year, BentallGreenOak and Related Fund Management defaulted on their mortgage on two buildings.
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Midtown-based landlord Vici Properties has been raised to investment grade by Moody's, potentially giving the Yonkers racetrack a competitive edge in its pursuit of a casino license. The rating, equivalent to BBB-, is based on the firm's size and scale, resilient operating cash flow, and disciplined financial policy. The upgrade, which will result in lower borrowing costs, is a strategic move as Vici now has a higher credit rating than many other bidders for one of the three downstate casino licenses the state government is expected to award next year. Vici owns 127 million square feet of commercial space nationally, including Chelsea Piers and the Bowlero chain of bowling alleys. The upgrade puts Vici's credit rating on par with Genting New York, Las Vegas Sands, and gaming operator Bally's. Office tower owner SL Green, which plans to develop a Caesar's in Times Square, has a weak credit rating, with debt levels nearly 13 times larger than operating earnings.
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A Greenwich Village office building, owned by Columbia Property Trust and Cannon Hill Capital Partners, sold for $255 million to real estate investment manager Savanna. The sale was administered by Blackstone Mortgage Trust, which provided a $270 million refinancing in 2022. The buyer is paying all cash for the property. Since the end of 2021, New York office values have plummeted 35% through September, with vacancies remaining elevated across the city and higher interest rates making it harder for landlords to cover costs. The property, which has 176,588 square feet of space with retail on the bottom, is one of New York's newest offices and is currently 71% leased to tenants such as Bain Capital Ventures and Tidal. The price plunge has changed the calculations for many owners and lenders, and a reset valuation can reset the economic incentives. The property is one of New York's premier properties for tenants seeking a flight to quality in the market.
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The Helmsley Building, a landmarked tower at 230 Park Ave, has lost 40% of its value in the last three years, according to a new appraisal by bond-rating firm Morningstar Credit. The 1.4 million-square-foot building is worth an estimated $770 million, down from $1.3 billion in 2021. The decline complicates RXR Realty's plans to secure a new mortgage after the building defaulted on $795 million in debt late last year. RXR CEO Scott Rechler has suggested that the Helmsley could be partially converted into apartments. The building was developed in 1929 by the New York Central Railroad and was acquired by RXR in 2015 for $1.2 billion. In 2021, the building took out a $670 million mortgage and carries $125 million in mezzanine debt held by Brookfield and Morgan Stanley. The Helmsley is only 70% leased, with tenants including Voya Financial and Clarion Partners expected to move out next year.
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Real estate mogul Sam Chang has sold his latest Manhattan inn for almost $60 million, marking his eighth sale since 2021. The Holiday Inn Express at 232 W. 29th St. was built in 2005 and opened a year later. Chang sold the 13-story property to Midtown-based private equity firm Prospect Ridge, which acquired the hotel through an entity named Cactus Street PropCo. Despite being owned by Chang, the hotel appears to be managed by Hersha Hotels and Resorts, which owns and operates 21 hotels across five states and the District of Columbia. Chang has been selling off his portfolio in recent months, including a Long Island City development site and three Manhattan hotels in late 2023. The city's hotel occupancy rate has rebounded, with a rise in August, partly due to an influx of migrants seeking shelter. However, the makeup of the city's total hotel inventory, or about 15,000 rooms, is likely to change as the city winds down its contracts with such hotels.
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A 1970s Financial District office building, 180 Water St., is at risk of defaulting due to its $265 million mortgage due this month. The building, re-engineered in 2017 by Metro Loft NYC, is a 460,000 square-foot tower that houses 573 apartments. The building has a $164 million mortgage and $100 million in mezzanine debt held by a party positioned to seize the building if Metro Loft cannot pay off the bills. KBRA downgraded 180 Water's mortgage to "underperform," and it is uncertain if the borrower will be able to pay off the loan maturity.
Nathan Berman, CEO of Metro Loft, is working with both lenders and will report back when something is reported. Berman has a history of converting 5 million square feet of office space to residential, and his work is in line with policymakers' desire to convert obsolete office buildings into residential. 180 Water would be the second Metro Loft-converted building to default on its mortgage. Rents at 180 Water average $4,800 a month, but since 2019 they have only risen by half the average 20% increase for Manhattan rentals.
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Valley National Bank claims office buyer hid ownership, defaulted on $179M in loans
Shaya Prager, founder of Opal Holdings, is facing legal attacks from lenders who claim he was aware of the controversial ground lease structure he used at investment properties. Prager created ground leases at office properties and took out separate loans against the land and buildings above, often exceeding what he had paid for the properties. This issue surfaced when his entities started defaulting on loans. Valley National Bank, a New Jersey-based lender, claims Prager has a direct or indirect interest in the entity that owns the ground, despite telling the bank he didn't.
Other lenders, including Pinnacle Bank, have also accused Prager of mortgage fraud. Valley National is accusing Prager and his wife Shulamit Prager of defaulting on loans totaling $179.3 million, with an unpaid balance of $158.8 million. Prager maintains that all lenders were informed of the possibility of common beneficial ownership and that all ground leases contained exhibits with an organization chart reflecting the ownership structure and interests of the landlord and tenant.
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Outpost will open this spring in historic Broadway building
The Malin, a boutique co-working company, is expanding its Manhattan presence to the top two floors of a historic Flatiron building. The company has signed a 33,000-square-foot sublease at 895 Broadway, which will feature a 2,700-square-foot mezzanine, private offices, desks, and other amenities. The Equinox gym occupies the bottom three floors of the building. The Malin, founded by Irish furniture designer Ciaran McGuigan, focuses on stylishly designed spaces. The building, built in the 1860s, was originally a Lord & Taylor and later became known as the Calhoun, Robbins & Co.
Building for the company that leased it in 1914. Garment manufacturer Saint Laurie bought the building in 1984 for $2 million and spent more than that on renovations. Equinox leased it in 1993 and converted the first three floors into a gym and the upper two floors into offices. The demand for co-working space increased after the pandemic, as more tenants sought flexible options for expanding or contracting their footprints. Co-working companies are now recognizing opportunity in the wake of WeWork's bankruptcy.
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Deal follows retired boxer’s purchase of $402M rental portfolio
Floyd Mayweather Jr. has invested in office landlord 601W Companies' largest portfolio, a $10 billion collection of 18 buildings spanning 10 million square feet. This is the former world champion's "most significant" investment to date. Mayweather has previously invested over $100 million with office landlord SL Green and has earned $1.1 billion in and out of the ring. The deal spans over 60 rental buildings and could be the city's biggest this year.
Through the 601W investment, Mayweather will be an owner-partner in properties including Amazon-anchored 410 10th Avenue in Hudson Yards, the Aon Center and Old Post Office Building in Chicago, and Jersey City's Harborside office complex. Mayweather is betting on a post-pandemic office comeback and sees "tremendous upside" in the 601W portfolio given the landlord's track record. The firm has managed workouts, such as extending a loan on Chicago's One South Wacker Drive and locking down a three-year extension on the half a billion dollars in debt backed by the Aon Center.
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Tilman Fertitta, CEO of Houston-based Landry’s, praised Herald Square hotspot as “New York jewel”
Texas-based billionaire, Titman Fertitta, has purchased the Keens Steakhouse brand and its Midtown location in Manhattan. Fertitta, the CEO of Landry's, a Houston-based hospitality brand, is known for Morton's The Steakhouse, The Palm, Rainforest Cafe, and Dos Caminos. The restaurant, which dates back to 1885, was bought by George Schwarz in the late 1970s and revived by Jesse Fink. The restaurant, which is the only survivor of the Herald Square Theatre District, was reopened by restaurateur George Schwarz in the late 1970s. Landry's also owns and operates the Golden Nugget Casino and Hotel brand and several luxury hotels across Texas. Fertitta is also the owner of the NBA's Houston Rockets and has a net worth of $15.2 billion. Keens general manager Bonnie Jenkins stated that the buyer agreed to allow the team to continue operating and managing the restaurant in the same tradition it has been for the past 140 years.
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Retail sales were 0.7% lower on month in October
UK consumers spent less in October due to uncertainty around the government's tax plans, according to the UK statistics agency. Retail sales were 0.7% lower than in the previous month, defying expectations of a slight increase in volumes. Worries over the new Labor government's tax-and-spend plans, which were set out in its autumn budget, led to consumers holding back on spending. The budget included plans for a major increase in spending and some higher taxes, mostly on employers and wealthy individuals.
However, there are signs that sales could pick up ahead, as consumers felt more confident this month, including about making major purchases. Clothing sales saw the sharpest drop in an unusually dry and mild October, suggesting consumers might have held off on buying winter gear. With snow hitting parts of Britain this week, spending on coats, scarves, and gloves could boost November's tally ahead of the Black Friday discounting weekend and the crucial Christmas shopping weeks. The focus for retailers will be shifting to building momentum for the most important shopping events in the year.
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