Major Developments:
The value of commercial and multifamily construction declined by 31% year-over-year from January through June.5 World Trade Center will be the first residential building at the World Trade Center. Gov. Kathy Hochul approved a deal to include 400 income-restricted apartments as part of a 1,200-unit tower.
Margaritaville lenders go after El-Gamal and partners for $86 million debt after they triggered a bad boy guarantee by throwing the project into bankruptcy, and the investors are personally on the hook for $86 million in debt. El-Gamal and his partners, Flintlock Construction Services’ Andrew and Stephen Weiss, became personally liable for the hotel’s mezzanine debt when they put their equity stake in the property into bankruptcy.
Brause Realty filed plans for a 20-story, 157-unit project at 729 Second Avenue in Murray Hill. The 129,000-square-foot project is expected to span a handful of adjacent sites owned by the developer, and likely take an East 39th Street address. 729 Second Avenue qualifies for 421a tax break.
The Independent Budget Office estimates that Madison Square Garden’s tax exemption has cost New York City an inflation-adjusted $947 million since its origin in 1982. The exemption is estimated to ring in at $42 million this year alone.
Blackstone holds a global industrial portfolio valued at $175 billion.
Invesco Real Estate has gone from lender to partner at 110 William Street, a 32-story, 928,000-square-foot tower. by converting $87.1 million mezzanine loan into a 22.5% stake in the property. Pacific Oak Capital Advisors and Savanna Real Estate Fund had been given several three-month extensions after defaulting on its debt in June 2022. Savanna transferred its 40% ownership stake to Pacific Oak, which at that point was the sole owner of the property.
Stopgap 421a held up by construction wage dispute. REBNY, Building Trades don’t see eye-to-eye on workers’ pay. A stalemate between developers and construction unions over worker wages is holding up negotiations to bring back a mini version of property tax break 421a, just as it did the last time the tax break expired.
Officials were contemplating a measure involving payments in lieu of taxes, or PILOTs. Under such arrangements, the state would take over properties and then rent them back to developers through long-term ground leases. The rent would be less than what the developers would pay in property taxes, essentially substituting for the benefit that 421a once provided.
City Planning recommends a 10-year permit for MSG. Arena seeking permanent right to remain above Penn Station. The Department of City Planning recommended renewing Madison Square Garden’s special permit for only 10 years.
City zoning requires a special permit for any arena with more than 2,500 seats. The City Planning Commission whose chairman, Dan Garodnick, also heads the Department of City Planning is expected to vote. The applications for the special permit and text amendment then head to the City Council.
Ground leases allow commercial real estate investors to divide the value of a property by treating the land and the building above independently. The building operator typically pays the landowner rent, which is adjusted periodically based on the land’s appraised value.
Vornado Realty Trust and the Korein family, which owns the land under Penn 1, Vornado’s marquee office tower. At stake is how much rent the company will pay the Koreins over the next 25 years.
Vornado estimated the annual rent for Penn 1’s ground lease might skyrocket to $26 million from $2.5 million. But by the end of the year, he expected the price to be far lower, given the state of the sector and other economic factors. The Koreins do not agree.
Vornado handed 608 Fifth Avenue back to the Korein family in 2020. Aby Rosen’s RFR relinquished Lever House to Tod Waterman and Brookfield.
Kraut K Property Group purchased the independent Sunshine Cinema at 141 East Houston Street for $31.5 million. The company demolished the theater, a Lower East Side institution, to make way for an office and retail development.
Alexico sues Rockrose, St. Francis over Brooklyn campus sale. Firm alleges parties breached agreements at 180 Remsen Street in a lawsuit filed by a real estate developer, St. Francis College.
City Council overrides veto on housing vouchers, setting stage for legal fight. Mayor Adams, saying rental subsidies will cost $17 billion. It has blown up the relationship between the Mayor Eric Adams and City Council, who are now likely taking their battle to court. City Council overrode the mayor’s veto of four bills that expand eligibility for the City Fighting Homelessness and Eviction Prevention Supplement, or CityFHEPS.
Related has struggled to sell in luxury towers despite deep discounts at 15 and 35 Hudson Yards and have left them with more than $1 billion of condos left to sell. Luxury residential tower 35 Hudson Yards still counts roughly 50% of units unsold, four years after sales launched.
The units sold are going for 30% less than the original prices and active listings are discounted by nearly 50%. Four large units recently sold for more than 40% off.
NYC Hotel room inventory has fallen to 118,000, compared to 144,000 before the pandemic. Occupancy is still below 2019 levels, but the city's average revenue per available room is higher than it was four years ago. Hotels in New York City pay the highest real property taxes in the nation.
NYC migrant crisis is using hotels as arrival centers. The Adams administration is paying $220M to the Roosevelt Hotel’s owner to occupy more than 1,000 rooms.
More than 140 hotels have a deal with the city, and have been enormously beneficial to operators that have struggled during Covid.
The Holiday Inn in the Financial District was put into bankruptcy, which would see the administration renting 492 rooms to house about 15,000 migrants over the 15 months paying $190 a room, which is more than usual $110/room.
