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Firm moving offices to 300,000 sf in Hudson Yards, in city’s largest relocation in October
TPG has become the latest tenant at Tishman Speyer's Spiral building in the Hudson Yards skyscraper. The company will take 301,276 square feet over eight high floors, marking a 20,000-square-foot expansion. The move is part of Tishman Speyer's real estate strategy and represents the firm's continued growth and evolution. The Spiral building, which opened in 2023, is now occupied by 94% of its tenants. Other tenants include the US headquarters of HSBC, Pfizer, Debevoise & Plimpton LLP, AllianceBernstein, Turner Construction, and Marshall Wace. The building's occupancy rate is now at 94%. The Spiral building, which opened in 2023, has become a major mover of corporate growth in Midtown, with the Spiral along with Related's Hudson Yards and Brookfield's Manhattan West attracting major corporate players. Tishman Speyer CEO Rob Speyer said the Spiral was designed to attract the world's premier companies from across industries.
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New York University has agreed to lease all 1.1 million square feet of office space at 770 Broadway for several decades and pay an undisclosed portion of rent upfront, according to building owner Vornado Realty Trust. The master lease is expected to start in January and last for at least 70 years. The school will pay enough upfront to allow Vornado to pay off its $700 million loan on the property. John Beckman, senior vice president for public affairs at NYU, said the school looks forward to finalizing its lease because 770 Broadway is critical to fulfilling NYU's aspirations in science and tech and important because of its proximity to the campus core's science facilities.
Neither Vornado nor NYU has disclosed the rent rate in the deal, but tenants Meta Platforms and Yahoo paid an average of $113 per square foot last year, suggesting about $125 million in annual rental revenue. The NYU lease would lift the occupancy rate to 90%, providing a welcome piece of news for Vornado, the city's second-largest commercial landlord. Office-leasing activity in the third quarter was a bit higher than earlier in the year at 454,000 square feet. Officials expect to lease up to 3.8 million square feet of space in 2024.
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Vornado Realty Trust reported lower cash flow and a nearly $20M net loss in the third quarter, indicating that there are still problem spots in its portfolio. The company has a few assets that are overleveraged and do not contribute to its funds from operations. The REIT is prepared to lose these buildings to its lenders, as foreclosure activity in New York is up significantly this year. The company's funds from operations, a key metric of REIT cash flow, were down to $0.52 per diluted share, compared to $0.66 last year. The company attributed these declines to "known move-outs" at 770 Broadway, 1290 Sixth Ave., and 280 Park Ave., along with higher net interest expense. In total, the REIT inked 454K SF of New York office leases in Q3 and 97K SF of retail.
Its occupancy in the city is 86.7%, below last year's 89.9%. Vornado's portfolio spans 32M SF in NYC, Chicago, and San Francisco. CEO Steven Roth said that the company is largely focused on leasing vacant space but also offloading poorly performing assets. Despite these challenges, Vornado beat expectations on its FFO and revenue, outperforming consensus estimates for the third time in four quarters. The company's stock price rose 57.6% in the three months ending in September, outperforming the industry's growth rate of 20.8%. However, Vornado's net operating income at share on a cash basis slightly decreased to $272M, partly due to large transactions in the quarter.
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681 Fifth Ave., a prime shopping location in the Plaza District, is in foreclosure proceedings after landlord Robert Siegel defaulted on its $215 million mortgage last year. Credit-rating agency KBRA reported a $131 million loss for loan investors. Court documents show that 30 retailers have declined to sign a lease at the property, including some of the most prestigious brands in the world. Some said the building didn't suit their needs, while others cited the cost of rent. It is unclear how much is being asked, but rent for retail space in the neighborhood averages $964 per square foot.
Filling empty space at 681 Fifth is crucial because time is running short for Siegel, CEO of Metropole Realty Advisors and a longtime Plaza District investor who acquired the building for $86 million in 2005. A New York state judge denied Siegel's motion to halt the foreclosure proceeding for 120 days so he could negotiate with lenders. KBRA estimated the building is worth $95 million, well below its 2016 value of $440 million.
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New York's hotel industry has recovered from its pandemic-era lows, but the incoming Trump administration could significantly curtail one of the main factors behind its rebound. As migrants have streamed into the city, hotels have been one of their main sources of housing. The city's policy to rent hotel space for temporary shelters and crackdown on illegal short-term rentals has helped boost demand for hotel rooms. However, mass deportations and shutting down the border were two of Donald Trump's most frequent promises on the campaign trail. If a crackdown does come to pass, it could result in at least some closures of hotels currently sheltering migrants. However, this could help fix New York's supply-and-demand imbalance. New York's hotel occupancy rate as of September was 87.3%, down slightly from 89.5% in September 2019. Mayor Eric Adams pledged to protect the city's immigrant communities and come up with a "realistic and compassionate" immigration strategy with the new administration.
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Gov. Kathy Hochul's Manhattan office is moving to 919 Third Ave., a tower co-owned by a New York state pension fund, after negotiating a significant reduction in rent. The state will pay $62 a square foot for its new space, one-third below what it paid at 633 Third Ave., a tower at East 41st Street owned by Time Equities. The state will also pay SL Green and the New York State Teachers Retirement System, which hold 51% and 49% of 919 Third's owners, respectively. The agreement comes after former Mayor Michael Bloomberg's media company agreed to a lengthy extension and large expansion at the East 55th Street building. The office space was chosen after meeting the Executive Chamber's needs related to safety, cost-efficiency, and location. Hochul staffers will move into their new offices by January, with 53,000 square feet at 919 Third, compared to less than 40,000 at 633 Third. The lease expires in 2031, and the parties are negotiating a 15-year extension.
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1325 Sixth Ave., an 800,000-square-foot office tower in Manhattan and downtown San Francisco, is a cultural landmark that holds significant cultural value. It was where Elaine Benes worked for J. Peterman on "Seinfeld," and its concrete facade flashed on screen whenever the action shifted to Elaine's career with Peterman. The building was mentioned in an analysis of Paramount Group's 12 million square feet worth of office buildings in Manhattan and downtown San Francisco by Steve Sakwa of Evercore ISI.
Sakwa argues that the "Seinfeld" building is worth only the land it stands on, as Paramount's portfolio has an average vacancy rate of 21% and the stock is worth less than $5 a share. In the event Paramount were to liquidate, its portfolio wouldn't sell for much. Three unencumbered buildings would sell for their land value, implying a $240 million valuation for 1325's ground, which could be a bargain, with the caveat that the land comes with an ailing building attached. 1325 Sixth is also a reason why Albany shells out hundreds of millions a year in cash refunds to Hollywood producers.
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Firm defaulted on $90M loan from Deutsche Bank earlier this year
Vanbarton Group has sold its 26-story Art-Deco office building in Midtown, New York, for approximately $90 million after defaulting on a nearly $90 million loan. The property, which was purchased for nearly $180 million in 2016, was renovated in 2018 and defaulted on an $87.5 million loan provided by Deutsche Bank in 2019. The loan had an original term of two years with three one-year extensions, all of which expired this year. Vanbarton and Deutsche Bank were close to a restructuring deal on the debt, but Deutsche Bank ultimately opted to sell the property.
The above-par sale of the note has cleared the outstanding debt. Vanguard Group has been experiencing financial difficulties at other properties, including a short sale of its San Francisco building. Sentry Realty, the real estate arm of American Exchange Group, also bought the $200 million debt on Savanna's 1375 Broadway from Aareal Bank in August. The firm is close to owning the equity on the building and has retained Savanna to help manage the property.
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Landlords must accommodate electric vehicles to satisfy tenants, laws
Electric vehicle (EV) charging for tenants is becoming increasingly popular, but it is complex and expensive for garage owners and multifamily and office landlords. Upgrading a building's electrical system can cost up to six figures, and parking spots typically require a charger and networking equipment. Installation and permits can cost over $7,000 per charger, and maintenance costs can be high. Companies like Orange Charger and Related Companies are competing for landlords' business, which is growing as more localities require EV chargers and more tenants request them.
New York City has passed laws mandating EV chargers in parking garages and lots, with New York's Local Law 55 mandating 20 percent of parking spaces have Level 2 EV chargers by 2035. Orange Charger offers a Goldilocks solution with slower, economical chargers that can charge more cars and avoid "musical cars." To install EV chargers, owners can contact their local utility, such as Con Edison, which has an incentive program for installing nearly 9,000 Level 2 and 400 DCFC plugs citywide.
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Brett Weinblatt, Ralph Hanan say they were stiffed in $123M Queens deal
Two Compass brokers, Brett Weinblatt and Ralph Hanan, are suing Triangle Equities for nearly $6 million in commissions on a Tesla lease. The brokers introduced Tesla to the landlord and cultivated a relationship during negotiations. They submitted a letter of intent requiring Triangle to pay all broker commissions, but the landlord did not object over an eight-month period. The brokers proposed a 4.75 brokerage fee for the initial term of the lease, which would net the landlord nearly $123 million over 15 years.
Triangle suddenly objected to the fee structure a month before the lease was finalized in May and refused to pay them. The brokers sued the landlord in July and placed a mechanic's lien on the property. Triangle filed a bond to discharge the lien. The site was bought from the city for $9.8 million in 2000 and secured a $50 million loan from Centennial Bank in late 2023. The automaker plans to use the space for sales, service, and delivery. A 153,000-square-foot retail and manufacturing development is planned, with architectural firm Ceso collaborating with Triangle Equities on the build-out for Tesla.
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Soho office and retail building owned by Allied Partners
A $200 million loan tied to the Prince Building in Soho, a 12-story office and retail property, landed in default last month due to the sponsors failing to repay the debt at maturity. The partners, Eric Hader and Stanley Cayre, were unable to repay the debt at maturity and had to buy themselves until October 2024 to stabilize the building's finances. However, the situation worsened when office tenants fled, leaving half the space empty and cash flow barely covering monthly mortgage payments. Hader and Cayre are now negotiating with special servicer Rialto Capital Advisors for another extension, with Rialto "evaluating all options," including foreclosure. Special servicers have approved short-term extensions to buoy borrowers until interest rates dropped or they could raise more capital or sign more tenants. However, rates have fallen 75 basis points from this cycle's peak, and lenders may decide to foreclose if the property's values sink further. The Prince Building was reappraised at $285 million in August, a 25% decline from its value in 2012.
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