Weekly Market Report - September 3, 2026
- 17 hours ago
- 9 min read
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Charles Cohen, shortly after settling a $187 million debt to Fortress Investment Group, is entangled in a lawsuit seeking $204 million in damages from the lender. This lawsuit arises from a foreclosure auction of four of Cohen’s former properties, which he claims was improperly conducted. Cohen alleges that the auction lacked commercial reasonableness, suggesting it should have involved different marketing strategies and timelines. His claims follow Fortress's purchase of the properties for $150 million, significantly below their internal valuation.
Despite Cohen's assertion that Fortress's actions forced him to raise funds to clear his debts due to the undervalued auction, Fortress has contested these allegations in court. Cohen's troubles escalated from a 2022 borrowing of over $500 million, where he guaranteed the loan. Fortress filed a lawsuit in 2024, leading to the forfeiture of the properties in one of the largest UCC foreclosures recorded. Following a favorable ruling for Fortress in February 2025 and the entry of the damaging judgment, Cohen had to liquidate several assets, including Manhattan towers. Fortress, however, indicated that it intends to pursue further claims against Cohen, suggesting ongoing legal battles ahead.
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A near-partial collapse last month at America’s largest office-to-residential conversion project in Midtown Manhattan is bringing new scrutiny to this booming development strategy. At the former Pfizer headquarters, two structural columns buckled during construction, causing part of a floor to sag and forcing the evacuation of several nearby buildings. The immediate danger has passed, but construction remains halted while the city looks into the cause. Nineteen Manhattan office buildings have begun conversions so far this year, and another 17 are planned. The stakes are high because cities throughout the U.S. are embracing conversions as a solution to two of their most vexing problems: a severe shortage of housing and a glut of office space left behind by the remote-work era.
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Three real estate leaders, Scott Rechler, Rafael Cestero, and Doug Steiner, have been appointed to advise Mayor Zohran Mamdani on the city’s economic growth as part of a new 15-member council. Their focus includes housing production, with Rechler and Steiner emphasizing the need to reduce development costs through regulatory reforms. The administration's push for private development has somewhat alleviated earlier skepticism from the real estate community. Mamdani has initiated task forces like SPEED and LIFT to accelerate affordable housing projects, and plans to revamp building codes to save costs for developers.
Despite concerns regarding production incentives under tax laws, Rechler views office-to-residential conversions as vital for affordable housing. Both leaders appreciate the administration's accessibility and openness to their input, contrasting it with previous administrations, particularly de Blasio's. They advocate for collaboration to tackle challenges in the housing sector, affirming a shared goal of creating affordable housing opportunities while navigating differing perspectives.
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The Midtown office tower at 500 and 512 Seventh Avenue is heading to foreclosure auction due to a $356 million debt, as ordered by a New York Supreme Court judge. Owned by the Chetrit Group, Joseph Moinian, and Edward Minskoff, the partnership faces significant financial issues, with the Chetrits reportedly pleading poverty amid personal judgments exceeding $163 million. The partnership had acquired the leasehold for $140 million in 1999 and took on a $375 million mortgage in 2018. Meyer Chetrit acknowledged the foreclosure process's severity, stating the company is "about to lose it."
Chetrit Group reportedly owes over $1 million in back rent and has been accused of self-dealing, including improper transfers of tenant security deposits to related projects. The 512 property features 544,300 rentable square feet, while the 500 building offers 676,500 rentable square feet, with an additional 10,000 square feet at 228 West 38th Street. Despite ongoing business activities, Meyer described the company as "dissolving" financially.
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The doorman at 90 Fifth Ave., an almost entirely vacant prewar office building near Union Square, describes the situation as extremely quiet, with only infrequent visits from the property manager. This highlights a broader issue affecting older office buildings across New York City, where vacancy rates remain high, unlike the fully leased newer towers. Recent findings show around 15% of one- to four-star office spaces are available, with an inventory surpassing the supply of five-star offices. A report indicates a growing income gap between Class A and older Class B office spaces.
90 Fifth Ave. has struggled significantly; its main tenant, Compass, relocated, leaving only a TD Bank branch as a tenant. The building is facing foreclosure, and its owners, RFR Holdings, deny knowledge of the deteriorating situation despite signs of negligence. A lawyer's questioning revealed a lack of awareness from RFR principals about significant property management issues, raising doubts about their business practices. Acquired for $28 million in 2001, the building's value has plummeted to $90 million, with no prospective tenants in sight.
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Thor Equities’ Joseph Sitt might face foreclosure on 350 West Broadway in Soho after defaulting on a $15 million mortgage tied to the property's commercial space, as reported by Crain’s. Rialto Capital Advisors filed for foreclosure in Manhattan Supreme Court. The ownership situation is unclear; while Sitt and Elyahu Cohen are listed as guarantors, Sitt is believed to be a minority owner. Regal Ventures, possibly the majority owner, claims to only manage the property.
A limited paper trail connects Sitt and Cohen to the building, with mentions in a 2020 refinancing document. The 10-story property, situated between Broome and Grand streets, has 14,000 square feet of commercial space and seven residential condos, remodeled in 2008. Previously, Amazon's AWS Startup Loft occupied the commercial area but left nine months prior to its 2024 lease end, resulting in vacancy. Recently, Thor acquired 1359 Broadway for $218 million and purchased a 58,000-square-foot property in March for $56 million.
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The IRS Notice 2026-40 offers transition guidance as the QOZ program shifts from QOZ 1.0 to QOZ 2.0 in 2027. It allows existing QOZ 1.0 projects to retain qualification and potential 10-year appreciation exclusion, but with limitations for future acquisitions. Investors can contribute gains to Qualified Opportunity Funds (QOFs) after January 1, 2027, but projects need to meet new transition rules. For tangible property acquired post-2026, restrictions increase. Existing projects can continue acquiring qualifying property if they have a working capital safe harbor plan in place by the end of 2026, which requires spending a portion of the planned capital.
A replacement property exception allows necessary upgrades to continue operating current properties but not new developments. Additionally, gains from pre-2027 QOF investments will become taxable by December 31, 2026, complicating calculations for many investors. This requires a detailed analysis rather than relying on fair market value alone. Developers should plan early, review working capital plans, confirm future acquisitions under transition exceptions, and communicate with investors regarding potential tax implications related to the 2026 gain recognition event to protect opportunity zone benefits.
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Genius Sports has secured a 53,000-square-foot lease at Vornado Realty Trust’s 1290 Sixth Avenue in Manhattan, New York, as it relocates and expands its headquarters from a previous site at 512 West 22nd Street, where it occupied 28,000 square feet. The 10-year lease, signed at an asking rent of $99 per square foot, increases the building's occupancy rate to 95 percent. The move comes after Vornado completed significant renovations at the 1963-built, 43-story tower, which included updates to the lobby, curtain wall, and wellness amenities to compete with newer office developments.
The Manhattan office market has seen a busy year, with year-to-date leasing volume reaching 26.6 million square feet by July, suggesting strong demand. Notably, the building currently houses anchor tenant Neuberger Berman, which occupies about 400,000 square feet. Other recent leases include global law firm Linklaters' 48,000-square-foot agreement and Oaktree Capital Management's 79,000-square-foot deal. The Trump Organization holds a 30 percent stake in the property, with restrictions on sale until 2044. Both Vornado and Genius Sports did not provide comments regarding the lease.
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Former Gov. Eliot Spitzer's lawsuit against the state for delaying his application to demolish 985 Fifth Avenue illustrates that persistence pays off. After a 26-month wait for a decision from the Division of Homes and Community Renewal (DHCR), Spitzer's request was finally approved 26 days post-lawsuit. He aims to replace the luxury rental building, constructed by his father in 1969, with a 20-story condominium featuring 26 units. In March 2024, he sought permission not to renew the leases of several rent-stabilized tenants. He previously warned DHCR of legal action if they remained unresponsive, referring to the agency disparagingly as "the Valley of Death."
A ruling on Aug. 19 confirmed that he met the necessary criteria for non-renewals, backed by $110 million in funding from Deutsche Bank. DHCR determined Spitzer provided proper tenant notifications, dismissing complications regarding an accidental lease renewal offer. The agency's ruling diminishes the tenants' leverage, but Spitzer may expedite the process through settlements. Compensation for holdouts includes relocation assistance and specific stipends. The lawsuit criticized DHCR for delays influenced by political pressures, highlighting it as a barrier to development. Free-market tenants at the building face no lease renewal rights due to high rental costs.
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Loeb Hall, the oldest dorm of The New School at 131 East 12th Street, has been sold for $51.5 million to Hawkins Way Capital and Varde Capital. The acquisition included a $40.5 million mortgage from Emigrant Bank. Hawkins Way plans to renovate the 286-bed dorm as part of its “FOUND Study” initiative, focusing on providing quality, affordable housing in markets with scarce options. Following renovations, they will offer a mix of direct and master leases, already listing rooms at $2,300 monthly for two-bedrooms, compared to The New School’s $10,500 per student for the same semester, approximately $2,600 per month each. The university had previously removed the dorm from its housing options and sought to stage and photograph the property.
This marks Hawkins Way’s third acquisition in New York this summer, having recently spent $28 million on a property with 28 student units at 81 E. 3rd St. and $80 million for a residence hall at 117 West 70th Street, which includes a three-decade lease back to AMDA College. Their past transactions include a 122-unit property acquired from The New School for $30 million and a former Holiday Inn bought for $155 million. Hawkins Way has diversified its portfolio with properties in Oakland, Berkeley, Boston, Newark, and Providence.
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Icon Realty Management is under contract to purchase the former parish house of the closed Saint John the Evangelist church at 348 E. 55th St. for $3.8 million. The prewar building spans 6,400 square feet and could be replaced by a 9,000-square-foot residential structure under current zoning laws, pending court approval required for nonprofit real estate transactions by the Archdiocese of New York. The parish was closed in 2025 and merged with another church.
If the deal, contracted on August 4, receives judicial approval, it would expand Icon’s portfolio on East 55th Street, where the developer already owns four apartment buildings acquired between 2007 and 2015. The Catholic Church has been divesting properties due to declining congregations and financial burdens from sexual abuse lawsuits. Significant recent sales include the archdiocese’s headquarters for $103 million, which is slated for redevelopment. Icon Realty, co-founded by Terrence Lowenberg and Todd Cohen, manages 1,800 Manhattan apartments across various locations.
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MAC Cosmetics is relocating to a new 5,300-square-foot space at 579 Broadway in SoHo, moving from its previous location at 506 Broadway. The store will occupy both the ground floor and lower level of the landmarked cast-iron building, which has residential units on the upper floors. The asking rent for the space was $500 per square footThe transition will see MAC replace the current tenant, British brand Allsaints, early next year. This move highlights the growing demand in SoHo's retail market, which has seen availability drop to 10.4%—the lowest on record. SoHo is leading retail activity, with 22 leases signed in the first half of the year and significant rent appreciation over the last five years. The cosmetics segment is booming, with brands like Ulta Beauty and Sephora also expanding their presence. MAC operates four retail locations in Manhattan, as part of the Estée Lauder Companies.
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The development site at 156-166 Bowery Street in Nolita, previously under Brandon Miller's management, is now being pursued by Ari Zagdanski’s Kinsmen Property Group. Kinsmen has submitted a land use application for the construction of 322 units and plans to enter the Uniform Land Use Review Procedure by the end of the year. The project consists of three buildings: a 29-story structure with 124 affordable senior apartments, a 26-story building featuring 99 mixed-income units and 3,200 square feet of retail, and another 26-story building with 99 mixed-income units and 4,400 square feet of retail.
Miller had been in negotiations with Zagdanski and Mark Seigel to shift the stalled life sciences project to residential apartments before his death. Following his passing, Seigel collaborated with Zagdanski to strategize for the new project. In early 2025, Zagdanski sued Miller’s Real Estate Equities Corporation for over $5.3 million in owed debts, leading to the termination of REEC’s ground lease. The city, under Mayor Eric Adams, previously identified Kinsmen to advance a housing project as part of alternatives to the canceled Elizabeth Street Garden initiative.
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