Weekly Market Report - March 11, 2025
- Broker Support
- Mar 14
- 9 min read
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Corporate demand is pushing out green shoots in the market
SL Green, the developer of the country's most valuable office tower, is looking for a project similar to One Vanderbilt or One Madison Avenue. Developers are ramping up to build high-end offices, as the office market has hit an all-time low due to work-from-home and rising interest rates. RXR and TF Cornerstone are expecting their 175 Park Avenue project to land an anchor tenant and break ground this year. BXP has a similar timeline for its planned office tower on the site of the Metropolitan Transportation Authority's former headquarters at 343 Madison Avenue. Vornado Realty Trust and Rudin recently kicked off the public review process for their Citadel-anchored skyscraper, 350 Park Avenue, where they will seek to start construction next year. Developers are inserting demolition clauses into leases to clear buildings for new towers. By the time these new buildings open, they will be the cusp of the new decade, with new office buildings likely to raise the bar again.
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Fund took two years to build and will be active in North America, Europe and Australia
Blackstone has closed on an $8 billion commercial real-estate debt fund, marking a record for such investment vehicles and indicating a property-market rebound. The fund, which will be active in North America, Europe, and Australia, was raised in two years and is part of nonbank lenders formed after the global financial crisis. Debt funds, which are among the so-called nonbank lenders, have taken advantage of large lenders' cautiousness in the sector, fueling commercial real estate's recovery. However, raising money for real-estate investments has been challenging due to soaring interest rates in 2022 and the highly leveraged nature of the business.
The commercial real-estate sector has shown signs of recovery this year, with the issuance of commercial mortgage-backed securities increasing nearly threefold in 2024 compared to 2023. Blackstone's latest real-estate debt fund, which started investing in late 2023, makes property loans and buys existing loans in partnership with banks. The fund aims to take advantage of problems faced by borrowers and lenders, such as buying loans from banks and insurance companies to reduce their real-estate debt portfolios and getting involved in properties with expiring loans.
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CEO Steve Roth hinted at deal last month
Vornado Realty Trust is close to signing a 300,000-square-foot lease at its Penn 2 office tower, with Universal Music Group in talks to take over the 31-story building. CEO Steve Roth said the company is weeks away from signing the lease and is negotiating a letter of intent for a "major headquarters." He expects the tower, which also includes Major League Soccer as a tenant, to be 80 percent leased by the end of the year. The demand for high-end office space is on the rise, with only a few major new office projects breaking ground in the past five years. The office availability rate in Manhattan hit 17.9% in the fourth quarter of 2024, the lowest level since 2020, with Class A office space making up the largest share of leasing activity. Roth has high hopes that asking rents at Penn 1 and Penn 2 will rise well above $100 per square foot.
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Mounting debts and foreclosure actions are slamming one of the city’s most prolific real estate clans
Joseph Chetrit, the principal at Chetrit Group, has lost a property to foreclosure after defaulting on $177 million worth of loans. The Chetrit family, known for buying and selling properties, has collectively defaulted on $1.6 billion worth of debt, with an additional $300 million at risk of default. At least eight properties owned by Chetrit or his brothers are in foreclosure proceedings, and the Chetrits have defaulted on $150 million worth of debt on the property. The family's rise and recent struggles are similar to those faced by over-leveraged developers in the past.
Joseph Chetrit, a former textiles importer, started a real estate business in the late 1980s. After a conviction for illegally importing fabric from South Korea, he moved to real estate and began buying buildings in Brooklyn and Queens. The Chetrit brothers split their business, with Joseph and Meyer owning 14 million square feet of space and Jacob and Juda forming Chetrit Organization. However, the pandemic and interest rate increases have led to a 53% drop in transaction volume in 2023, with many properties with high vacancy rates on the market.
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Manhattan office buildings are being sold at a steep discount to lenders as they seek to cut their losses. Empire Capital Holdings has agreed to buy the properties at 229 W. 36th St. and 256 W. 38th St. for less than $50 million, a price at least 68% below the $157 million they last sold for in 2017. The deal was a short sale, meaning the owner Investcorp and lenders agreed to sell the properties for less than the outstanding mortgage amount. The buildings are located within a rezoning district, which may allow for a potential residential conversion down the line. Short sales have become more common as office values have plummeted, often below loan amounts.
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A Midtown South office building in New York has been acquired in a foreclosure auction for $50,000, with Wells Fargo as the only bidder. The building, which was valued at nearly $22 million and $19 million by an appraiser, is part of a shakeout in the office market. Class C properties, which make up 13% of inventory, account for about 100 million square feet of office space. Two-thirds of office mortgages aren't being refinanced, and landlords who can't find the cash to pay off their properties' debts risk losing them. The Helmsley Building, a 1.5 million-square-foot tower developed in 1929, is in foreclosure proceedings after RXR Realty defaulted on its $670 million mortgage. The building was acquired in June 2019 by sporting-goods magnate Mitchell Modell and Brodsky family's BEB Capital from an investor group. The bank's interest is now to minimize its loss by selling the building for whatever it can to someone who might seek to convert it into apartments. Joshua Stein, a real estate attorney, expects more Class B or C properties to be sold at depressed prices as more owners decide the economics don't work anymore.
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Douglas Eisenberg's firm bought former Stonehenge Village for $287M in 2018
Douglas Eisenberg's A&E Real Estate is selling the 413-unit Holland complex on the Upper West Side, which it acquired in 2010 during its buying spree. The multifamily landlord is looking for a price around $200 million, a third less than the $287 million it paid seven years ago. The Holland complex is one of the latest deals to show the impact of 2019 rent laws on rent-regulated apartment buildings. A&E purchased the complex from Ofer Yardeni's Stonehenge Partners in 2018, just over a year before the Housing Stability & Tenant Protection Act of 2019.
The law limited landlords' ability to raise rents on regulated apartments and has significantly impacted building values. A Newmark team is marketing the Holland for sale. The group of buildings is 94% leased, with nearly 60% of the apartments being rent stabilized. Of those 213 units, 213 have preferential rents averaging 93% below the legal rents. The preferential rents represent $3.3 million in potential upside. A&E, founded in 2011, has amassed one of the city's largest multifamily portfolios by buying large apartment complexes. The company is currently facing foreclosure on a 3,500-unit spread across Harlem, Queens, Brooklyn, and the Bronx.
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1,100-bed property on Lafayette Street
Apollo Global Management has refinancing the largest dormitory at New York University, Lafayette Hall, in Tribeca, New York. Corigin Real Estate Group secured a $180 million loan from Apollo to refinance 80 Lafayette Street in Tribeca, known as Lafayette Hall. The refinancing retires a $161.3 million Freddie Mac loan originated by Prudential Mortgage Capital Company in 2015. The refinancing is part of a larger $110 million mortgage on the property securitized by Bank of America in 2005. Apollo loaned to Corigin through its Athene insurance business. NYU has master-leased the dorm building for over two decades and recently signed a 10-year extension. Apollo's private fund holdings include 30,000 student housing beds across the country. Recently, Apollo provided Rockpoint and the Brooksville Company a $275 million loan to refinance a pair of multifamily properties in the Financial District. Apollo also recently agreed to acquire publicly traded real estate investment firm Bridge Investment Group for $1.5 billion, expected to double Apollo's real estate assets under management.
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Office leases are being renewed and expanded across NYC, with RTO in force
In the month of November, office leases saw a surge in renewals and expansions. The top four leases were all renewals, with expansions also occurring. Jane Street Capital inked a lease renewal and expansion to a million square feet in Brookfield Place, while Mayer Brown signed on for another 10 years in the Times Square building, expanding by almost 100K square feet. A&E Television Networks signed a third renewal in the Grand Central building, owned by Republic Investment Company. iCapital signed a new expansion in the Grand Central building, following a previous expansion and renewal in 2022. WeWork inked a new sublease in the Hudson Yards building. Capital One inked an expansion in the Flatiron building, owned by a joint venture between L&L Holding Company, Columbia Property Trust, and Allianz Real Estate. Booking Holdings inked a new expansion in the Grand Central building. GoldenTree Asset Management inked a new 15-year lease in the General Motors Building. Gersh Academy signed a 10-year lease in the Dumbo building for a new campus. S Rothschild inked a renewal in the Garment District building.
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Sycamore’s deal to take Walgreens private follows chain’s decline amid e-commerce and health-industry changes
Walgreens Boots Alliance, a storied pharmacy chain, was sold to private-equity firm Sycamore for $10 billion, down 91% from its $106 billion peak in 2015. The chain, founded in 1901, was a retail juggernaut and became a ubiquitous seller of items like diabetes injections and nail files. However, it failed to keep up with customer preference to buy online and navigate the fierce competition and intense cost pressures of healthcare. Walgreens's cash flow sagged, its debt piled up, and shares sank.
Sycamore, a New York-based firm that specializes in retail and consumer investments, is expected to sell off pieces of the business or work with partners to turn it around. The transaction ranks as one of the largest leveraged buyouts in the past decade. Walgreens Boots sought to expand its pharmacy footprint and leverage its heft at filling prescriptions through partnerships with the firms that distributed medicines to pharmacies. However, the company's core pharmacy business struggled, and the pandemic hit, accelerating patients' shift from online shopping to in-store visits.
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Hundreds of federal office buildings were expected to go on sale in Washington, D.C., and around the country
II. The US government is gearing up for one of the largest sales ever of commercial real estate, but the General Services Administration (GSA) has halted the sales process after removing nearly 80 million square feet of space from its website. The move follows criticism from workers, elected officials, and others opposed to the mass property sale. The Trump administration has been aiming to sell scores of federal buildings throughout the country as part of President Trump's effort to shrink the government and slash federal spending.
The list of 440 properties, which included the Washington, D.C., headquarters of the Federal Bureau of Investigation, the Department of Health and Human Services, and the Labor Department, was later reduced to 330 properties and removed many of the higher-profile buildings. The GSA's shift represents a rare setback for the government overhaul efforts by the Trump administration, which has moved swiftly through the Elon Musk-led Department of Government Efficiency to shed costs by urging federal workers to take buyouts and firing thousands of newly hired workers. The government's sales process could still hit cities in dozens of states and put new pressure on office-building values during one of the worst downturns for the industry since World War
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Claims over six properties tied to Signature Bank loans
Madison Realty Capital is facing foreclosure at several Manhattan properties once linked to the failed Signature Bank. A group of lenders, Community Preservation Group, Related Fund Management, and Neighborhood Restore, filed six pre-foreclosure actions against the borrower, claiming Madison Realty is on the brink of default. The buildings, which include rent-regulated units, were acquired in 2023 when they teamed up to buy a stake in $5.8 billion of Signature's rent-stabilized loans.
The Federal Deposit Insurance Corporation awarded a 5% equity interest to the ventures formed to hold the debt. The buildings securing the combined $76 million worth of debt are scattered across Manhattan. The largest loan is tied to 361 East 50th Street, a 44-unit building in Turtle Bay that carries a $33 million loan originated in 2019. Madison Realty recently tried to foreclose on Fred Ohebshalom's Fifth Avenue Hotel, which the landlord refinanced with a loan from KSL Capital Partners and Columbia Pacific. Madison Realty has emerged as one of the fastest-growing lenders in commercial real estate, with a reputation for "a take-no-prisoners approach to the business."
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