Weekly Market Report - September 30, 2025
- Broker Support
- Oct 1
- 14 min read
***
Storied New York hotel fully reopens next month after eight-year saga in which buyer went to prison and Chinese government took over
In 2014, Chinese businessman Wu Xiaohui shocked New York by buying the Waldorf Astoria for $1.95 billion, far above its estimated value. He envisioned a fast, glamorous transformation into a five-star mix of condos and hotel rooms. But Wu’s arrest in 2017 for fraud derailed his plans, and the Chinese government seized his company, Anbang Insurance. The project passed to Dajia Insurance Group and stretched from three years to eight, plagued by delays, pandemic shutdowns, and soaring costs.
Workers replaced plumbing, electrical systems, and 5,400 windows, while carefully restoring historic features like the lobby clock and mosaic staircase. By completion, the total bill reached $6 billion, including lost revenue during closure. This fall, the Waldorf reopens with 375 hotel rooms and 372 condominiums, managed by Hilton under a 100-year agreement. With nightly rates starting at $1,500 and condos averaging $3,272 per square foot, the renovation dazzles—though many doubt the owners will ever recoup their investment.
***
New interest-rate easing cycle could lead to more property sales and lending, reversing yearslong slide
The Fed's recent interest-rate cut may quickly benefit commercial real estate, which has faced challenges since the 2022 rate hikes. Lower rates can stimulate property values, sales, and lending, although a weak economy and persistent inflation may limit growth. While the cut could enhance short-term lending and refinancing prospects for property owners, concerns about inflation impacting long-term debt yields could hinder recovery. Analysts indicate increased activity in property sales, especially in the office market, yet caution that headwinds remain, including rising vacancy rates and a potential slowing economy. The interplay between short-term rates and longer-term yields complicates the outlook, as rising Treasury yields post-rate cut indicate investor concerns regarding inflation, potentially undermining the benefits of a lower federal funds rate
***
The department-store operator intends to use the proceeds to pay down debt after last year’s acquisition of Neiman Marcus
Saks Global is exploring the sale of a 49% stake in Bergdorf Goodman for approximately $1 billion, aiming to unlock value and reduce debt. The ultraluxury department store, known for its premium goods and exceptional service, is valued between $1.5 billion and $2.5 billion. Potential buyers include Middle Eastern sovereign-wealth funds and strategic investors, with a deal possibly finalized by early next year. Executive chairman Richard Baker indicated that the sale process is targeted at enhancing stakeholder value while maintaining the store's strategic importance.
Saks Global, which acquired Bergdorf Goodman through the $2.7 billion purchase of Neiman Marcus last year, is also selling $600 million of real estate amid ongoing challenges in luxury retail sales. Notably, Bergdorf Goodman focuses on high-end offerings, with an iconic Fifth Avenue location and a history dating back to 1899. While a prospective buyer would acquire a stake in the operating company, the valuable real estate remains with the Goodman family, highlighting the store’s exclusivity compared to conventional department stores. Despite facing challenges, Bergdorf Goodman continues to thrive, distinguished by its singular locations and notable cultural references, including appearances in films and documentaries that celebrate its legacy.
***
Marc Holliday aired interest in dated icon after RFR exit
SL Green CEO Marc Holliday has indicated interest in acquiring the Chrysler Building, pending a favorable price. This follows several setbacks for SL Green, such as the rejection of its Times Square casino proposal and missing out on acquiring Paramount Group. The Chrysler Building's recent history has been tumultuous, especially after its former ground lease tenant, RFR, was evicted for non-payment. Cooper Union, which owns the land beneath the building, is marketing the ground lease. In January, a judge ended RFR's lease, prompted by Cooper Union's claims of $21 million in unpaid rent.
RFR, having purchased the lease for $151 million in 2019 and spent $170 million on renovations, struggled with lease payments exacerbated by the pandemic and RFR's partner’s bankruptcy earlier this year. The building has notable tenants such as Moses & Singer and Creative Artists Agency, but also has a 15 percent vacancy rate as of May. Meanwhile, Holliday criticized a Community Advisory Committee decision against the Times Square casino, calling it a "despicable display." Concurrently, Rithm Capital has agreed to buy Paramount Group for $1.6 billion, concluding a competitive bidding process that included SL Green.
***
During the pandemic, landlords quickly repurposed vacated office spaces into gyms and lounges, creating a new expectation for amenities among returning tenants. However, industry experts discussed the balance of amenities, noting a shift back from overly extravagant demands. Manhattan's office leasing has increased significantly, with 8.4M SF leased in Q2 and a notable rise in Class-A spaces. Tenants are now more focused on transportation accessibility and food options than on luxury amenities like golf simulators. Studies show many amenities offered by owners go unused or don't influence tenant decisions. Strategies are evolving, emphasizing monetization of spaces after office hours. Operators aim to enhance tenant experiences through technology and customized showcases, aligning with tenant needs to facilitate successful lease negotiations.
***
Charles Cohen sold the office tower at 623 Fifth Ave. for $218 million, intending to ease his nearly $200 million debt to creditors. However, he received only $30 million after deductions for lenders and brokers. He is close to selling another property at 3 E. 54th St. and is seeking a buyer for a third building at 622 Third Ave., which had a 68% occupancy rate in March. Creditor impatience is growing, prompting their lawyers to petition the court for an outside party to sell Cohen’s properties to recover the owed amount.
Although Cohen's attorneys assert he is acting promptly to liquidate assets, Fortress Investment Group argues he is not fulfilling his obligations. A judge previously ruled that Cohen must repay $187 million linked to loan defaults. Despite his asset transfers, which Fortress claims are efforts to shield assets, Cohen's net worth has fallen to $2 billion. The recent sale of 623 Fifth primarily served to settle debt, and the upcoming sale of 3 E. 54th is projected to leave him significantly short of settling obligations.
***
More than 25 years ago, Grand Central Terminal underwent a costly expansion despite initial criticism. The new Madison Avenue and Park Avenue entrances significantly improved local office tower viability, particularly impacting 477 Madison Ave., which faced a 40% vacancy rate earlier this year. Following a lease by NewEdge Wealth and the Bank of Hope, vacancies are projected to drop below 10%. Proximity to Grand Central is a major draw, with travel time from the building reduced to eight minutes post-expansion.
The project received $95 million in public funds to enhance accessibility, much needed by commuters. RFR Holdings, which acquired 477 Madison in 2019 for $258 million, invested an additional $35 million in renovations during the pandemic. As Manhattan's overall vacancy remains near 16%, demand for office space near commuter hubs remains high, with Park Avenue's rate notably lower. Office leasing volume in Manhattan rose 34% this year, signaling a strong recovery as businesses rekindle interest in prime locations amid growing commuter convenience.
***
Baupost, King Street backers with three deals already done
RXR has launched the Gemini Office Venture, an ambitious $3.5 billion initiative targeting New York City office properties. The venture has attracted investments from reputable firms such as Baupost Group, King Street Capital Management, Criterion Real Estate Capital, Liberty Mutual Investments, and Abrams Capital. Gemini's initial portfolio includes significant acquisitions like the $1 billion purchase of 590 Madison Avenue, a minority stake in 1211 Sixth Avenue, and an interest in the Starrett-Lehigh building. Scott Rechler's RXR is solidifying its position as a major player in the city's office market, having already secured $3.5 billion in transactions.
The plan revolves around capitalizing on current market discounts, as office properties are reportedly priced at approximately 50% below previous cycles. The recent acquisition of 590 Madison Avenue, supported by a $785 million loan from Apollo Global Management, marked the largest office investment deal in New York in three years. The Gemini Office Venture, owning 49-51% of its properties, has positioned itself well to ride the anticipated recovery of New York City's office market, enticing investors aiming to capitalize on discounted opportunities.
***
Higher rent payments expected to yield $1.5B for city, land authority
Brookfield has extended its ground lease for the 9.4-million-square-foot Brookfield Place in Battery Park City for an additional 50 years, now expiring in 2119. The lease extension includes increased ground-rent payments, anticipated to generate $1.5 billion for the city and fund affordable housing development. In addition to the financial commitments, Brookfield is committed to achieving net-zero emissions by 2050, improving West Street with contributions up to $2.5 million, and designating 10,000 square feet of office space for nonprofits.
This agreement is seen as beneficial for Battery Park City and the broader New York City economy, as stated by Gov. Kathy Hochul. Office rents at Brookfield Place range from $53 to $65 per square foot. Brookfield acquired the property in 1992 from bankrupt Olympia and York, investing $900 million in modernization. Earlier this year, Jane Street Capital expanded its presence at Brookfield's 250 Vesey Street to nearly 1 million square feet. Other notable tenants include Royal Bank of Canada and Jones Day, while Scotiabank is in the process of relocating.
***
Jack Guttman’s Pearl Realty Management buys LIC property for $42M
RXR sold the Standard Motors Product Building in Long Island City for $42 million to Pearl Realty Management, significantly below its 2014 purchase price of $110 million. The transaction involved a 300,000-square-foot office building, equating to $140 per square foot. This sale aligns with RXR's strategy, led by Scott Rechler's "Project Kodak," to categorize assets into outdated "film" and modern "digital" segments, with this building housing the Kodak Film Lab as a tenant. Tenants also include the Jim Henson Foundation, luxury homebuilder I Grace, and luggage maker Rimowa, which renewed leases about a year ago. The building's debt, part of a $343 million portfolio of underperforming loans, included a $66 million loan issued in 2014. Pearl Realty remains active in the NYC real estate market, recently acquiring a Gowanus office building. RXR concurrently closed a $1 billion deal for a prime commercial property at 590 Madison Avenue.
***
DOJ sounded alarm in hotel operator’s bankruptcy proceedings
LuxUrban Hotels filed for Chapter 11 bankruptcy, yet continues to accept bookings, resulting in customers being turned away at Manhattan locations. Concerns from an online booking platform, the Department of Justice, and the Hotel and Gaming Trades Council were raised with the bankruptcy judge about potential consumer harm, unpaid wages, and illegal withholding of retirement funds. Reports indicate that customers arriving at LuxUrban properties have been left stranded, prompting calls for emergency hearings due to these issues. Cloudbeds informed the judge that it believed at least one hotel had closed without any updates from LuxUrban.
The Department of Justice expressed worries over unpaid wages, as workers reportedly struck for lack of pay. The Hotel and Gaming Trades Council asserted that LuxUrban owed significant wages and had improperly withheld over $57 million in retirement contributions. A New York Fire Department order to vacate one property remains unenforced. LuxUrban reported over $15 million in secured debts and $22 million in unsecured claims, with less than $10 million in assets. The company has a history of issues in New York, including arrears, a hefty fine for illegal rentals, and a Nasdaq delisting.
***
Eric Adams donor reels in $77M deal in Lower Manhattan
The Department for the Aging is relocating to 14 Wall Street in Lower Manhattan, having signed a 20-year lease for 81,000 square feet valued at $77 million with Alexander Rovt. The deal has sparked controversy due to claims that city officials favored Rovt, a known donor to Mayor Eric Adams. Former DCAS deputy commissioner Jesse Hamilton, who resigned amid corruption charges, reportedly advocated for Rovt's property despite another site, AmTrust Realty’s 250 Broadway, being rated higher in an internal assessment. The city’s lease entails a starting payment of $33 per square foot for the first five years, escalating every five years to a maximum of $44.
While DCAS Commissioner Louis Molina defended the deal, stating it was the best economic option, critics argue it reflects a biased procurement process. An internal review by DCAS found that procedures were followed, asserting that choosing 250 Broadway would have imposed an extra $16 million cost on taxpayers, while officials from the Department of Aging favored the 14 Wall Street location. Rovt's financial contributions to Adams include $9,200 for his campaigns and $5,000 for his legal defense.
***
50 confidentiality agreements signed with interested parties so far
Entities linked to Joel Wiener plan to auction 93 NYC apartment buildings, totaling 5,100 units, due to bankruptcy, with debts exceeding $564 million owed to Flagstar Bank. Eastdil Secured has garnered 50 confidentiality agreements from potential buyers, with a bid deadline proposed for December 12 and an auction on January 8. Financial challenges are attributed to high interest rates, inflation, poor rent collections, and tenant-friendly regulations, which have led to a surge in housing code violations among the properties in question. Many units in these buildings are rent-stabilized. The auction follows a bankruptcy filing by Wiener-associated parties in May, and marketing efforts for the sale commenced last week, pending federal approval.
Despite current financial distress, Kenneth Fisher, a lawyer for Pinnacle Group, noted that code violations have risen citywide since 2019, worsened by pandemic-related maintenance difficulties. The financial landscape includes an $84 million revenue generation reported for 2024. Wiener stands out as an early adapter of Israeli bond market financing, having raised over $500 million previously. His Zarasai Group is restructuring $275 million in bonds from the Tel Aviv exchange, with Chapman and Cutler LLP engaged for this process.
***
Empire State Realty Trust (ESRT) is undergoing a significant leadership change as Thomas Durels, the long-serving executive vice president of real estate, steps down. This information was revealed in a filing with the Securities and Exchange Commission. Chief Revenue Officer Ryan Kass and newly appointed Chief Operating Officer Jackie Renton will assume Durels’ responsibilities as co-heads of real estate. Durels will remain in an executive role until June 30, after which he will serve as a consultant for an additional year, maintaining a base salary of $757K with a potential bonus of around $1.1M, plus a separate bonus of approximately $284K for 2027.
Additionally, he is set to receive company equity worth $1.4M in 2026 and $698K in 2027. The filing does not clarify Durels’ future intentions post-transition, nor does it provide reasons for this leadership change. Durels has been with the firm since 1990, managing leasing and redevelopment activities for over 30 years. Kass, with the company since 2013, has led leasing efforts, while Renton was recently recruited from Atlas Capital Group, where she held a COO position for 11 years. This transition occurs alongside ongoing shifts within the NYC-focused office REIT sector.
***
You can book a room at The Tuscany by LuxUrban for around $800, but check-in may be an issue as the hotel, part of bankruptcy-filing LuxUrban Hotels, was reportedly not accepting guests. Confusion arose last week when customers were turned away. The Department of Justice and LuxUrban's booking platform have voiced concerns, prompting a request for an emergency bankruptcy hearing. LuxUrban filed for Chapter 11, claiming less than $10M in assets, against debts exceeding $15M and unsecured claims topping $22M. Cloudbeds, the booking platform, informed the U.S. Bankruptcy Court that some hotels it services may be closed and criticized LuxUrban for not updating room availability information.
Concerns over unpaid employee wages and consumer protection were raised by the U.S. Trustee, emphasizing various outstanding issues that warrant court attention. Additionally, the Hotel and Gaming Trades Council alleged LuxUrban owes employees weeks of pay and has illegally withheld $57M in 401(k) contributions. Judge David Jones is set to hold a conference next week regarding these matters. The New York Fire Department previously ordered The Tuscany to vacate due to safety concerns, further complicating LuxUrban's financial struggles, as the company has been evicted by multiple landlords for unpaid rents.
***
One Beverly Hills will include a high-end Aman hotel and condos, plus designer retail shops and restaurants
One Beverly Hills is a $10 billion real estate project spanning 17.5 acres, featuring an Aman hotel, condos, and 200,000 square feet of luxury retail and dining options. Near Rodeo Drive, which is nearly fully leased at rents averaging $1,000 per square foot, the development aims to create a new luxury center amidst a scarce retail market. Notable tenants include Dolce&Gabbana and high-end restaurants like Casa Tua Cucina. The project will also feature botanical gardens and extensive public spaces. Expected to finish before the 2028 LA Olympics, One Beverly Hills targets upscale residents with condos priced from $20 million, while the Aman hotel boasts exclusive amenities and private club access.
***
The Core Club on Fifth Avenue will remain operational following a judge's ruling that prevents its landlord, Michael Shvo, from evicting the exclusive members-only venue accused of defaulting on substantial rent payments. This decision continues the ongoing legal dispute between Core Club's founder, Jennie Enterprise, and Shvo, who is trying to retain his high-value properties. Core Club relocated two years ago to Shvo's space at 711 Fifth Ave, but tensions escalated when Shvo attempted to terminate their lease, claiming a $3.6 million rent default. However, Judge Andrea Masley ruled that Core Club had entered a memorandum of understanding that allowed for modified rent payments, which the club honored in good faith despite Shvo's lack of signature on the agreement.
She mandated that Core Club must pay rent according to its original 2021 lease while prohibiting Shvo from any action to alter the lease. Shvo's spokesman expressed satisfaction with the ruling that requires Core Club to pay its dues, while Core Club's attorney labeled Shvo's eviction efforts as baseless and hinted at seeking damages for what they term Shvo's misconduct. Core Club, with about 1,500 members paying over $10,000 annually, reported significant financial health with $25 million in revenue last year and substantial cash reserves. Their strained relationship has been ongoing, evidenced by a recent ruling that Core Club owes Shvo $1 million from a loan, which they are appealing. Meanwhile, Shvo faces his financial challenges with other properties in danger.
***
A Bushwick retail property at 321 Starr St. has been sold for $17.5 million to Yale Properties USA, marking their first purchase in New York. Previously owned by Arel Capital, the building includes tenants like the Michelin-endorsed Thai restaurant Tong and the rock-climbing gym MetroRock. Principal Harrison Mashaal expressed confidence in Bushwick’s retail potential and confirmed no plans to replace existing tenants, praising their contributions. He indicated that future leasing efforts will focus on businesses that can grow alongside current occupants. The property, encompassing about 27,000 square feet, has a history of trading hands, having been bought for $9 million in 2015 before its acquisition by Arel Capital. Mashaal's family is connected to the investment firm Senvest Management, though Yale Properties operates independently. The Michelin Guide has highlighted Tong as a vibrant spot but cautions customers about the restaurant's spicy offerings.
***
Last week, Paramount Group agreed to be acquired for $6.60 a share, a 40% discount to its book value, which Evercore ISI described as “disappointing,” believing $10 a share was reasonable. Rithm Capital, a lesser-known asset manager from Fortress Investment Group, won the bid despite interest from SL Green and Blackstone Group. Rithm cited the acquisition of an "exceptional" portfolio of 9 million square feet in Manhattan and 3 million in San Francisco. Despite New York City's office jobs exceeding pre-pandemic levels and commercial tenants leasing space at increased rates, concerns linger about the substantial markdown. Paramount’s advisers had marketed the company’s properties for four months, indicating limited potential for a higher bid.
Evercore ISI's analyst predicted limited options for better offers despite the long-term asset value being perceived higher than the buyout price. The Manhattan real estate market shows highs in Class A office leasing at an average of $140 per square foot, but Class B properties lag at $70 per square foot, and Paramount's earnings average $90 per square foot. Paramount’s properties, while well-located, are slightly distant from major transit hubs, contributing to high vacancy rates, such as 40% for 31 W. 52nd St. and 23% for 712 Fifth Ave. Meeting leasing challenges may require significant investment for upgrades or rent concessions, highlighting the high costs associated with office building ownership, as noted by analysts.
***
A Greenpoint homeless shelter, The Continental, has been sold for nearly $30 million to Colorado-based Bear Creek Asset Management. The 4-story building at 83 Apollo St. was purchased from Apex Investments for $28 million, supported by a $22.6 million loan from Deutsche Bank. Situated between Nassau Avenue and Bridgewater Street, the facility, operated by nonprofit Breaking Ground in partnership with the city’s Department of Social Services and Department of Homeless Services, will continue its operations under Breaking Ground. Details regarding Bear Creek's future plans for the property remain unclear, and there has been no comment from the investment firm or Apex Investments on the reasons for the transaction, which comes less than a year after the shelter welcomed its first residents. The transitional home contains 145 units and offers essential on-site services.
Comments