Weekly Market Report - September 2, 2025
- Broker Support
- 7 days ago
- 9 min read
Updated: 31 minutes ago
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Developer eyeing 30-story hotel in Midtown Manhattan
Kensico Properties plans to convert 509 Madison Avenue in Manhattan from a 21-story office building into a 30-story hotel, as reported by Crain’s. The proposal includes 96 hotel rooms, a lobby, amenity spaces, and 3,300 square feet of separate retail space, totaling 139,000 square feet. Despite strong occupancy rates, Kensico considered selling the office property in 2017, but the leasehold did not sell. Current tenants, like Banyan Tree Capital Management and Yellowstone Capital Partners, may be displaced by the conversion, which offers no remaining office space.
If approved, the new hotel would compete with established amenities like Omni Berkshire Place and Hotel Elysee. New York City's hotel market trends show robust performance, with an 82% occupancy rate and average revenue per available room at $238.93. Recent legislative changes, including a special permit requirement for new hotel developments and restrictions on short-term rentals, have impacted the construction landscape for hotels in the city.
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New York City’s major office owners are interested in acquiring the troubled publicly traded landlord Paramount Group. The REIT, holding 13 million square feet of commercial real estate, has been considering a sale or other strategic alternatives since May, entering the second round of bids from potential buyers, according to The Real Deal. Bids have come from the largest NYC-based REITs, including Vornado Realty Trust, SL Green Realty Corp., and Empire State Realty Trust, as well as from Blackstone, Rithm Capital, and a DivcoWest and Saray Capital partnership. Recently, Saray acquired a 5% stake in Paramount.
Despite refinancing 1301 Sixth Ave. for $900 million, Paramount has reported significant losses, including a $38.6 million net loss at the end of 2024 and a $29.8 million loss for common stockholders in early 2025. Occupancy dropped to 85.4% as of June, down from 86.2%. The stock price gained 40% this year, reaching a $1.4 billion market capitalization, with shares rising 4.5% following the bidding news.Paramount faces scrutiny over $4 million in undisclosed payments to CEO Albert Behler and is under SEC investigation for potential conflicts of interest and executive compensation issues. Key executives, including COO Wilbur Paes and SVP Gage Johnson, departed in May.
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Vornado Realty Trust is purchasing the office portion of 623 Fifth Ave. for $218 million from Charles Cohen, a significant discount considering the 2023 valuation of $712 million and the previous $480 million valuation. This acquisition will clear $146 million in existing debt on the building and provide Cohen with approximately $70 million in net proceeds. Vornado plans to transform the 36-story, 383,000 square foot space into Class-A boutique office space, contrasting with Cohen's earlier idea to convert it to residential. Currently, the building is 75% vacant and boasts views of Rockefeller Center and St. Patrick’s Cathedral. The deal is expected to finalize in September, with redevelopment projected to complete by 2027. Cohen's financial troubles have intensified, leading to lawsuits and foreclosure on multiple properties amid declining tenant occupancy.
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Fashion-apparel retailer and a partner pay $34 million for mall in Longview, Texas
Dillard’s, in partnership with a collaborator, purchased the Longview Mall in Texas for $34 million, marking a departure from the trend where major department stores like JCPenney and Macy’s are selling off properties. This acquisition reflects Dillard’s strategy to secure this 47-year-old mall, which is favored by CEO Bill Dillard, against what they perceive as irresponsible ownership in the industry. Dillard's co-CFO, Chris Johnson, noted concerns about certain mall investors neglecting maintenance, thereby diminishing value. While many companies are offloading weaker assets, including plans from Macy's to generate $750 million from real estate sales and JCPenney's agreement to sell 119 stores for $950 million, Dillard's remains resilient.
With over $1 billion in cash reserves, Dillard's aims to capitalize on the mall's potential, with efforts led by partner Trademark Property aimed at revitalizing the facility. The Longview Mall is considered attractive due to its strong tenant interest, particularly Dillard’s store that has thrived there. As mall ownership dynamics shift, Dillard’s hopes to enhance traffic and sales through management improvements, contrasting the broader struggle of department stores in the evolving retail landscape. The acquisition signals a notable attempt to engage directly in mall ownership after decades of decline in such practices.
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Metropolitan College of New York plans to sell its Manhattan campus to City University of New York (CUNY) for $40 million, offering relief to its bondholders. The sale proceeds will be allocated to redeem part of Metropolitan College's $60 million outstanding debt and cover deferred past debt service. This is beneficial for bondholders, especially as the college's bonds have been downgraded to junk status by Fitch Ratings. The real estate, valued for its potential to help investors recover losses during financial struggles, consists of approximately 100,000 square feet of commercial condo units designed for educational use.
CUNY aims to utilize the space temporarily for the Hunter-Bellevue School of Nursing while a new center is developed. The property currently hosts the president's office and other administrative departments of Metropolitan College, which had around 480 students enrolled in the 2023-24 academic year. The sale is pending approval from bondholders and the institution's accrediting body. Negotiations are ongoing.
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The Nine Orchard hotel in Manhattan's Dimes Square, known for its trendy ambiance, has been sold for $92 million to a Texas-based limited liability company linked to MML Hospitality from DLJ Real Estate Capital Partners. Situated in the historic Jarmulowsky Bank building, the hotel features 113 rooms and two restaurants: the casual Corner Bar and the elegant Swan Room. Room rates range from $675 to $1,675 per night. The new owner's plans remain unclear as representatives did not respond to inquiries.
DLJ acquired the Jarmulowsky Bank building in the early 2010s for $41 million, establishing the hotel as a notable addition to the vibrant Dimes Square area, which experienced a surge in bars and restaurants post-pandemic. MML, founded by chefs Tom Moorman and Larry McGuire in 2009, is primarily known for its restaurants and retail sites, with this being its second hotel acquisition and first in New York. The recent trend of hotel sales includes the Washington Square Hotel, which sold for $23 million.
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LuxUrban’s alleged delinquency compounds alleged $60M loan default
A Midtown hotel, The Herald, operated by LuxUrban Hotels, faces foreclosure as it allegedly accrued over $1.6 million in unpaid rent at 960 Sixth Avenue since last June. A judge approved the landlord's eviction request while LuxUrban contends it did not receive critical documents. This situation has intensified scrutiny on the property’s owners, led by Victor Tawil and Ely Cohen, who are now facing a lawsuit from lender Aareal Capital over a defaulted $60 million mortgage.
The owners failed to pay the $55.2 million loan balance when it matured on August 15, having missed previous payments and not maintaining a reserve account for shortfalls. The Herald, which charges a minimum of $270 per night, has encountered operational challenges, receiving criticism for cleanliness and service standards. LuxUrban, already under scrutiny for overstated holdings and facing a $1.2 million city fine and a shareholder lawsuit, struggles to stabilize its business.
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MML Hospitality picks up buzzy 113-key Nine Orchard hotel
MML did not comment on the recent transaction, while DLJ was unreachable by the Observer. Emily Sundberg’s Substack newsletter reported that DLJ acquired the Jarmulowsky Bank Building in 2012 for $5.3 million, later renovating it into a hotel that opened in June 2022. This 14-story, 71,000-square-foot property has attracted celebrity guests and received accolades from Travel + Leisure. DLJ, a private equity firm, has shifted to a seller's approach in New York's hospitality market this year.
Blackstone's recent agreement to buy the Kimpton Hotel Eventi for $175 million highlights market activity, alongside MML's growth in hotel acquisitions since partnering with Liz Lambert. Last year, MML and Riverside Resources secured a $193 million loan for the Sixth&Blanco luxury condo project in Austin, which includes a hotel and retail spaces. Additionally, Hawkins Way Capital recently purchased a 492-key hotel in Manhattan’s Financial District for $154.5 million from GF Hotels & Resorts after a foreclosure filing.
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Capstone has been snapping up properties through bad debt
Capstone Equities, led by Joshua Zamir, has initiated foreclosure proceedings against Madison Capital and Vornado for defaulting on a $75 million loan for their “Gateway to SoHo” building at 140 Crosby Street. Capstone's lawsuit claims the borrowers failed to repay the loan, which matured in September 2024. Notably, Richard Wagman and Vornado Realty signed a guarantee on this debt in 2019, putting them at risk for a deficiency judgment post-foreclosure.
The 36,000-square-foot property, developed by Vornado and Madison in 2019, was only 25% leased by the end of 2024, according to Vornado's latest report. The partners attempted to sell the property for around $100 million last summer, but no deal occurred. The loan, taken out in 2019 with Société Générale, also included a “bad boy guarantee,” which holds the borrowers liable under certain conditions. While Capstone did not cite violations in its lawsuit, it reserved the right to enforce the guarantee. Zamir has previously acquired distressed properties, indicating a strategic focus on distressed assets.
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Fallon Company CEO explains why he prefers Charlotte, Raleigh and Nashville
Two decades ago, the Fallon Company built a 20-unit condominium in Brooklyn but has since completed over $5 billion in projects outside NYC, primarily in the Southeast. CEO Michael Fallon, whose father founded the firm, views New York positively but identifies Nashville and Charlotte as better opportunities due to favorable infrastructure, political climates, and business-friendly environments. His pipeline is largely Southeast-based, avoiding local political instability related to housing commodification, highlighted by the socialist views of politician Zohran Mamdani. Fallon believes successful housing solutions involve for-profit development, emphasizing traditional methods to build affordable units.
Upcoming projects include a $3 billion Nashville East Bank with 300 affordable units and a Charlotte mixed-use project featuring up to 975 residential units. Since entering Charlotte in 2016, Raleigh in 2018, and Nashville in 2019, the Fallon Company has found these cities more conducive to development due to lower regulatory hurdles and local government support. While New York's recent low vacancy rates suggest potential, its complexity, high costs, and competing firms make large projects challenging. Fallon aims to concentrate on markets where he possesses a competitive advantage, ensuring better chances for long-term success with investors.
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Plus, a sale from Yoel Goldman’s faded empire and more news from this week
The value of the Manhattan office building at 1140 Sixth Avenue plummeted by 90%, dropping from $180 million in 2016 to $17.8 million now, with a value per square foot of $70, lower than previous asking rents. American Strategic Investment Co., the owner, is struggling with financial issues, as occupancy rates fell from 91% to 69% and net operating income dropped from $9.5 million to $1.6 million. Foreclosure proceedings began after the loan was transferred to special servicing in April due to ground lease payment failures.
Meanwhile, developer Yitzchak Tessler lost control of unsold units at 172 Madison Avenue to ArcPe after failing to secure exit financing. ArcPe rejected Tessler's attempts to keep penthouses with a new partner. In another transaction, an investor paid $28 million for the retail section of 229 West 43rd Street, previously owned by the Kushners, who lost it to foreclosure. Additionally, Avery Hall Investments purchased a Brooklyn site for $10.1 million, previously valued at $14 million by Yoel Goldman, who faced bankruptcy challenges.
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Special servicer claims $133M loan tied to former MetroTech property in default
Brookfield Properties is facing foreclosure at a Downtown Brooklyn office building due to an alleged $132.7 million loan default by its subsidiary, Forest City Myrtle Associates. Rialto Capital Management, as special servicer, filed a pre-foreclosure complaint on August 21 in New York State Supreme Court, claiming that the 2013-originated loan, initially for $170 million and securitized into a CMBS trust, was not paid off upon maturity in September 2023.
The outstanding amount includes principal, interest, and default interest, excluding reserves. The loan is secured by 115 Myrtle Avenue, a 692,000-square-foot office building within the Brooklyn Commons campus. Although Brookfield upgraded the property after acquiring Forest City Realty Trust in 2018, the firm faces a foreclosure threat amidst heavy debt of $13.8 billion across its New York portfolio, with significant office asset weight. Rialto's recent aggressive tactics have targeted borrowers, leading to defaults and foreclosure lawsuits, raising concerns for landlords beyond Manhattan’s core. Brookfield has not commented on this situation.