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Weekly Market Report - September 17, 2020

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Rosen takes a gamble on Midtown’s recovery with a sweeping renovation

With the economy reeling from Covid-19 and the investment sales market at a standstill, RFR Holding, a company that likes splashy plays, has completed another one. RFR, founded by Aby Rosen, also controls Midtown's Chrysler and Seagram buildings. It plans a sweeping renovation of the 575,000 square feet of office space at 522 Fifth, with the goal of fashioning a headquarters for a single tenant. Rosen seems to be betting that historic Midtown, which had been losing tenants through the years to hipper enclaves on the West Side, might have staying power. The 522 Fifth Ave. building, designed by McKim, Mead and White, was constructed in 1896. It was stripped down in a 1961 renovation. Morgan Stanley has owned it since 2007. The bank paid $468 million before converting the tower into a 10-unit commercial condo. RFR now controls nine of the 10 units, which will be occupied by the current tenant, Morgan Stanley Wealth Management, until at least 2023. A renovation of terraces and air systems will follow.


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Regus hits a rough patch

Short-term office company Regus put half a dozen of its New York City workcenters into bankruptcy as the company seeks Chapter 11 protection for upwards of 100 locations across the country. The company has filed for six workcenters in Manhattan, Brooklyn and Long Island City in the past week. Four of the locations are in Midtown: Paramount Group’s 1325 Sixth Avenue at 53rd Street, Levin Properties’ 1501 Broadway in Times Square, Brookfield Properties’ 424-434 West 33rd Street in Manhattan West and EQ Office’s 1740 Broadway at 56th Street. A representative for Regus declined to comment. But in the half-year update from its parent company, Switzerland-based IWG, CEO Mark Dixon said the firm will be accelerating its plan to trim 4 percent of its global portfolio in response to Covid-19. Regus is the largest flex-office provider in the world, with about 10 times as many locations as WeWork. The company, founded in 1989, is largely seen as a barometer for the short-term office market, which has grown significantly in the past few years with WeWork’s expansion driven largely by SoftBank. The majority of the sites Regus put into bankruptcy are in urban cores including New York, Chicago and San Francisco — areas hard hit by the virus. The number of centers in Chapter 11 represent about 2 percent of the 1,000 locations the company has in the United States and Canada.

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JPMorgan suffers setback in return to office

JPMorgan Chase sent some employees home this week after a worker tested positive for Covid-19, just days after the bank directed some of its staff to return to the office. The bank alerted employees on Sunday that a worker on the fifth floor of the company’s 383 Madison Avenue building had been infected, Bloomberg News reported. The communication came less than a week after JPMorgan told some employees in the sales and trading divisions to prepare to return to the Madison Avenue building by Sept. 21. A spokesperson for JPMorgan told Bloomberg the bank could not comment on any one case, but said the company has been “managing individual cases across the firm over the course of the last few months and following appropriate protocols when they occur.” Company CEO Jamie Dimon has been going into the office since June, and more JPMorgan employees have been slowly returning to the workplace since Labor Day. But this recent interruption highlights the challenges banks and other companies face as they look to return to the office after months of working from home.

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One Vanderbilt opens


SL Green held a triumphant and optimistic opening ceremony for its long-awaited 1 Vanderbilt office tower Monday morning, even as the pandemic continued to spark what's arguably Manhattan's worst office market in recent history. Several top SL Green executives and elected officials were on hand for the ribbon-cutting ceremony at 1 Vanderbilt, the 77-story, 1,401-foot-tall tower right by Grand Central that the real estate firm has spent years developing. Although multiple speakers acknowledged the devastating toll Covid-19 has taken on the city this year, the overarching attitude was that finishing 1 Vanderbilt represented one of the first major signs of the city's comeback. Multiple high-profile tenants have already signed leases at the new building, including the law firms Greenberg Traurig and McDermott, Will & Emery and the financial firms the Carlyle Group, Sentinel Capital Partners and TD Bank. The building was about 70% leased as of the opening ceremony, and it should be about 72% leased by the end of the year, said Andrew Mathias, SL Green's president.

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