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Few investors are benefiting more from the office market’s budding recovery than SL Green
SL Green Realty, the largest owner of New York City office space, has seen a surge in vacancy due to the pandemic and the struggle to find new tenants. However, the company is now benefiting from the office market's recovery, with white-collar workers spending more time in offices. The company is on track to lease 3.5 million square feet of space this year, exceeding its target by 1.5 million. Its share price has soared more than 65% in 2024, making it one of the top performing real-estate stocks this year. SL Green's portfolio occupancy is projected to increase slightly to 93.2% next year. However, high interest rates and hybrid workplace policies continue to batter most office landlords, with the vacancy rate nationwide standing at a record 13.9%.
New York's office market is outperforming other cities due partly to the large number of financial-services firms, which are more aggressive in bringing workers back to the office. SL Green's solid balance sheet and higher-quality properties offer it a competitive advantage. The company is also using its market clout to cut favorable loan extensions and modifications with creditors, and is on track to do more than $5 billion of refinancings this year. SL Green's improving fortune is positioning the company to play more offense in a market that is beginning to attract more investor interest despite its high
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The DuMont Building in Midtown, New York, is facing financial difficulties, with only 73% of the cash needed to pay its mortgage and other costs generated. The building defaulted when its $103 million mortgage matured last year. Despite this, owner Jeff Gural, who owns 60 pre-war properties, is sticking with his tower. Gural has negotiated two loan extensions and plans to make good on the mortgage when it comes due again. Opportunity is harder to find among owners of Manhattan's older office towers, with the Helmsley Building in foreclosure proceedings and the Chrysler Building operator RFR Holding being told to leave the building after falling behind on rent. Gural has reasons to be hopeful about the DuMont, as he negotiated a loan extension in April 2023 and pledged to contribute "significant" cash to upgrade the building.
The vacancy rate has improved to 18%, but the property's vacancy rate is still painful, as it was less than 2% before the pandemic. A February 2023 appraisal valued the property at $155 million, 33% below when its mortgage was written in 2013. Gural and lenders struck a second loan modification agreement in June, requiring the developer to contribute $5 million to a reserve fund to cover any shortfalls in mortgage payments. KBRA estimates mortgage investors face a 15% loss and rates the loan "underperform."
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Extell Development, led by Gary Barnett, has filed plans to build two residential projects at the former Disney/ABC campus on the Upper West Side. The project at 30 W. 67th St. would span about 76,000 square feet and would include 50 residential units, some of which would be low-income housing. The address is currently home to a 14-story office building that Extell would demolish. The project at 7 W. 66th St. would span about 44,000 square feet and would also include 31 residential units. Extell purchased the campus from Silverstein Properties in 2022 for $931 million.
The new office at 7 Hudson Square, which Disney is calling the Robert A. Iger building, is already open to employees and should be the company's official home for its news, editorial, and advertising divisions by next summer. Other addresses on the campus include 147 and 149 Columbus Ave. and 47 and 77 W. 66th St. Extell has not filed new building plans for those sites yet. The projects are just the latest in Extell's busy year, as the firm recently filed plans to build a 37-story mixed-use tower at 655 Madison Ave. and is also working on a 32-story tower with Manhattan's first Ikea at 574 Fifth Ave.
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Office landlord recently signed 220K sf lease at property
SL Green, a Manhattan office landlord, has announced a series of ownership moves at its Midtown Manhattan office tower, 100 Park Avenue. The landlord refinanced its debt at the property, extending its $360 million mortgage's maturity date to December 2027 while maintaining a 2.25 percent interest rate. The lenders provided an additional $70 million to the debt, a rare increase in Manhattan office mortgage balance in recent years. The lenders were a syndicate led by German commercial bank Landesbank Hessen-Thuringen Girozentrale, also known as Helaba.
SL Green also agreed to buy its partner's 49.9% interest in the property, which Prudential Financial has owned since 2000. The company made Alvarez & Marsal's lease at the property official, signing a 220,000-square-foot lease, bringing occupancy to 96 percent. SL Green is closing out the year showing confidence in an office market battered by the pandemic and a higher interest rate environment. The company also finalized an extension and modification of a $743 million loan backing the property at 1515 Broadway, keeping its 3.93 percent interest rate while pushing the maturity date into March 2028.
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Thor, Barington Capital claim retailer’s portfolio worth up to $9B
Macy's is facing pressure from activist investor groups Thor Equities and Barington Capital Group, who are seeking seats on the company's board. The group is proposing a plan to lift Macy's stock, including forming a separate real estate unit and spinning off the retailer's top chains, Bloomingdale's and Bluemercury. The investors are calling on Macy's to cut spending to between 1.5 percent and 2 percent of sales and buy back up to $3 billion in stock in the next three years. The investors estimate the Macy's real estate portfolio to be worth as much as $9 billion.
They are also proposing Macy's to form a real estate subsidiary to control the company's owned and leased properties, to which the retailer would pay rent. The investors have drawn comparisons to the turnaround at Dillard's, but there is no apple-to-apple comparison. Macy's expressed confidence in its strategy but is looking forward to engaging with the investors. The retailer plans to pursue its strategy of shutting down hundreds of underperforming stores, cutting costs, and opening more locations for Bloomingdale's and Bluemercury. The stock price closed at $16.72 on Monday and is down 15.4% year-to-date.
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Developers embrace office-to-residential transformations
Office-to-residential conversions dominated the biggest project filings of 2024 in New York City, driven by office surplus and housing shortage. Tax breaks for affordable units may continue, pushing more projects forward. New York City's top projects for 2024 include the Pfizer Building, a 1.3 million square foot conversion by Metro Loft, a 32-story office building by Gary Barnett, a 31-story building by Jeff Gural, a tax break for mixed-income apartment projects, a 40-story office tower by Bushburg Properties, a 612,000-square-foot stadium by Major League Soccer's New York City Football Club, a 16-story cancer center by New York-Presbyterian Hospital, a 47-story mixed-use project by Jonathan Landau, a 12-story residential building by RiverSpring Living, and the final two buildings of Miami's Williamsburg Wharf project. The projects are expected to deliver 1,500 units, add four floors, and deliver the first rentals in the next 20 months. The commercial office market has made these projects possible, with the Pfizer Building being the biggest ever for Metro Loft.
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Large deals in November include math museum, pickleball and child care
New York City has seen a surge in retail leases, with fitness centers, restaurants, pickleball courts, and even a museum signing new leases. Vibe Fitness, the gym in Long Island City, signed a 10-year lease, while the National Museum of Mathematics moved from 11 East 26th Street to its new location in Chelsea. Equinox, a high-end gym, signed a 20-year lease, while Kitchen + Kocktails signed a 15-year lease. Goodland Pickleball, a pickleball club, signed a lease in the Greenpoint building owned by Pearl Realty Management. Michael Kors secured an unusual deal in the Upper East Side building, securing more space at the same effective rent.
The Bronx Sky Child Care Center in Central Harlem signed a 10-year lease, with Moshe Akiva and Sammy Levy representing both the tenant and landlord, L+M Development Partners. Princess Polly, a fashion brand, signed a new lease in Soho, with Ike Bibi representing the landlord, Soho Plaza Corporation. Urbn, a retail brand, signed a lease in the Cobble Hill building, with Tim Duffy representing the tenant and Elizabeth Bueno representing the landlord in-house. Buck Mason, a menswear brand, signed a lease in the Soho building, with Michael Leifer of Runyon New York representing the tenant and Nicholas Judson and Wendy McDonald representing the landlord, Tri-Star Equities. These developments highlight the growing trend of retail leasing in New York City.
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