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New York City's Conversion Accelerator Program has been attracting interest from 64 office landlords seeking to convert their properties to housing. Four buildings have already been converted or begun construction, creating around 2,100 apartments. The program assists developers in navigating city laws and bureaucracy to expedite complex conversion projects. The initiatives aim to create 20,000 apartments from underutilized office stock over the next decade, with the four in-progress projects in the Financial District. Mayor Eric Adams' administration aims to alleviate the housing crisis, which saw only 1.4% of apartments available to rent last year and only 5% of apartments in the city being affordable to the average worker.
City Planning Director Dan Garodnick called conversions a "win-win-win" and noted that bringing more inventory to the city is likely to drive down costs for other units. The state government is also pushing to boost conversions of commercial properties to housing, with a new tax break for residential conversions allowing developers to be exempt from property taxes for 35 years if they start a project by 2026 that reserves 25% of its units for households making 80% or less than the area median income.
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Plaintiffs claim data was wrongly shared to keep room costs high
CoStar Group and six other defendants have filed a motion to dismiss a class-action lawsuit in Seattle federal court against prominent hotel operators Hilton, Hyatt, and Marriott. The lawsuit alleges that the defendants improperly shared data that resulted in artificially high prices for hotel rooms. The defendants claim there is no evidence showing a conspiracy to fix prices. The plaintiffs, a group of renters seeking class-action status, allege that defendant hotels shared prices, supply, and future plans, allowing them to use rivals' strategic information to increase prices in various markets. The defendants claim the lawsuit is "fanciful" and an attempt to align "algorithmic pricing" with price-fixing, which they claim does not involve.
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The firm is cutting deals across its 170 locations, some of them "priority"
WeWork, the co-working company, is set to exit bankruptcy this month after filing for Chapter 11 in November. The company aims to eliminate $4 billion in debt and receive $450 million in fresh financing, most of which is coming from Yardi Systems. The company has figured out the path forward for most of its locations, with 97% of the portfolio's future determined. In New York, WeWork has moved to assume 18 leases, while rejecting five. In Miami-Dade, WeWork confirmed lease agreements for four of its six local locations. In Southern California, WeWork filed requests to assume 10 leases, including multiple locations in Santa Monica and Irvine. In the Bay Area, WeWork recently cut deals to keep a pair of locations in San Francisco and Oakland. In Chicago, WeWork is keeping most of its locations, only planning to close a Fulton Market spot that Workbox is set to take over. WeWork is expected to exit bankruptcy this month after filing for Chapter 11 in November.
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Palm Beach-based TZ Capital paid $180M, 35% discount to 2013 price
Joe Sitt's Thor Equities has sold a Madison Avenue property at the base of the Carlton House condop to Florida-based investor TZ Capital for $180 million, about 35% off the $277 million Thor paid for the property in 2013. The sale marks two distinct eras in New York retail. When Thor bought the property, investors were in a frenzy to buy properties as retail rents shot up, resulting in a speculative bubble that eventually burst. After years of declining rents and investor defaults, retail is now experiencing a slow recovery, and investors like TZ Capital see reason to start buying again. The primary source of money for the purchase comes from the family office of financier Steven A. Tananbaum, founder of GoldenTree Asset Management. The Carlton House retail at 680 Madison Avenue is a leasehold on the 34,000 square feet of space that wraps around the front of Madison Avenue between East 61st and 62nd Street.
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Only 1 in 3 apartments is affordable for industry employees
New York City's tech workers are struggling to afford apartments, with only 35% of available rentals being affordable for entry-level professionals last year, according to a report from Tech:NYC and StreetEasy. This is significantly lower than the average worker's income, but still reflects the high rents that are affecting all walks of life. Only 2.1% of studios and one-bedroom units were affordable for entry-level professionals, and only 10.7% of market-rate rentals were priced below the affordable amount. To comfortably afford the city's median asking rent, one would need to earn $139,000 annually. While Manhattan was unaffordable for entry-level tech workers, nearly half of the 274 units in Staten Island were accessible.
The lack of affordability could lead to a potential brain drain for the city, with essential workers earning the city's average annual wage only able to afford 5% of available rental units. Solutions for making the rental market more affordable include zoning reform, eliminating parking requirements, increasing Manhattan's floor-to-area ratio, and revamping upfront costs.
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The 44-story, 1.6 million square-foot building at 1166 Sixth Ave. is set to fill nearly 250,000 square feet of soon-to-be-vacant space, a significant move for landlord Edward S. Minskoff Equities. The 44-story building will lose DE Shaw & Co. and hedge-fund services provider Arcesium when their leases expire next month. Minskoff, the owner of 1166 Sixth, has invested $64 million in elevator and lobby upgrades, putting the company at 96% leased. The building was constructed in 1974 but has undergone $64 million in elevator and lobby upgrades. Minskoff owns, leases, or manages over 4 million square feet of commercial space, including 1166 Sixth, with Marsh & McLennan, the majority owner and anchor tenant. The tower features a block-long, privately owned public space with chairs, tables, a fountain, and trees.
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Office owners north of Grand Central Terminal on Park Avenue are experiencing a surge in demand for premium office space, with bankers returning to work and JPMorgan building its 70-story headquarters. However, south of Grand Central, a shortage of casually dressed office workers is causing headaches for landlords, including Charles Cohen, who defaulted on over half a billion dollars worth of personally guaranteed loans. The widening gap between Park Avenue's north and south sides is not entirely due to location, but rather the newer, taller buildings offering amenities and better-quality offerings. Park Avenue's southern half faces challenges due to the rise of Cohen Bros. and WeWork. Cohen Bros., owners of nine Midtown towers and 12 million square feet, has seen occupancy rates drop from 86% in 2019 to 54%. The largest remaining tenant, publisher Houghton Mifflin Harcourt, is trying to sublease 50% of its space. WeWork's reorganization plan is set for May 30. The reopening of 360 Park Ave. South is also testing the market.
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WeWork's collapse continues to spread as the coworking company regroups in bankruptcy court. Wells Fargo has sued ABF Properties for defaulting on a $70 million mortgage secured by 25 W. 45th St., a 16-story office building where WeWork leased two floors but exited in 2021. The loan came due in January but was not paid off. Wells Fargo is now asking a judge to begin the foreclosure process at the Midtown property. ABF has not yet filed a legal answer to the complaint. The Class B building, which has an 88% occupancy rate, has a lower and cash-flow-challenging 73% in the wake of WeWork's exit in 2021. This is the latest WeWork-fueled blow against ABF, a 30-year-old Manhattan-based firm that appears to have gone all in on leases for the once-ubiquitous coworking firm. WeWork has moved to rip up dozen of leases across the city after its November bankruptcy protection filing, creating vacancies at ABF-controlled 183 Madison Ave. near NoMad and 1156 Sixth Ave. in Midtown.
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Massachusetts Mutual Life Insurance is reportedly seeking to foreclose on RXR Realty's property at 340 Madison Ave., according to court papers. The 22-story tower was provided with a $315 million loan in 2011, but RXR has still defaulted on the loan. The company has been focusing on converting obsolete buildings into "film" properties and modern ones into "digital" properties to address the challenges faced by office buildings in the city. RXR has been in discussions with the lender to restructure the mortgage. The building, which is 760,000 square feet and was built in 1928, was renovated in 2003. It is estimated to have asking rents between $68 and $83 per square foot and is 60.6% leased with 377,000 square feet of vacant space. RXR has leased space at the building to Yaupon Capital Management and Northampton Capital Partners this quarter.
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