New York New Developments
Vacant office and retail space will have a domino effect on the city’s budget and economy. The Metropolitan Transportation Authority faces a $12 billion budget deficit by 2021. The low office numbers have also led to a projected $9 billion drop in sales tax and other revenues.About 24,000 New Yorkers have lost their lives to the coronavirus. The unemployment rate is 16% and just 10% of workers have returned to the office by September. Personal income tax revenue may drop by $2 billion this fiscal year. Only a third of hotel rooms are occupied, and apartment vacancies crept over 5% for the first time in 14 years. These figures tell the impact of the coronavirus outbreak on New York City.
AKA Wall Street, an extended-stay hotel, closed permanently at 84 William Street.
The Canadian bank CIBC wants Harbor Group International to pay up or hand over the keys to its retail space at 445 Fifth Avenue. CIBC is suing companies tied to Harbor Group for failing to meet its debt payments. Facebook’s lease at the Farley Post Office redevelopment in Midtown post covid came with a perk: a 9% discount when it signed the 730,000-square-foot lease. Facebook agreed to pay $109 per square foot in rent, with an increase of $10 per square foot every five years over a 15-year period. Facebook also got increased free rent and a more generous work letter.
New York City typically leads the nation in leasing demand from law firms, but the pandemic has upended that. Leasing volume from law firms dropped by 45% in the first half of 2020 compared to the same period last year.
Potential changes to the rules for Opportunity Zones could allow some foreign investors to reap tax benefits from the program. The Internal Revenue Service is considering new rules pertaining to foreign investors’ ability to defer capital gains in the Opportunity Zones program. The new regulations could be released soon.
Home Depot, currently at 731 Lexington Avenue, may be moving to a 90,000-square-foot space formerly occupied by Bed Bath & Beyond at 410 East 61st Street. Bed Bath & Beyond announced it would shut that location as part of its larger plan to close 200 stores throughout the U.S.
SL Green Realty and Jacob Chetrit have resolved their dispute over the busted deal for the Daily News Building, one of the biggest property deals to disintegrate as the coronavirus pandemic froze the debt markets. The real estate investment trust dropped the lawsuit to recover a $35 million deposit from escrow after Chetrit objected to its release.
The operator of the Martinique hotel in Manhattan has filed for Chapter 11 bankruptcy protection. Herald Hotel Associates, which runs the boutique hotel at 49 West 32 Street in Koreatown, filed a petition. The Council voted in favor of a bill that prohibits the enforcement of personal liability provisions in commercial leases or rental agreements where a default occurred between March 7, 2020 and March 31, 2021. The initial measure only applied to defaults that happen through Sept. 30, 2020.
Commercial tenants are getting a small reprieve. New York’s moratorium on commercial foreclosures and evictions will be in place until at least Oct. 20. The moratorium was set to expire Sept. 30, but a new order was signed extending the ban for another month. But the state allowed commercial eviction warrants to be issued beginning Sept. 4 for cases that commenced before March 17, and some of those cases may now proceed.
HelloFresh has signed a 10-year lease at the Sunset Park mixed-use complex, and will move its content studio and production space and take over 9,294 square feet at 88 35th Street. Governors Island has a proposal for a new, 4.2 million-square-foot mixed-use development. The Trust for Governors Island unveiled a wide-ranging plan which includes the development of office space, hotels and dormitories. The proposal calls for taking over 33 acres on the island’s southern end that were designated for future construction under a 2010 master plan for the park.
An affiliate of International Workplace Group has filed for Chapter 11 bankruptcy protection. Regus put 6 of its New York City workcenters into bankruptcy,as the company seeks Chapter 11 protection for more than 100 locations across the country. The company has filed for six workcenters in Manhattan, Brooklyn and Long Island City.
Knotel is looking to get out of 10 Manhattan locations with lease commitments of nearly $200 million, as the company clashes with landlords over unpaid rent. Knotel has about 2.5 million square feet in New York and a total of 5 million square feet spread across its 17 markets. Knotel was reportedly looking to give back 20% of its overall portfolio to landlords. Knotel also went through two significant rounds of layoffs in 2020.
WeWork, the shared office space provider, is now offering “On Demand” workspaces for as low as $29 a day and $10 an hour for a meeting room.
SL Green Realty, the National Pension Service of Korea and Hines, opened the 1,401-foot-tall One Vanderbilt to the public. Herald Square’s Courtyard by Marriott has closed. The hotel’s owner recently filed a notice detailing its plan to lay off 59 employees, who have been furloughed since March. The reason for layoffs is permanent closure of the 167-room hotel, located at 8 Herald Square.
The owner of New York Sports Clubs filed for Chapter 11 bankruptcy after the forced closure of gyms led to big losses in revenue.
Century 21 Stores is the latest retailer to file for bankruptcy, and it blames insurance providers for its collapse. The New York-based off-price retailer filed for Chapter 11 bankruptcy and will wind down operations to close its 13 stores.
The owner of bakery chain Maison Kayser has filed for bankruptcy, with a plan to save the company. Cosmoledo LLC had agreed to sell its assets to restaurant investor Aurify Brands.
Shopify is taking over a sublease from Google at 131 Greene Street. Barclays is considering moving into Hudson Yards from its current location in Times Square. Barclays is looking to lease around 500,000 square feet. The bank is currently headquartered at 747 Seventh Avenue, which it acquired in a deal to buy part of the investment bank’s U.S. operations in 2008.
Amazon Music has signed a new lease for 40,000 square feet at 25 Kent Avenue in Williamsburg.
J.C. Penney will be acquired by mall operators Simon Property Group and Brookfield Property Partners, avoiding liquidation. Simon and Brookfield will pay about $300 million in cash and assume $500 million in debt to buy J.C. Penney. Some of the stores and distribution facilities will be divided into two property companies. The deal values the department store chain at $1.75 billion.
ABS Partners is suing the parking garage operator, claiming it owes more than $7 million in rent and other fees at 270 Madison Avenue, where Icon occupies the second floor of the 269,000-square-foot building. Icon Parking and its affiliates, which have repeatedly been sued over allegedly failing to pay rent at various locations, Eleven Madison Park, a three-Michelin star restaurant, has struck a rent agreement with its landlord SL Green Realty.
More than 300 restaurants have filed a class action lawsuit against the city and state for delaying indoor seating. There is an indication that 64% of restaurants across the state expect to close by the end of the year SL Green Realty is replacing a construction loan on a $600 million construction loan for its office project at 410 Tenth Avenue. Amazon and First Republic Bank have signed leases to anchor the 20-story property. RFR Realty signed a $224 million loan for its acquisition of a 23-story office tower at 522 Fifth Avenue. RFR closed on the acquisition of the 575,000-square-foot building for $350 million. It purchased the property from Morgan Stanley. Morgan Stanley has agreed to stay as a tenant for at least three years after the sale. After the firm departs, Rosen is seeking to lease the building to a single tenant beginning in March 2024.
The city pulled out of negotiations with a group of private developers on a plan to rezone the site once slated to be Amazon’s campus in Long Island City. Mayor Bill de Blasio’s administration scuttled the talks with a group including MaryAnne Gilmartin’s company and Bruce Teitelbaum over disagreements regarding infrastructure work at the site.
The pandemic has changed the way CEOs around the globe see the future of work. More than two-thirds may reduce their office footprint in the coming years. The CEOs’ sentiment does not bode well for office landlords who have been waiting for the return of their tenants. Malls in New York City can reopen, but not for hanging out. Gov. Andrew Cuomo announced that shopping malls can reopen Sept. 9 at 50% capacity. Malls in other parts of the state were allowed to reopen in July provided they had special air-filtration systems.
The governor announced that casinos can open Sept. 9 at 25% capacity, though table and drink service on the casino floor are still off-limits. Casinos, too, must have enhanced filtration systems in place.
Shops inside subway stations could once count a steady stream of foot traffic. But now, with ridership down, many well-known retailers are shutting down. Times Square was the subways system’s busiest last year, with 65 million riders per day passing through its turnstiles. Systemwide, ridership is down more than 80% from its peak. 35 of 215 retailers inside New York’s subway stations have closed since March, putting further pressure on the cash-strapped agency.
Elie Tahari allegedly bailed on its Midtown lease at 510 Fifth Avenue, and Vornado Realty Trust is seeking $14.8 million in future rent payments.
At the beginning of the pandemic, property owners were seeking to defer rent payments but having to contend with their own mortgage payments and other costs, they are increasingly filing suits to collect on unpaid rent.
Parking garages have emptied out as tourists and workers stay home and about 420,000 residents fled the city. Now, one of the city’s largest garage operators is facing a barrage of lawsuits for unpaid rent.
Brookfield Property Partners and Qatar Investment Authority’s own One Manhattan West. It has a rent roll with a weighted average lease term of over 17 years. The 2.1 million-square-foot office portion of the building was 94% leased to seven major tenants and three Brookfield affiliates as of Aug. 1.
The Hilton hotel in Times Square is closing its doors permanently. The 478-room hotel at 234 West 42nd Street disclosed its plans to permanently shutter in a filing. The hotel’s 200 employees, some of whom had been furloughed since March, will be permanently laid off. Macy’s has unveiled a plan to open smaller, off-mall stores and fulfillment centers, while consolidating its current locations. Neighborhood locations saw some action from digital sales being fulfilled in stores.
Michael Chetrit is suing Discovery Communications for rent at 850 Third Avenue for June and July rent. Discovery’s lease expired at the end of May, but Chetrit says it did not vacate.
A limited liability company owned by Argentic Real Estate Investment has filed a lawsuit against 17th Street Property Owner. The court filing says Ashkenazy has failed to pay back a $46.2 million loan, backed for the original Barneys store in Chelsea even though the loan matured. The lawsuit seeks to foreclose on and sell the property.
J.C. Penney’s lenders are preparing to take control of the struggling retailer after discussions with its bidders hit a dead end. If the lenders take control of the retailer, it will likely lead to liquidation of its assets. The company is looking to negotiate a debt-for-equity swap with its lenders in the next 10 days and is also still seeking new bidders.
