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Barings has acquired a Midtown office tower in New York City after losing the 22-story building at 340 Madison Ave. at a foreclosure auction. The property was acquired from a court-appointed receiver for $161M last week. The sale follows months of foreclosure proceedings against RXR, which MassMutual initiated in May after defaulting on the building's debt. The property is currently 60.6% occupied. MassMutual provided the $315M loan to RXR in 2011, but after a six-month extension, RXR still had not paid it off by the new maturity date of February 2024.
RXR owns millions of square feet of New York City office space and is battling to hold onto one of its signature properties, the landmarked Helmsley Building on Park Avenue. In December, SL Green filed a preforeclosure suit after RXR allegedly defaulted on a $670M loan. The company has had some success in recent months, signing one of the largest office leases of the year last year with law firm Ropes & Gray's relocation to 1285 Sixth Ave. and signing a giant sublease deal at 237 Park Ave., which RXR co-owns with Walton Street Capital. CEO Scott Rechler plans to take advantage of the same type of distress that took hold at 340 Madison by launching a $1B office distress fund last year with Ares Management to buy troubled loans and buildings.
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Universal Music Group (UMG) is close to a deal to move into a 300,000-square-foot office at Vornado Realty Trust's Penn 2 office tower. Negotiations are ongoing, but if the deal is approved, UMG would leave its current 242,505-square-foot office at Jack Resnick & Sons' 1755 Broadway, where it has a lease running through 2028. The potential deal comes after Vornado completed a redevelopment of the 31-story Penn 2 building, which includes a new facade, lobby, and rooftop lounge. Other tenants of Penn 2 include Madison Square Garden Entertainment and Major League Soccer. Vornado CEO Steven Roth predicted that Penn 2 would likely be 80 percent leased by year-end, achieving rents above underwriting. UMG will be another significant lease for Vorando to close this year, as the company recently finalized its master lease to New York University at the 1.2 million-square-foot 770 Broadway, which would relieve $700 million in debt on the asset.
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Fashion brand in discussions for 65K sf
Luxury fashion brand Chanel is in talks to purchase retail space at Gary Barnett's luxury project at 655 Madison Avenue in Midtown Manhattan. The deal, which has not been finalized, would provide Chanel space on the ground floor, below street level, and on higher floors. The blended price of a $450 million deal would break down to $7,000 per square foot. Chanel's presence in Midtown includes a watch boutique at 730 Fifth Avenue and a fashion store at 15 East 57th Street.
Extell Development could benefit from Chanel's presence as a means to secure financing for the project. Chanel previously negotiated for space across the street at 660 Madison Avenue, where it was willing to pay around $600 million. If Chanel ultimately purchases the retail space, it would join a growing list of luxury retailers keen to own their own spaces in Manhattan. Last year, Kering, the French luxury group that owns Gucci, Balenciaga, and Alexander McQueen, purchased the retail portion of 715-717 Fifth Avenue from Jeff Sutton and SL Green for $963 million.
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B&H Photo has secured a deal on a Garment District office building that Brookfield recently sold for over $100 million. The 10-story building, which spans 350,000 square feet, was previously home to a Sam Ash music store before the company closed all its locations last year. Brookfield purchased the property for $255 million in 2018 and sold it for $150 million. B&H's electronics superstore is currently located at 420 Ninth Ave., but it appears to be planning a move to 333 W. 34th St., as Brookfield spokeswoman Laura Montross referred to the property as the buyer's "future home." If B&H moves its store into 333 W. 34th, it would join a growing number of retailers opting to own their own space, a trend that has been highlighted by Prada and Gucci parent company Kering. Smaller businesses have also joined in, including Italian restaurant Rosemary's and French skincare firm Caudalie.
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Paramount Group, a Midtown Manhattan landlord, paid a private jet company owned by its CEO nearly $2M in a single year, according to its annual 10-K report with the Securities and Exchange Commission. The costs included $1.7M to Behler's private aviation company, $462K to his consulting company, and $12K for wine from Behler's winery in Germany. Paramount Group expanded its disclosures this year to include "direct and indirect related party transactions," including items that fell below the materiality threshold required for reporting. The company's stock price is currently around $4.10 a share, about 70% below its pre-pandemic value.
Paramount Group has spent over $3M chartering private planes with an aviation company that is 50% owned by Behler, with costs increasing from $289K in 2022 to $1.1M in 2023 and $1.7M in 2024. Behler also owns 100% of a consulting firm that supervises Paramount's investment efforts in Germany, spending $1.6M on the firm's services from 2022 to 2024. Paramount Group also contracts with Kramer Design Services, owned by Behler's wife, for branding and signage development. The company has predicted a 33% decline in rental income for 2025 due to tenants moving out faster than they are moving in.
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Luxury watchmaker is first retail tenant at Parc Cinq corner site after bank’s exit
Luxury watchmaker Audemars Piguet has signed a lease for 12,000 square feet at 785 Fifth Avenue in Manhattan's Lenox Hill neighborhood. The lease spans the entire corner site at East 60th Street and is part of the Parc Cinq luxury building. The retail space, which was once occupied by a Citibank branch, has been managed by the co-op board of the Parc Cinq building. The asking rent for the two-floor space is $4.8 million per year. The tenant, Audemars Piguet, will have a third spot in Manhattan. The retail space has been expanded and needs to go through the Landmarks Preservation Commission due to its historic district. The Swiss company also has a sales boutique and service center on Fifth Avenue. The city is set to redesign Fifth Avenue, which will double the width of sidewalks between Bryant Park and Central Park, costing $350 million, excluding the cost of relocating underground utilities and sewers.
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Falling auto sales dragged down overall figures; ‘people are browsing more than buying’
Retail sales rose modestly in February, offering reassurances that consumer spending has not buckled. The Commerce Department reported a seasonally adjusted 0.2% increase from the prior month, less than the 0.6% gain expected by The Wall Street Journal. Sales figures for the prior month were revised lower, falling 1.2% in January. The slimmer gain in February sales was concentrated in sales at automobile and auto-part dealers, where sales fell 0.4%. Excluding those, overall sales rose 0.3%, in line with expectations.
Sales rose at grocery stores and nonstore retailers, while electronics and appliance retailers and department stores were among the categories where sales declined. Sales also fell at food services and drinking places, primarily restaurants and bars, a sign that Americans are scaling back on nice-to-haves. Consumer spending is on track to slow sharply this quarter, but not by as much as previously feared. The parts of the report that feed directly into the Commerce Department’s gross domestic product calculations—a so-called control group—rose 1%, suggesting that while GDP appears to have slowed in the first quarter, it hasn’t contracted.
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Wilmington Trust has won an auction to buy the American Bank Note Company Building in Manhattan's Financial District, which was once home to a banknote maker. The five-story granite building was built in 1908 and was given landmark protection by the New York City Landmarks Preservation Commission in 1997. The building was bought by a Chinese investment and construction firm in 2010 for $18 million, but ownership was transferred to Winta in 2015 through a $15 million loan from Silverpeak Real Estate Finance. The loan was later sold as bonds. The building was put on the market in 2016 for $88 million, but it never sold and the property remained vacant for over seven years.
In May, Winta filed for Chapter 11 bankruptcy for the property after a federal judge entered a $24.7 million judgment against the firm to foreclose on the property. Winta, which valued the building at $16 million, had defaulted on a $15 million loan around 2020 and became entwined in a legal battle with Wilmington, which was the trustee of the property's mortgage. However, Winta's bankruptcy filing effectively halted the foreclosure action and allowed the firm to market the property through Northgate. Now, Wilmington has taken possession of the property after its $20 million bid was the only offer received.
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Santander Bank has signed a seven-year renewal for 191,667 square feet across the fifth through 10th floors of Sage's 40-story Midtown East office tower in Manhattan. The deal comes with an option to extend the lease. The deal, one of the largest seen in the market this year, shows the resurgence of Manhattan's commercial real estate market. Sage's Michael Lenchner, who represented the landlord in-house along with Jack Brennan, said that the exact asking rent for base units at the property ranges from $79 to $84 per square foot. Sage brokered the deal for the tenant, with Savills' Mitti Liebersohn, Arthur Mirante, and Ana Erickson breaking the deal. Santander landed at the building between East 49th and East 50th streets in 2020, when the bank signed a sublease from coworking giant WeWork for 160,000 square feet. The bank relocated its headquarters from 45 East 53rd Street as part of the sublease. Other office tenants of 437 Madison include accounting firm Armanino and art gallery Eden Gallery leasing ground-floor retail space.
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Horizon Media has signed a 17-year extension on its 360,000-square-foot office at Hudson Square Properties' 75 Varick Street, spanning six floors of the 18-floor building owned in partnership between Trinity Church NYC, Norges Bank Investment Management and Hines. The building, built in 1929, has a total area of 1.16 million square feet and was recently renovated, including a rooftop sun deck, an updated lobby, and outdoor terraces on some floors. The company's CEO, Bill Koenigsberg, said the space will continue to be a hub for innovation, collaboration, and creative power, enabling Horizon to attract and develop top talent while fostering an environment where people can thrive In November, Equinox had a 30,248-square-foot, 20-year deal in the building, while productivity app maker Notion agreed to take 49,713 square feet on the eighth and ninth floors of 75 Varick.
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Uber Technologies has signed a lease to expand its office space at 3 World Trade Center, which was first taken in 2019. The lease will be for 44,110 square feet, with office rents in Lower Manhattan averaging $56.47 per square foot in February. Uber moved into the space in 2020 to consolidate several of its New York City offices into the Financial District tower. Other tenants of 3 World Trade include ticket sales platform StubHub and fintech firm Hudson River Trading. The tower is also home to a group of local artists, who were welcomed to the vacant floors by developer Larry Silverstein in 2017. This led to the founding of nonprofit Silver Art Projects, a residency program that provides a year of free studio space to 28 artists.
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The Socony-Mobil Building, owned by investors David Werner and Mark Karasick, has been granted grace following a $525M loan default. The CMBS loan backed by the office tower has been extended by three years to September 2027 and returned to its master servicer. The loan will continue to be cash-managed until the debt is paid off. The 42-story, 1.7M SF building is owned by investors David Werner and Mark Karasick, who bought the leasehold in 2014 for over $900M. Berkadia is the master servicer.
The partnership's 99-year ground lease runs through 2113, with ground rent payments increasing from $20M annually to $24M last year. S&P lowered its ratings on the debt as the building faces significant rollover risk in the coming years. A total of 15 leases, which make up 61% of the building's net rentable area and 75% of gross rent, roll in 2028. Wells Fargo, the largest tenant, announced in late 2023 that it will leave following its 2028 lease expiration. Three other tenants have marketed either a portion or their entire space for sublease. The building has not signed a new lease since 2018 despite being nearly 12% vacant.
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NYS Housing Finance Agency provides loan for 339-unit rental building
Glenwood Management has secured a $231 million loan from the state public benefit corporation for a 339-unit rental building in Manhattan's Lincoln Square. The deal closed about a week ago, following a previous $260 million loan from the NYS Housing Finance Agency in 2014. The developer acquired the site in 2011 from Fordham University for $125 million, after Douglaston Development abandoned efforts to construct a 57-story tower at the site. The building includes retail space, resident amenities, and is only steps from Lincoln Center.
The property faced controversy when Glenwood banned dogs weighing 15 pounds or more from the building and required their owners to carry them into the elevator to avoid doggy paws scuffing up the lobby floors. The Gotham Organization and the Carlyle Group also secured a $216 million bridge loan a year ago associated with their acquisition of the building at 200 West 67th Street. The loan was provided by MF1 Capital and was brought to market shortly after Gotham and Carlyle purchased The Aire from A&R Kalimian Realty for $265 million.
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Integritas Capital, Bravo Property Trust provide financing for conversion
Watermark Capital Group secured $125 million in construction financing for a 19-story office-to-residential conversion of 175 Pearl Street in Dumbo, Brooklyn. The firm acquired the property last summer from Cannon Hill Capital Partners for $66.5 million. Landau plans to convert the property into a multifamily unit complex and an 11-story condo property. The rental portion of the building will qualify for the city's 467m program, giving Landau a tax abatement for 35 years in exchange for 25% of apartments being earmarked for affordable housing.
The abatement provides a 65 percent exemption for the first 30 years and 10 percent annually for the last five years. The building's tenants include Constangy, Brooks, Smith & Prophete, Thelab, and Spaces. Amenities include tenant lounges and a fitness center. Watermark expects to complete the conversion in 2027. The firm has also submitted a proposal for a residential project on the site of a shuttered church in Greenwood Heights, requiring a zoning change from the district's light manufacturing zoning status to residential.