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Weekly Market Report - June 12, 2023

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Ongoing feud could end in foreclosure


The Plaza District office building is destined for foreclosure due to the feud between SL Green and Ashekanzy. In April Ashekanzy had raised the rent on his ground lease with SL Green from 4.6 million to 20.25 million a year. Ashkenzay had failed to pay a $195 million mezzanine loan backing his fee position. Depending on who purchases the majority stake of the building and for how much, SLG could credit bid the amount that is owed and consolidate its ownership stake. However, he could be out bid if someone saw the value and increased the bid.


The office building is now viewed as a potential high-end residential condo. The UCC foreclosure auction is scheduled for August 8. In 2014 Ashkenazy had bought the lot for $400 million and SLG rent was considered below-market and potentially could increase $50 million a year which is 10x more what the firm is paying. In April an arbitrator had set the rent which SLG was appalled by the figure. In 2019 Marc Holliday’s SLG purchased a stake in his mezzanine loan from the UK based children’s investment.


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Gural and partners plan to convert the upper portion of the famed building to residential.


Jeff Gural and his partners sans Nathan Silverstein managed to retain the property with a winning bid of $161.5 million, a price that was driven up only by bidders who had presented the court-appointed referee with a $100,000 deposit, with plans to convert part of it to residential. Just two months prior he outbid the current owners at $190 million, something that came to be viewed as a suspicious attempt to snag the historic landmark when he failed to pay the $19 million deposit that was due two days after the bidding closed. Silverstein fell out of favor with the other partners after publishing house Macmillan departed in 2019, leaving all 21 floors vacant. With the building needing up to $100 million in renovations, and Silverstein allegedly stonewalling those plans, the other four partners took him to court in 2021.


A judge set a partition auction for March 22. Garlock drove the price up to $190 million, ghosted on the deposit and Gural declined the option to purchase the building at $189.5 million, and so May 23 became the date for the second auction. As contingent in the original auction, a failure to pay would result in the winning bidder being required to pay the expenses to hold a second auction. But Gural and the other partners have gone a step further in suing Garlick’s firm, Abraham Trust, for damages and the full $19 million deposit as liquidated damages. In the suit, the plaintiffs claim that Garlick knowingly breached that auction contract signed before bidding and drove the price up even without the financial capacity to cover the deposit, using 175 LLC to shield himself and Abraham Trust from liability.


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One property on West 55th Street went for 40 percent below ask


A pair of Midtown office buildings once valued above $40 million recently sold for about half of that amount, dragging the properties into the mid-market range and topping the list of commercial real estate deals between $10 million and $40 million that hit city records last week. DuArt Media, an Academy Award-winning film studio, sold its longtime home on West 55th Street for $28.5 million, a whopping 40 percent discount from the $48 million it sought when it placed the building on the market last year.


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Executives Gather in New York To Discuss Market Gripped by ‘Inertia and Uncertainty’


As the U.S. central bank’s 10 interest hikes since March 2022 have slowed lending and deals, the commercial real estate industry is seeking guidance far and wide when it comes to financing, particularly involving the hard-hit office sector. The CRE Finance Council’s mid-year annual conference this week in New York City served as a much-anticipated exchange of ideas as executives took stock of issues facing the industry including approaching loan maturities. Many of the sessions and hallways at the Marriott Marquis hotel in Manhattan were filled. One central theme running through the event was the impact of lenders and investors getting more cautious in opening their wallets, moves that hurt loan origination and transaction volume, especially when it comes to offices, a property type disrupted by the slow-to-return rate started by the pandemic.


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After Albany let major incentives expire, NYC throws owners a bone


The Manhattan Commercial Revitalization Program encourages owners of commercial buildings to begin the transition of renovations. Due to firms being hybrid investments have decreased, interest rates are increasing, and lenders are getting scarce. Patka who is a partner at a real estate law firm said the new tax break could make a big difference due to how the program is structured and believes it will offer a larger insight of incentives than the Industrial and Commercial Abatement Program.

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