Major Developments:
NYC office struggles no threat to tax revenue: Worst-case 40% value decline would decrease revenue up to 1.4% by 2027 The city would face a revenue shortfall of $323 million in fiscal year 2025 (which starts on July 1, 2024) if the value of office properties declines 40% from 2023 to 2029. By the time fiscal year 2027 rolls around, that shortfall would be projected to jump to $1.1 billion. That figure represents only 3% of the city’s property tax levy and 1.4% of its tax revenues. The city’s tax revenues may be slightly worse condition than suggested. The institutions recently revised a study regarding the values of office properties to put the number at 44% by 2029.The state legislature revived a property tax break for landlords who renovate their apartment buildings, but provisions will narrow its use to mostly affordable properties. Lawmakers over the weekend passed the “Affordable Housing Rehabilitation Program,” which replaces the lapsed J-51 tax break. The measure awaits the governor’s signature. As with its predecessor, the program must be authorized by the City Council; the state bill merely gives the city the ability to implement the program. If approved, it would apply to renovation work completed after June 29, 2022 when the previous version expired and before June 30, 2026. It is now an abatement-only program that lasts for up to 20 years.
After Albany let major incentives expire, NYC threw owners a bone. As the state legislature wrapped up last week without reviving 421a, a new incentive for building owners quietly became available. The Manhattan Commercial Revitalization Program, or M-Core, went live. It’s intended to encourage owners of aging commercial buildings south of 59th Street to make transformational renovations.
A 270-unit multifamily project is being proposed in Borough Park. Despite housing needs, local community boards shot down several similar projects. A low-rise community in Borough Park has high hopes for more housing. New project filings by an LLC tied to developer Meir David Tabak outline a 14-building complex in the South Brooklyn neighborhood. The development would include 270 units, 81 of which would be designed for affordable housing. The mixed-use development would include 272,000 square feet of housing and 63,000 square feet of commercial space that would cover four city blocks roughly cornered by 14th and 16th Avenues and 59th and 61st Streets. The assemblage was purchased by Brooklyn Yards Development LLC in 2019 for $4.25 million, with deeds signed by Stanley Rieder under the LIBR Corp. of Manhattan LLC.
Al Laboz proposes the first project to use controversial SoHo rezoning and wants to convert a historic commercial buildings into apartments and would add 10 stories to the three-story Oltarsh Building at 277 Canal Street. A quarter of those units will be designated affordable, as required by the city’s Mandatory Inclusionary Housing law. The proposal promises to maintain the three-story facade at the building’s base and replicate its appearance upwards.
Urban Edge hit with foreclosure filing at a 290,000 sf commercial building when they missed a payment on a $66 million loan on Kingswood Center in Midwood. Wells Fargo filed to foreclose on the nearly 300,000-square-foot building at 1630 East 15th Street, citing a single missed payment last month on a $65.5 million loan. p.
Joel Schreiber was hit with over $100 million in judgments in separate suits brought by Starwood, Goldman Sachs in separate lawsuits. Two New York state judges ruled that Schreiber owes tens of millions to both Goldman Sachs and an affiliate of Barry Sternlicht’s Starwood Capital Group.
Fitch downgraded the security linked to the mortgage at 650 Madison Avenue in the Plaza District, co-owned with Vornado Realty Trust, Oxford Properties Group and the Ontario Municipal Employees Retirement System. Rental income has declined in the last year, sinking 38% and occupancy is down to 82%. The decline in performance led Fitch to downgrade two portions of the security linked to the building’s $800 million mortgage debt. The loan-to-value ratio at the building has grown from 106% in 2019 to 127%.
Ralph Lauren occupies more than 40% of the 650 Madison Avenue is set to have its lease expire in 2024. RL may downsize or even vacate the building. Ralph Lauren plans to reduce its footprint in North America by 30% in the coming years.
Memorial Sloan Kettering vacated approximately 17% of the property’s space a year before its lease was due to expire last June. The joint venture acquired the property in 2013 for $1.3 billion. Prior to the pandemic, the owners refinanced the 27-story mixed-use building for $800 million; it was 98% occupied at the time.
Vornado’s challenges are widespread. This year, it wrote down the value of its real estate portfolio by $600 million. Roughly 80% of the writedown stemmed from a handful of Midtown properties. The assets included 327,000 square feet of office space.
SL Green is ready to foreclose on Ashekanzy’s interest in the ground underneath the 625 Madison Avenue, The move comes after an arbitrator gave Ashkenazy the go-ahead to raise the rent on his ground lease with SLG from $4.6 million a year to $20.25 million. The fate of the property now hinges on who buys the ownership stake and for how much. Ashkenazy recently defaulted on the $195 million mezzanine loan backing his fee position. SLG could credit bid the amount it’s owed and consolidate its ownership stake.
In April, developers filed 22 permits for multifamily building foundations to support 569 future apartments. Two projects account for 487 of those units: a five-story, 101-unit building at 6014 Beach Channel Drive in Arverne, Queens, and a larger development at 12096 Flatlands Avenue in East New York. of Innovative Urban Village, a 13-building, 100% affordable complex expected to add 2,100 units to the area.
Chris Xu plans a 700-unit mixed-use complex in Rego Park. Skyline Tower developer paid Vornado $70 million for the development site. Xu’s United Construction and Development Group released renderings for a three-building mixed-use complex at 93-30 93rd Street in Rego Park. The 140,000-square-foot site is zoned for up to 670,000 square feet of development. The complex will include up to 706 apartments, 200,000 square feet of commercial space and 806 parking spaces.
Mezzanine lender SME Capital Ventures can proceed to foreclose on 541 West 21st Street, a boutique office conversion in Chelsea, a federal bankruptcy judge has ruled. The decision allows SME to sell the ownership interest in the project that longtime owner Erno Bodek pledged as collateral via his ERBO Properties. Things looked different in 2019, when Bodek borrowed $60 million to convert the industrial building at 541 West 21st Street into 65,000 square feet of offices. The project ran out of gas before it could get a temporary certificate of occupancy. Last year, SME initiated a UCC foreclosure.
Two Manhattan hotels could be back online soon, but their fates are more connected than what meets the eye. Both the Manhattan Four Seasons at 57 East 57th Street and the Plaza Hotel at 768 Fifth Avenue appear poised for a rebirth.
Opponents are challenging the Extell development at 740 Eighth Avenue on the basis of its free-fall amusement. The 776,000-square-foot, mixed-use project would have more than 1,000 hotel rooms, plus restaurants, bars, retail establishments, a gym and an observation deck. The ride would be between the observation deck and the top of the hotel.
