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Gary Barnett filed for 876k sf office building at supertall site
Extell Development, led by Gary Barnett, has filed plans for a 32-story office tower on Fifth Avenue, which is part of a larger development along Fifth Avenue between 46th and 47th streets. The 875,720-square-foot building will include offices and three floors of retail space. The developer has previously planned a 1,100-foot, 78-story glass-encased supertall with over 1 million square feet at the site. Extell's filings offer two visions for the project: a 1.5 million-square-foot residential and hotel tower with 1,524 hotel rooms, 468 apartments, and 76,000 square feet of retail at the base, or a second option that would replace tourists with workers, rising 860 feet tall and offering 1.4 million gross square feet of office space. The project would also include about 77,000 square feet of retail and a 20,000-square-foot event space. Extell borrowed $340 million from South Korea-based firm IGIS Asset Management in July to refinance the development.
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The owner of 277 Park Ave., a 51-story, 1.9 million-square-foot office building in New York City, has made a higher-than-expected down payment to refinance its mortgage with Deutsche Bank. The Stahl Organization, which has owned the property since 1963, had been expected to contribute $250 million towards the refinancing. The property is 98% leased and has recently invested $150 million in new entrances, elevators, and amenities. JPMorgan Chase occupies almost half of the tower, while other tenants include Sumitomo Mitsui, M&T Bank, and Visa. JPMorgan's leases expire between 2026 and 2028, and the bank is expected to move out shortly after its new headquarters are finished next year.
Tahl has already leased most of a 300,000-square-foot space that JPMorgan left behind in 2021, but the prospect of filling another 900,000 square feet seems to have given the landlord's lender pause. Deutsche Bank's new mortgage for 277 Park has a five-year term, half the length of the building's previous loan, and an interest rate nearly twice as high at 7.01%. A spokesman for Stahl said its $283 million payment would create a reserve fund for the building, covering costs such as tenant improvements and free rent. Banks are often demanding larger sums of cash before refinancing mortgages at higher rates than required in a pre-Covid environment.
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Bridgewater Associates is close to a deal to lease office space in Manhattan, its first office outside of its headquarters in Westport, Connecticut. The hedge fund firm plans to take space at 295 Fifth Ave., located between 31st and 30th streets. The deal has not closed, and Bridgewater's headquarters and a majority of its employees would remain in its Connecticut office. The New York office would allow some employees more flexibility on location. The Manhattan building, constructed in 1920, was recently renovated and law firm Quinn Emanuel Urquhart & Sullivan signed a lease last year for 132,000 square feet of space. While New York's office market continues to struggle with vacancies, financial industry tenants have been drawn to space at newly developed or renovated office buildings. Daiwa Capital Markets America plans to relocate its New York headquarters to the former Exxon Building on Sixth Avenue, and TPG is in talks to lease space at the Spiral, a new tower at Hudson Yards.
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Manhattan's largest landlords, SL Green and RXR Realty, are reportedly in a legal battle over control of the Helmsley Building. SL Green has been appointed special servicer to the troubled office tower, which gives the developer a seat at the table while RXR Realty tries to secure a new mortgage for the landmarked building. As special servicer, SL Green could recommend that lenders foreclose on the 1.4 million square-foot pre-war building, which is 70% leased. RXR CEO Scott Rechler welcomed the firm as special servicer, noting that they co-own properties including Worldwide Plaza and 5 Times Square.
The Helmsley defaulted in January after its $670 million mortgage came due, and lenders agreed to give RXR time to explore converting part of the building into apartments. A conversion plan is due in the fourth quarter. SL Green owns over 30 million square feet of commercial space in New York, about a third of it in office buildings near the Helmsley. The firm has been named special servicer on more than $12 billion worth of commercial mortgages. RXR owns about 26 million square feet of commercial space, including 237 Park Ave., and acquired the Helmsley in 2015 for $1.2 billion.
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A credit agency has warned that investors in a Sixth Avenue office tower's mortgage could lose up to 63% of their investment if the owner defaults or finds a buyer for the property. American Strategic Investment Co., the owner of 1140 Sixth Ave., has written down the value of the building by half last year, to $70 million, or $110 million less than it paid in 2016. The firm has breached two provisions in the $99 million mortgage due in two years and plans to sell properties including 123 William St., a 550,000 square-foot Financial District office building with a low-for-the-neighborhood vacancy rate of 11%. The building's debt-service coverage ratio is -5%, meaning operating costs are devouring all the building's cash flow.
KBRA warned mortgage investors that they could suffer a $62 million loss, or 63% of their investment. The building was developed in 1926 and extensively renovated between 2007 and 2015 before being sold to American Strategic Investment. In 2019, the Securities and Exchange Commission charged former CEO and Chairman Nicholas Schorsch with pocketing inflated incentive fees. The firm's remaining seven New York office and residential properties are valued at $600 million, but its market capitalization is just $23 million, meaning remaining investors don't think management can extract much value from the portfolio.
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3,700 properties may be noncompliant, incurring $900M in fines
Mayor Eric Adams has increased the enforcement staff for Local Law 97, a climate legislation in New York City, to combat building owners with high carbon emissions. The Department of Buildings has 30 staff ready to enforce the law, with the agency onboarding eight more employees and 20 open positions. The increase comes after criticism about understaffing, with only 11 staff members at the start of the year. The administration allocated $4 million in this year's budget to add staff, and the city received a $20 million grant from the U.S. Department of Energy to expand staff.
Enforcers will begin collecting and analyzing building emissions reports in spring, and penalizing owners who don't meet their carbon emissions goals. The aim of Local Law 97 is to cut emissions 40% by 2030 and 80% by 2050 from 2005 levels. A study estimated that 3,700 properties could be noncompliant, resulting in $900 million in fines annually by 2030. A lawsuit to block enforcement of Local Law 97 is currently pending in the state court system, with the city working to get the case dismissed on appeal.
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Departure comes after seven years, crisis at Cushman with $3B in debt
Patrick Murphy, a seven-year veteran of Cushman & Wakefield, has submitted his resignation from the firm. Murphy, who was an executive vice chair in Cushman's New York City office, will join JLL next month. In 2017, Murphy was one of the ten biggest dealmakers in the city and represented major clients such as MetLife, UBS, and KPMG. He has recently made notable deals for Cushman, including the Major League Baseball Players Association's relocation to 1325 Sixth Avenue, MetLife's renewal at 200 Park Avenue, and IBM's 328,000-square-foot deal at One Madison Avenue.
JLL and Murphy did not immediately respond to a request for comment from the publication. Cushman, a venerable commercial brokerage, has been facing difficulties in recent months, including a crisis of confidence and a heavy debt load. Last year, Cushman's New York City sales office lost the top brokerage team led by Doug Harmon and Adam Spies and a group led by Dan O'Brien, both of which were poached by Newmark.
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REIT paid 60 cents on the dollar for $224M mortgage
SL Green has bought a $224 million loan on Aby Rosen's 522 Fifth Avenue office building for around $134 million, according to a source familiar with the deal. The Marc Holliday-led REIT purchased the debt from Credit Suisse, providing transparency into the evolving situation at Rosen's building and the market for distressed office debt. RFR Realty, which is set to begin a full-scale building renovation this month, declined to comment on the price but said it worked proactively with SL Green on the debt purchase. The deal was led by a Newmark team led by Adam Spies and Joshua King. RFR bought the building in 2020 from Morgan Stanley for $350 million. Credit Suisse provided a floating rate loan, but interest rates spiked, and Credit Suisse affiliate Column Financial filed to foreclose in June.
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Bank puts office portion of 500 Park Ave up for sale
Morgan Stanley is preparing to sell its office building at 500 Park Avenue, which was first developed in 1960 as the headquarters of Pepsi-Cola. The 11-story office space, totaling 200,000 square feet, is being offered for $125 million. The property is being pitched as a value-add play, with a new owner potentially taking advantage of the "strategic rent growth potential" by upgrading the lobby and adding amenities. The new owner could also mark up the rents on expiring leases to the Plaza District market rate averaging around $120 per square foot. Lauren Hochfelder, co-CEO of Morgan Stanley's $53 billion real estate group, said the company had been moving away from office buildings due to their capital-intensive nature. A Newmark team led by Adam Spies and Marcella Fasulo is handling the sales process. The occupancy at 500 Park is 95 percent, with tenants including SLR Capital Partners, Georgetown Company, and Friedland Properties. Morgan Stanley is also looking to sell the San Antonio mall it acquired for $100 million in 2021 after Simon Property defaulted on its loan.
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Joshua Zamir’s firm in contract to buy Savanna’s 360 Lexington for $65M
Capstone Equities and AmTrust RE are buying a Midtown East office building for $65 million, a third of its $180 million price five years ago. The deal is in contract with Savanna, which bought the property for $180 million in 2019, when it was about 82% leased. The property is now 60% leased, and with a $110 million mortgage due, Savanna is in an unenviable position. The lenders, Barclays and PPM America, directed the sales process. A Newmark team led by Adam Spies and Adam Doneger negotiated the deal. The property, which was previously a potential office-to-residential conversion, will remain an office building. Savanna bought the 24-story building from AEW Capital Management while it was buying office buildings. The company has struggled with a weak office market and rising interest rates. Last year, it handed over its Harlem office building to its lenders.
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