Weekly Market Report - July 8, 2025
- Broker Support
- 4 minutes ago
- 10 min read
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The Kingdom’s Public Investment Fund is teaming with New York developer Related Cos.
Saudi Arabia's Public Investment Fund (PIF) is taking a two-thirds stake in a planned Manhattan skyscraper project with Related Cos. The Saudis own the site, which was purchased last year for over $600 million. The project is expected to cost over $1 billion. The Saudi fund has already invested about $200 million in the project. Foreign investors have been returning to New York City's commercial-property market, which is the largest, most liquid, and one of the top performers in the U.S. The market has been recovering as more workers return to the office, providing a new lift for neighboring businesses. The Saudi Public Investment Fund has assets of about $1 trillion and is one of the world's largest investors. The fund has a close relationship with Related, best known for its Hudson Yards development on Manhattan's west side. The Saudi Public Investment Fund has historically been a relatively small player in real estate outside of the country, but has planted its flag on high-profile global properties and brands.
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Mexican banking scion Moises CosÃo Espinosa is considering a $500,000 loan to fix the aging Art Deco office tower 500 Fifth Ave., built in 1931 and designed by the same architects as the Empire State Building. The property, which is about 20% vacant, is located across from Bryant Park and Grand Central Terminal. CosÃo agreed to extend the mortgage to 2027 in exchange for over $10 million in cash. The estimated cost of the renovation is $100 million, including updated electrical and HVAC systems and new office spaces. The building's small floor plates could make it an attractive candidate for conversion to residential. The estimated cost of renovating 500 Fifth is $5 million more than CosÃo's father paid to acquire the building in 1996. The building generated $8 million in net operating income last year on $14 million in total revenue, with most tenants being small businesses. The building was appraised last year at $275 million, or $385 per square foot, which was slightly less than half its 2014 value.
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S&P Global downgraded a Financial District office tower after its vacancy rate reached 40%, indicating stress in downtown Manhattan's office market. 75 Broad St., a 34-story tower with 700,000 square feet steps from the New York Stock Exchange, saw its $230 million mortgage rating cut from A- to BBB-, S&P's lowest investment-grade level. The building's vacancy rate should improve to 30%, but rents are unlikely to change from their average of $58 per square foot while upkeep costs rise. Downtown remains the weak link in the New York office-recovery story, as it is home to 19% of the city's office space and is the second-largest market after Grand Central. Office leasing in Manhattan over the first half of the year was its highest since 2014, thanks to strong activity in Midtown. New York's office vacancy rate reached 12.7% in the first quarter, the lowest in the country except for Palm Beach, Florida. Demand for space in Manhattan exceeded supply this year for the first time since 2019. However, many buildings in the Financial District continue to struggle, with 75 Broad's mortgage being 30 days delinquent and its owner indicating insufficient cash flow going forward.
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Lender alleges developer failed to pay off loan by maturity
Wells Fargo, acting as a trustee for bondholders, is seeking to foreclose on a 22-story APF Properties office building in Midtown Manhattan. The lender claims that APF defaulted on a $180 million loan in January, with principals Ken Aschendorf and Berndt Perl named as defendants. The building was a victim of WeWork's bankruptcy in 2023, which slashed leases throughout the U.S., including 28 West 44th Street. The lender agreed to restructure the loan after the borrower's "event of default" in March 2024, but by January, the loan matured and APF failed to pay off the $180 million debt. The property is among many older office buildings in New York that have faced challenges since Covid, but lenders and servicers are more likely to extend loans rather than foreclosing and taking a loss.
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Charles Cohen, owner of several struggling Midtown office towers, has denied transferring ownership of his home and a 220-foot yacht to his wife to shield them from creditors. Cohen, whose properties include 750 Lexington Ave. and 135 E. 57th St., allegedly defaulted on over $500 million in loans in 2024, according to a lawsuit filed last year by Fortress Credit Corp. Cohen is personally on the hook for $187 million and has been accused of "funneled" valuable assets to his wife, including a 30-acre residence in Greenwich, Conn., and a superyacht named "Seasense." Cohen insisted he has "more than sufficient assets to cover any payment obligations" and that he does not intend to dissipate any of his assets to evade a judgment. Forbes estimates Cohen's personal fortune at $1.6 billion, down from $3.7 billion in 2023. Cohen has agreed to not transfer, sell, or otherwise encumber his substantial ownership interests in the aforementioned NYC properties.
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Firm has bought $20 billion in commercial property debt in last 24 months
Blackstone is buying $2 billion in commercial real-estate loans from Atlantic Union Bankshares at a 7% discount due to their loss of value. The loans, backed by apartment buildings and neighborhood retail, have been a significant buyer of discounted commercial property debt, having acquired $20 billion in the last 24 months. The debt sales are an encouraging sign for the commercial property sector, which has suffered a severe downturn since World War II due to higher interest rates and weak demand for office space.
Many small and regional banks struggle with large volumes of commercial property loans made when interest rates were low, which lost value after the Federal Reserve's rate increases in 2022. Atlantic Union is selling its portfolio to Blackstone after its merger with Sandy Spring Bank, which marked-to-market its commercial property portfolio. This move could lead to more sales of banks' loan portfolios. Deal activity among banks is expected to increase under the Trump administration's more open approach to mergers and acquisitions, but major challenges remain, including higher interest rates and economic uncertainty.
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Manhattan office leasing has seen its busiest first half of a year since 2014, with companies leasing about 20.6 million square feet of space in the borough during the first six months of 2025. This is a strong sign that activity could finally be returning to pre-pandemic levels. The average asking rent remains lower than it was before the pandemic, at $73.82 per square foot, and the borough's availability rate is 15.4%. Manhattan still has a substantial amount of available office space, at roughly 82 million square feet, but the tally has fallen sharply from its post-pandemic peak of more than 98 million square feet in February 2024.
Midtown was the busiest submarket, with companies leasing just under 4 million square feet of space during the second quarter. The largest deals included Amazon at 10 Bryant Park and Versant taking 165,000 square feet at 229 W. 43rd St. The average asking rent was up year over year but down quarter over quarter, at $79.32 per square foot. In Midtown South, firms leased about 3.9 million square feet, the submarket's strongest quarter since the end of 2019. The average asking rent still fell slightly, to $77.52 per square foot, while the availability rate decreased for the fourth consecutive quarter to 15.7%.
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Spring Place New York, a Tribeca office coworking space for filmmakers, fashion photographers, and their entourages, has been issued a notice of default after failing to pay millions in rent. The building, which was developed in 1960 as a telecommunications switching station, has been delinquent on $5.1 million in base rent and common charges for space at 50 Varick St. Italian developer Alessandro Cajrati Crivelli bought part of the seven-story building in 2010 and later carved out an 85,000 square-foot space for fashion shoots, movie castings, and events.
Crivelli invested nearly $9 million in the coworking space, on top of $28 million by previous owner New York REIT, a firm that has been in liquidation for eight years. The coworking space features hardwood floors, long wooden tables with leather desk chairs, wooden coffee tables, tall plants, and a large metal dinosaur fossil statue. Spring Place New York has 1000 members and is 25% owned by Crivelli. Fitch Ratings said 50 Varick wasn't generating enough cash at the end of 2024 to pay debt service and other expenses. The building is current on its $78 million mortgage and a property tax abatement granted by the city in 2015 expires this year.
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Zohran Mamdani's rise in the New York real estate community has caused "hysteria" in the market, but Wall Street does not view Mamdani as a significant threat. Shares in publicly traded developers recouped most of the losses they took on Wednesday, the day after Tuesday evening's political earthquake. Some think Mayor Eric Adams' reelection chances have dramatically improved, and Mamdani has said he wants to make it easier to develop housing in the city, especially affordable housing. However, there is no good way for equity investors to bet on the sector most threatened by a Mamdani mayoralty: rent-regulated housing. New Yorkers have until after the World Series to decide, and trade unions and Albany fears of more 1% flight could prove a powerful counterbalance. Mamdani's odds of getting elected mayor are 74%, with Eric Adams at 18%, Andrew Cuomo 7%, and Curtis Sliwa 1%.
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Plus, Manhattan’s office market comes back down
The Rent Guidelines Board approved a 3% rent increase for one-year leases and 4.5 percent for two-year leases in rent-stabilized units, displacing both landlord and tenant representatives. Landlord groups argued the increase wasn't enough to cover rising operating costs and housing stock distress. Tenant advocates and some politicians called for a rent freeze due to affordability concerns. The vote highlighted the board's difficult position in balancing affordability for tenants with the financial health of rent-stabilized buildings.
Community Preservation Corp acquired a $5.8 billion portfolio of troubled Signature Bank debt tied to rent-stabilized buildings, expecting distress and a clean-up effort. More than 70% of the loans show financial distress and nearly 40% are linked to physical property issues. CPC's strategy for the portfolio is loan modifications to restore cash flow and improve building conditions. Manhattan's office market experienced a sharp reality check in Q2, with office leasing volume dropping by 18.9% to 9.2 million square feet in Q2. The borough's availability rate tightened for the fifth consecutive quarter, and sublet supply decreased by over 30% in the last year.
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Blue Owl Capital provides financing for luxury Baron’s Cove
Blue Flag Capital has secured a construction loan of $54 million for the renovation of the iconic Sag Harbor hotel, Baron's Cove. The loan, provided by Blue Owl Capital, will be used for an extensive renovation of the 67-room property, which was acquired by the Boston-based real estate private equity firm for $66.5 million last summer. The property, which has a history dating back to the 1950s, is one of Sag Harbor's first resorts and has rooms that can now cost over $1,100 per night. Blue Flag Capital, founded in 2019, has been acquiring vintage vacation spots in New England, including its popular Faraway Hotel brand. The renovation is set to begin in October and will include upgrades to guest rooms, public spaces, and exterior. The financing will also be used to secure employee housing. The renovation is expected to begin in October and will include upgrades to guest rooms, public spaces, and exterior.
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Grocer claims crowd at Schrager, Witkoff’s property blocks overnight deliveries
Whole Foods Market is suing Ian Schrager's Public Hotel for blocking overnight deliveries to its East Houston Street location by restricting access to its driveway and loading docks. The lawsuit seeks to temporarily stop Schrager from operating the rooftop bar, known as The Roof, between 6 p.m. and 6 a.m., and is demanding at least $400,000 in damages. The suit claims that drivers trying to access the loading dock have to wait hours and maneuver around hundreds of people, risking accidents and injury. Schrager did not immediately respond to a request for comment.
This is not the first lawsuit involving the hotel, as Schrager and his partner Steve Witkoff faced a UCC foreclosure on their equity in the property after falling behind on their mortgage in 2023. The New York City Regional Center, an EB-5 manager that raised nearly $80 million for the project, said the developers left the investors "flying in the dark" because they refused to share details and claimed that Schrager and Witkoff needed its approval to negotiate any deal. The hotel reopened in the summer of 2021 but by the next year, the developers had defaulted on their $189 million senior mortgage.
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Mayoral candidate Zohran Mamdani’s policies could hurt a promising source of new housing supply
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Turning Manhattan's unloved offices into apartments is becoming a profitable venture, potentially unlocking a new source of supply for New York City's housing market and providing more opportunities for private-equity firms and family offices. However, the mayoral primary victory by Democratic candidate Zohran Mamdani could potentially affect office conversions, as they typically take advantage of a tax incentive that gives them a 90% property tax exemption for up to 35 years. To qualify, 25% of the apartments in a conversion have to be rent-stabilized.
Rent increases on these apartments are decided by the city's Rent Guidelines Board, so the units could be hit by a freeze. Around 16% of New York City's office stock is empty, compared to 1.4% of its apartments. Turning those old workplaces into homes is starting to make more financial sense, as owners of distressed offices are getting more realistic about their worth. Office values need to be about 50% below those of apartments, with the discount averaged 24% in 2024. Conversions are delicate to pull off, and they can be done much faster than building from scratch, lowering the risk of external shocks and bringing badly needed supply onto the market.
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Magna Hospitality Group has acquired the Hilton Garden Inn hotel in Midtown Manhattan out of foreclosure after Joseph Moinian failed to pay off a $175M loan at maturity. The Rhode Island-based hotel real estate investment firm bought the $25M mezzanine loan tied to the building prior to a June 10 UCC foreclosure auction. Magna's affiliate won the auction with a $10M bid, but a deed transfer filed with the city this week valued the 401-key hotel at just under $144M.
Magna will have to service the existing senior debt, which matured in March, along with other financial obligations. Moinian developed the 34-story building with Starwood Capital Group for $131M and brought it online in 2014. Morgan Stanley first financed a $200M debt package with a $175M senior CMBS loan, consisting of three pari passu notes totaling $155M and a $20M B note, and a $25M mezzanine loan in 2015. The debt matured in March, causing it to be sent to special servicing. Magna emerged as a prominent buyer of distressed New York City hospitality properties after the onset of the pandemic, scooping up 800 Manhattan rooms at significant discounts.