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Private equity firm 17Capital has signed a long-term lease for 16,298 square feet for the entire 29th floor of the 30-story building, also known as 10 Bryant, in New York City. The company will double its current footprint when it moves into 10 Bryant during the first quarter of 2026, bringing the office building at the corner of Fifth Avenue and 40th Street to full occupancy. The move comes as office inventory in Manhattan tightens due to office-to-residential conversions and slow development. PBC's Midtown tower will soon lose its anchor tenant, HSBC, as the bank plans to leave its 350,000-square-foot presence for The Spiral next year. PBC has begun attracting companies like 17Capital, which will join tenants including Brighton Park Capital Management, Generate Capital, and Tilden Park Capital. The building's tenants have leased nearly 75,000 square feet since the beginning of 2024.
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The Federal Reserve has cut its benchmark interest rate by half a percentage point, signaling further declines in the city's investment sales market. This aggressive move is expected to boost activity in the market, which has been slowing down in 2024. However, activity has picked up in the second quarter and is expected to continue increasing in the coming years. Additional rate cuts are necessary for the property market to stabilize, and these will likely happen at the two remaining Fed meetings this year. Real estate deals take time to put together, so a surge in activity will not happen immediately. The cut should also help the city's renters see relief, as high interest rates have been a major factor behind the city's record-high rents. The cut should open the door for some renters to break into the sales market, although a major rent decrease is unlikely anytime soon or a huge uptick in sales activity. Mortgage rates are still twice as high as they were about four years ago, and affordability for the sales and rental markets is still about a two-and-a-half year wait.
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Steven Roth paid $300 million to keep Michael Bloomberg's company at 731 Lexington Ave., the Roth-run REIT that owns the Bloomberg Building. To close the deal, Roth agreed to kick in $200 million toward free rent and upgrades to the 57-story tower. A new mortgage will raise 731 Lexington's borrowing costs by at least $100 million, according to Piper Sandler real estate analyst Alexander Goldfarb. Goldfarb calculated that the cost of keeping Bloomberg will cause Alexander's 2026 earnings to come in 33% below this year's.
The current dividend is unsustainable, as lower profits mean lower dividends. Bloomberg LP extended its lease by 11 years for all of the office space at 731 Lexington, a 1.3 million square-foot tower at the corner of East 59th Street. Roth agreed that Bloomberg's rent would never rise higher than $109 per square foot over the life of the lease and pledged to spend $124 million, or $135 per square foot, to fix up the 20-year old tower. With that worst-case scenario behind him, Roth's next order of business is to nail down 731 Lexington's next mortgage. The new loan should weigh in at $400 million, 20% smaller than the previous loan, and Alexander's would put up a $100 million down payment to make up the difference. The tower was appraised at $1.2 billion.
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The Prince Building in SoHo, New York, is facing a dilemma as its 300,000 square feet of office space has been half-empty since a publisher moved out last year. The building's $200 million mortgage comes due in three weeks, and its owners are seeking a third extension. The Prince, developed in 1897, is owned by Eric Hadar and Stanley Cayre, who own over 5 million square feet of property in the New York area. The building's vacancy rate is 25.5%, or 9.3 percentage points higher than a year ago, and the deteriorating fundamentals suggest that lenders will require Hadar and Cayre to contribute a substantial down payment to get a new mortgage.
The vacancy jumped when its largest tenant, Group Nine Media, moved out of 95,000 square feet of space last September after being acquired by Vox Media. Despite the building's appraised value in August 2023 being "well above" the balance on its $200 million interest-only mortgage, Moody's expects a moderate loss on the loan due to the recent occupancy and cash flow declines.
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In 2018, WeWork leased 214-224 W. 29th St., two interconnected towers in Manhattan, and David Berley invested $16 million in improvements. However, WeWork moved out after filing for bankruptcy protection last year, and no one has replaced it. Today, the property is just 12% leased, and investors in the $74 million mortgage risk losing more than 60% of their investment. Berley, the 85-year-old chairman of Walter & Samuels, said it would be mistaken to attribute his building's problems to WeWork.
The enduring popularity of working from home would have doomed the Class B building anyway. Berley leased to WeWork 93% of the space at 315 W. 36th St., which is 98% vacant and whose last remaining tenant is a kosher steakhouse. To raise cash, Berley is selling properties, including a former WeWork site at 225 W. 39th St. and a parking garage at 220 E. Ninth St. Berley started buying office buildings in the 1960s.
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Half-empty office building could be converted to residential
Joseph Hoffman's Bushburg has completed its $160 million purchase of the Rudin family's 80 Pine Street office building. The half-empty, 1.2 million-square-foot building was initially pitched as a potential residential conversion. The contract was signed on February 11, more than two months before state lawmakers passed a budget in April that provided an incentive program for developers to convert office buildings.
The program offers a tax abatement of up to 90% for developers south of 96th Street in Manhattan who set aside 25% of a conversion's units as affordable at 80% of the area median income. However, the tax break only lasts for up to 35 years, while the units must remain permanently affordable. Bushburg did not immediately respond to a request for comment. The 40-story building has had high vacancy since AIG relocated to Midtown in 2021, leaving 800,000 square feet of space.
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Office values remain hazy, 16 East 40th Street saga reveals
The owners of a Midtown office building, 16 East 40th Street, are struggling with distressed debt and foreclosure proceedings. After defaulting on a $32 million loan, the partners have filed to foreclose, but have found an escape route through the sale of the building, last appraised at $61 million. They have received a $35 million offer for the property, which would exceed the debt and is expected to close in two months. The building also received a new appraisal of $22 million, indicating the ambiguous office values remain. If the deal closes for $35 million, it would price the property at $364 per square foot, well below the $615 average tracked through the first quarter. However, it is above the $100-some per square foot that office assets in Los Angeles have traded for. The property should sell for a steal, as it has high vacancy and could attract new tenants and higher rents. The purported offer signals a market for assets that many have written off as in perpetual decline.
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JV pays $24M for Garment District building, lands $50M construction loan
A joint venture between Fred Leffel's Flatiron Equities and self-storage developer Mequity Companies has acquired 152 West 36th Street in New York City for $23.8 million. The property, built in 1900, will be converted into a 16-story facility operated by Manhattan Mini Storage. The 46,004-square-foot property, located in M1-6 zoning, includes 28,500 square feet of development rights and will have 1,500 climate-controlled storage units across 75,000 square feet. The project is part of a trend to fill empty office buildings, with self-storage becoming a hot ticket in recent years. The West 36th Street storage business is expected to open in spring 2026. Flatiron Equities has also repurposed a Class C office building into a life science property and upgraded a century-old Class C office building to Class A. The acquisition follows a trend of repurposing empty office buildings for various uses, including apartments, storage units, gyms, and film studios.
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Miami-based firm’s first Big Apple hotel purchase included $230M acquisition loan
Miami-based real estate investment firm Gencom has acquired the Thompson Central Park Hotel in New York City for $308 million. The hotel, which is home to Parker's, will continue to operate under Hyatt as a Thompson-branded hotel. Ramsfield Hospitality Finance provided a $230 million acquisition loan, and the hotel underwent a $100 million renovation. The deal was represented by Eastdil Secured and arranged by Gencom. The hotel, located beneath the luxury condominium development One11 Residences at Thompson Central Park, was last traded for $420 million five years ago. GFI Capital Resources Group and Elliott Management bought the property and designed residential condos. Sales at the building launched in 2022, and a 3,000-square-foot duplex penthouse entered contract in February with an asking price of just under $17 million.
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