Weekly Market Report - June 24, 2025
- Broker Support
- Jun 27
- 10 min read
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Supply is on pace to contract for the first time in 25 years, as incentives help accelerate conversions to residential buildings
The US office supply is on track to contract for the first time in 25 years this year due to demolitions and conversions. Office conversions are increasing due to falling prices and government incentives, revitalizing neighborhoods. High vacancy rates persist despite shrinking supply, but leasing activity and investment are showing signs of recovery. Developers have slowed new office construction due to questions about future tenant demand. The pace of office conversions is picking up, thanks to the rapidly falling prices of obsolete office buildings, changes to zoning rules that allow for more residential construction, and government incentives that help bring down costs. In New York City, analysts are forecasting about 40 million square feet of offices to be converted into residential and other uses over the next five to 10 years.
Developer Scott Rechler's current office-conversion project at Manhattan's 5 Times Square is an example of one that benefited from the forces making this process more economically attractive today. He and his partners are transforming a 1.1-million-square-foot office building into as many as 1,250 apartments, including 313 affordable units. The costs to acquire the property were about 40% less than the value of the building in 2019, in line with how much office values have fallen in New York over that period. Even with supply shrinking, it is too soon to call a full-blown office-market recovery. The vacancy rate nationwide is 19%, and many landlords can't afford the cost of upgrades and amenity packages that tenants are demanding.
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Activity has come back much more in New York and Miami than elsewhere
Office activity has rebounded in New York City and Miami compared to other markets, with office activity only down 18% in New York and 20% in Miami compared to May 2019. This discrepancy may be due to the prevalence of ground-floor retail in New York City office buildings, the critical mass theory, and the ease of transportation. Working from home is more attractive in larger cities where homes are larger, and subways have been working well lately, but are rarely jam-packed at rush hour as they were before Covid. Straphangers have found that the modest drop in ridership has meant more space on trains and fewer delays, as it's easier to board and exit.
Congestion pricing, which began in New York City in January, has not hurt office buildings and has probably helped, despite predictions from naysayers. Homes for sale on Staten Island were rare a year ago, but they are much rarer now. The top residential deal recorded was $13.5 million for 180 East 88th Street, PH46, while the top commercial deal was $5.3 million for 36 West 89th Street. The largest new building application filed was for a proposed 76,268-square-foot, 12-story, mixed-use building with 80 dwelling units at 1445 Fulton Street in Brooklyn.
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A Georgia-based limited liability company, Milkystar LLC, has purchased a mixed-use office building in SoHo for $30 million. The 5-story building, which spans 30,000 square feet between Spring and Prince streets, has eight tenants, including shoe retailer Steve Madden. The majority of the building is used as office space, with the remaining 5,000 square feet used for retail. Broadway Continental Corp., a finance and insurance company, is also listed as a tenant in the building. The building is located in the trendy Manhattan neighborhood, which was rezoned in 2021 to allow for more housing. The 5,000-square-foot lot is currently zoned for high-density residential uses as well as light manufacturing with commercial and community uses, meaning a commercial-to-residential conversion could be in the cards. The new owners' intentions for the site are unclear, and James Carolan, an attorney at the Hudson Yards-based law firm Crowell, did not respond to a request for comment by press time.
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Hyatt has joined Silverstein Properties' bid for a casino at the Jacob Javits Center in Manhattan's Far West Side. The 1,000-room luxury hotel, known as The Avenir, would be part of the sprawling project if it wins state approval. The complex would also feature multiple restaurants and a 700-seat food hall for local eateries. The project would represent a significant milestone in Hyatt's strategic expansion in key travel destinations. The development team emphasized its track record of working with organized labor and stressed that union workers would operate the hotel and casino.
The project is estimated to provide 4,000 union construction jobs and almost 5,000 permanent jobs, and it has the potential to drive more business to the Javits Center. Silverstein announced in June 2023 that it was entering the ongoing high-stakes bid to win one of New York's downstate casino licenses. The proposal would center on a tower standing 785 feet and 45 stories tall between West 40th and West 41st streets and 10th and 11th avenues. The project would include more than 100 affordable housing units, an outdoor pool, a fitness center, and a roughly 150-seat entertainment venue.
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Boxer Floyd Mayweather Jr. has purchased a Midtown diamond exchange from a seller with ties to a trumpeter. Shell company Jewelry Tower LLC, which includes celebrity jeweler Avi Davidov and reportedly boxer-turned-real-estate investor Floyd Mayweather Jr., has purchased 1192 Sixth Ave. for $27 million, based on a deed that appeared in the city register. Davidov signed the deed in the deal, which went into contract on January 10 and closed on June 12. The seller of the property was Jo Gelbard, born Jo Kaplan, and the Kaplan family has owned the retail property at the entrance to the Diamond District since at least the 1960s.
The entity that sold the property is named Nalpak 1196 Company, LLC. Gelbard had a relationship with jazz trumpeter Miles Davis in the 1980s and was reportedly embracing the music legend when he died in 1991 at 65. Davidov, who fashioned a 145-carat diamond-encrusted wristwatch worth $1.8 million for Mayweather, currently houses his celebrity-focused Pristine Jewelers business down the block. His partner in the business is jeweler Ofir Ben Shimon. Mayweather, who retired from boxing in 2017, has been an ambitious real estate investor after retiring from sports. One of his largest investments involved the $402 million purchase of a 60-property New York City portfolio last fall.
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The Mack Real Estate Group has secured a $235 million refinance deal for seven budget hotels in Manhattan, including the Holiday Inn Express Times Square, Hampton Inn Madison Square Garden, and Holiday Inn Wall Street. The properties, which were acquired out of foreclosure four years ago, were previously owned by a joint venture between China's Cindat Capital Management and Hersha Hospitality. The new mortgage comes due in just two years, with three one-year extensions possible. To secure the loan from Wells Fargo, the Macks agreed to put up a nearly 20% down payment, demonstrating their continued dedication to the portfolio.
The deal may also indicate increased risks associated with Manhattan hotels during a time when tourism is expected to fall somewhat this year. NYC Tourism & Conventions is expecting 64 million total visitors this year, 1 million fewer than last year and lower than its previous estimate of 67 million. The Mack family, who have been big real estate players for 60 years, were willing to increase their bet on the seven budget hotels. The properties hold a combined 1,087 rooms priced to move at an average daily rate of just $227, with an average occupancy of 86%.
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SL Green, Manhattan's largest office landlord, has improved its chances of securing a casino license for Times Square after rival Related Cos. abandoned its bid to build one in Hudson Yards. The company wants to develop a casino and a 50-story hotel at 1515 Broadway, a 57-floor, 1.7 million square-foot tower occupied mostly by media giant Paramount Global. The field of rival bidders has shrunk, with Related giving up on plans to develop a casino in Hudson Yards after strong community opposition. SL Green must win at least four votes on a six-person board appointed by six elected officials, including Gov. Kathy Hochul, Mayor Eric Adams, Borough President Mark Levine, State Sen.
Liz Krueger, Assemblyman Tony Simone, and City Councilman Erik Bottcher. SL Green has teamed up with Caesars Entertainment and Roc Nation for its casino, but must overcome opposition from some Midtown business owners and well-funded rivals pitching their own casino plans. Bids are due June 27 and it is expected to take state regulators several months to pick the winners. Times Square's vital signs are strong, with Broadway shows grossing $1.9 billion in sales and Times Square hotels averaging an 86% occupancy rate in 2024.
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Times Square building nabbed loan extension last year, causing valuation to drop from $595M to $320M
1440 Broadway, a Manhattan office building, has been placed in special servicing for $399 million due to a balloon payment or maturity default. The building, purchased by Australian pension fund QSuper in 2017, was facing dire financial conditions, including high interest rates, remote work, and the collapse of WeWork, the building's anchor tenant. Investors managed to secure a loan modification in May 2024, pushing the maturity date back to October 2025, replacing CIM with StepStone LP, and appointing a new property manager.
However, the building's value dropped by 46%, from $595 million to $320 million. The property's debt service coverage ratio was poor at only.15, and as of October 2024, the building was only 59% occupied, with rental rates averaging about $57 per square foot. Office leasing has been increasing in Manhattan, but the area around 1440 Broadway is not performing as well. The Times Square area had a vacancy rate of 17.3%, compared to 13% in the Plaza District, and the lowest asking rent for Class B office space among Midtown neighborhoods at $47 per square foot annually. Neither QSuper, now the Australian Retirement Trust, nor StepStone have responded to requests for comment.
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Dealmaker was sued for defaulting on more than $190 million in loans tied to this property
Shaya Prager, the owner of the Minneapolis office campus, has been sued by MidWestOne Bank for defaulting on two $36.8 million mortgages tied to the ground lease at 8300 Norman Center Drive. The lawsuit, filed in Hennepin County District Court, accuses Prager and the entity that leased the ground from the owner as defendants. MidWestOne Bank also names the landlord and senior noteholder, UMB Bank, though it is not seeking a monetary judgment against them.
As of June 1, Prager owes the lender $35.5 million. The bank is asking the court to appoint a receiver, allow a foreclosure sale, and force the loans to be paid back. Prager is personally on the hook for the loan, as he guaranteed full and prompt payment of the Notes to Lender. MidWestOne has requested a receiver in all three cases. Prager, his wife, Shulamit Prager, and his firm have been sued more than a dozen times in six states in the last year. Prager and his partners borrowed about $3 billion, and two lenders have sued him over the ground lease structure.
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Brokerage arranges $173M refi on Upper East
Meridian Capital Group has secured a $173 million Freddie Mac-backed loan for Rubie Schron at 175 East 96th Street, a luxury multifamily building in the Upper East Side. The 10-year loan, originating from NewPoint Real Estate Capital, has a 5.07 percent interest rate and includes eight years of interest-only payments and a 35-year amortization schedule. This is Meridian's first deal with either Freddie Mac or Fannie Mae since the agencies blacklisted the brokerage nearly two years ago. Meridian's brokers were allegedly inflated sale prices to help owners obtain larger loans, leading to a temporary ban for one of the largest brokers of the past decade. Freddie Mac lifted its ban on Meridian late last year, while Fannie Mae did the same a couple of months ago. Meridian is set to arrange its first Fannie Mae loan shortly. As part of the blacklist being lifted, Meridian added new underwriting procedures and formed a management credit approval committee to assess large loans. The firm is expected to execute roughly $500 million in agency loans by the end of the year.
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Landlord Benny Barmapov took back long-vacant development site after Miller’s death
Toll Brothers is set to buy 118 10th Avenue in Chelsea from Benny Barmapov, a source familiar with the deal said. The contract price is $53 million. The property, which includes two adjacent properties, was once owned by Brandon Miller and was hoped to be used for residential development. Miller's Real Estate Equities Corporation bought the leasehold for the property in 2017 for $21 million. However, the office project was never built and the leasehold changed hands again two years later when an entity tied to GDS Development Management and Swedish real estate firm Klövern AB took it over.
The leasehold was transferred back to Miller in December 2023, and he stopped paying the ground lease in early 2024. Before his death, Miller pledged his equity interests in the entity controlling the property to a company called DIA Family Holdings, which later filed for bankruptcy protection. Barmapov took the property back and collapsed the ground lease, and he put it up for sale this past February. Toll Brothers, founded in 1967, is one of the largest homebuilders in the United States and a Fortune 500 company.
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Life Time has signed for 52,000 square feet of retail space at 10 Bryant Park, a Manhattan tower where Amazon recently signed for 330,000 square feet. The deal will open in early 2027, and it will be part of the leasing picture at the address, which consists of three formerly separate structures. Life Time has 180 clubs in the US and Canada, and its chief property development officer, Parham Javaheri, said 10 Bryant Park met his desired location in Midtown. The new edition will feature a luxurious, co-ed "wet" suite, a workout floor, a recovery space, and boutique-style studios for group fitness. Property & Building Corp., the landlord of 10 Bryant Park, repositioned the building in a post-Covid world and reimagined the commercial building in a challenging environment. The 30-story tower's office floors are 100% leased. Life Time and Javaheri first met in October 2023, and the company is the only one in New York it wholly owns, although it has discreet investments at others.
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