Major Developments:
New York City is gearing up for a rezoning that could bring 12,000 homes to Jamaica, Queens.One neighborhood rezoning is on the cusp of being approved by the City Council, one just started public review and another is about to. City Planning will certify the plan to rezone a swath of Jamaica to allow for the construction of more than 12,000 homes in the Queens neighborhood, of which 4,000 would be income-restricted through the city’s Mandatory Inclusionary Housing program. This would be the largest MIH area ever mapped. The administration also projects that the rezoning could net 2 million square feet of commercial space. The certification starts the months-long land use review process called the Uniform Land Use Review Procedure. The plan covers more than 300 blocks in and around Downtown Jamaica and will ultimately need buy-in from local Council members, as well as City Council Speaker, all of whose districts will be affected by the rezoning.
The rezoning of Atlantic Avenue in Central Brooklyn, expecting 4,600 new homes, has been approved by City Planning and is proceeding to the City Council. Similarly, the City Council has approved a 46-block rezoning in the Bronx, projected to yield 7,000 new homes within the next decade. Public review has commenced for the Midtown South rezoning, anticipated to generate 9,700 units, while the Long Island City rezoning plan, published last June, outlines the potential for 14,000 new units.
CMBS issuances surged to $18.3 billion in February, up 196% year-over-year, with no slowdown predicted. Major NYC refinancings included Irvine Company's MetLife Building ($1.5B), RFR Holding's Seagram Building ($1.2B), and Ivanhoé Cambridge's 3 Bryant Park ($1.1B). The MetLife loan carries a 6.25% interest rate, doubling debt-servicing costs. The Seagram Building refinancing retires $1.15B in existing debt at a 6.25% interest rate.
Gov. Kathy Hochul has committed funding to construct new affordable housing and preserve existing stock, contingent on City Council approval of zoning changes. The city has also dedicated $1 billion to housing. Many projects could be in line for state funding, including the QNS development in Astoria and Pacific Park at 5 World Trade Center. Some argue that the funding should be used for public housing and Mitchell-Lamas, and that spreading it over five years and broadly allocating it will dilute its impact.
RXR and TF Cornerstone are expecting that their 175 Park Avenue, the heir apparent to SL Green’s One Vanderbilt, will land an anchor tenant and break ground this year. BXP (formerly Boston Properties) has a similar timeline for its planned office tower on the site of the Metropolitan Transportation Authority’s former headquarters at 343 Madison Avenue.
Vornado Realty Trust and Rudin recently kicked off the public review process for 350 Park Avenue, their Citadel-anchored skyscraper.
A 13-member commission convened by the mayor has proposed City Charter reforms to streamline the Uniform Land Use Review Procedure (Ulurp) and encourage housing development. Ulurp adds delays and costs to projects, and allows local community boards to block citywide development. The commission's proposed reforms would shift decision-making power to a citywide body and introduce a "builder's remedy" to allow as-of-right development, bypassing Ulurp in some cases.
Harlem USA shopping center may default on its $108 million mortgage due to 26% vacancy rate. KBRA values the property at $82 million, significantly less than the mortgage. The root of concern appears to be the 26% vacancy rate, which is 10 percentage points higher than the neighborhood average. Modell’s Sporting Goods, Chuck E. Cheese, and Buffalo Wild Wings closed, leaving 50,000 square feet empty that has not been filled.
City still paying indicted hotel owner Weihong Hu $542,000 a month for nonprofit program amid possible plea agreement to host a nonprofit program at a Queens hotel. Hu was indicted for allegedly bribing the chief executive officer. The Fresh Meadows hotel has housed formerly incarcerated people since 2021.
Kinsmen Property Group is suing Real Estate Equities Corporation (REEC) for abandoning a development project at 156-166 Bowery Street. REEC owes more than $2.9 million in ground rent and failed to meet the agreed-upon deadlines for demolition and construction. REEC also owes more than $5.3 million in back rent, demolition costs, tax reimbursements, and outstanding liens.
City kicks off review of 350 Park Avenue. 350 Park is the first office tower presented to City Planning in 5 years. The 1.8 million-square-foot office tower planned for 350 Park Avenue is a special case. The Department of City Planning certified the project, kickstarting the months long public review of the project.
The project is made possible, in part, by the 2017 rezoning of Midtown East, which allowed air rights from landmarked properties to be transferred to non-adjacent sites throughout the district. The development team is buying more than 480,000 square feet of air rights from St. Patrick’s Cathedral and St. Bartholomew’s Church. As part of those deals, the developers are paying more than $30 million to a public Realm improvement fund created as part of the rezoning.
RXR, TF Cornerstone, and BXP. The Park Avenue project was made possible by the 2017 Midtown East rezoning, which allows air rights transfers. The developers are buying air rights from St. Patrick's Cathedral and St. Bartholomew's Church and paying over $30 million to a public Realm improvement fund. The 350 Park Avenue office tower project is unique due to Ken Griffin's involvement.
The plan calls for moving Madison Square Garden to the former Hotel Penn site, and building a park on the former arena site. Renderings show a classical facade, new train hall and single-level concourse. Tony Simone pitched revising plans for a megadevelopment surrounding the station to include more housing and a park on the Hotel Penn site.
Mets owner Steve Cohen’s casino project, will no doubt remind us it should be referred to as Metropolitan Park, got the rezoning it needs from the City Council. Cohen’s main obstacle is getting parkland alienated from the state legislature, because the local state senator, Sen. Jessica Ramos, doesn’t want a casino in her district. It’s possible that the legislature will alienate the parkland over her objections, but that is rare for Albany. If ever an exception would be made, it would be for something like this. The parkland is really just a parking lot.
Retrofitting buildings to meet decarbonization goals is expensive, and with rising interest rates and long payback periods, some owners find it more cost-effective to pay the fines for non-compliance. Despite this, most buildings are currently meeting the emissions targets set by the city. The Department of Buildings claims fewer than 11% are out of compliance with 2024-26 emissions targets.
Flagstar Bank has filed its largest commercial pre-foreclosure action in years against Pinnacle Group. The action involves summonses on loans exceeding $600 million and impacts over half of Pinnacle's NYC multifamily portfolio, including two dozen Manhattan properties and approximately 75 properties in the outer boroughs.
RXR and SL Green worked out a deal on the $940 million mortgage backed by Worldwide Plaza on Eighth Avenue. The borrowers, which also include a subsidiary of the liquidating company for New York REIT, will use loan reserves to fund operating expenses and debt service shortfalls; the loan is still set to come due in November 2027.
For some New York City property owners, there’s still not enough incentive to limit carbon emissions. Dozens of landlords are planning to pay fines for failing to comply with Local Law 97, rather than retrofit their properties to reduce emissions. Some owners think the bottom line looks better if they absorb the fines that will be levied against them for failing to meet decarbonization goals dictated by the law.
It is set to undergo a seismic change after the city reached a deal with the merchants to redesign the street in the fall, which will see more space opened for pedestrians by doubling the width of the sidewalks between Bryant Park and Central Park. City officials have estimated the redesign would cost $350 million, excluding the price of relocating underground utilities and sewers.
RFR Holding and Commerz Real are involved in three lawsuits over the Soho luxury hotel 11 Howard. Commerz Real has filed a petition to evict RFR and is suing them for over $18 million in back rent and other costs. RFR alleges that Commerz violated their lease agreement by seeking potential buyers despite RFR's right of first offer.
RFR Holding plans to redevelop the vacant Trylons property (145-155 East 42nd Street) next to the Chrysler Building. The 13,000 sq ft lot can hold a building of up to 100,000 sq ft, with potential for further expansion through air rights and rezoning. The owner intends to lease the redeveloped property, ideally for no less than 100,000 sq ft at $10 million annually on a triple-net lease.
The City Council has extended the authorization of the tax lien sale program through 2028. The next scheduled sale is May 20, 2025. This program concerns properties with outstanding property taxes and/or water and sewer bills. These debts are sold to a private trust, which may initiate foreclosure proceedings if the owner does not settle the debt. Upon reauthorization, the Council instituted modifications, including the "Easy Exit" program, which permits owners of specific one- to three-unit and condominium buildings to withdraw their property from the lien sale up to three times within 36 months. Alternatively, owners may opt for foreclosure, transferring their property to an approved nonprofit organization, where they are guaranteed a 99-year affordable lease.
Developers are building smaller projects to avoid higher construction costs under the new tax abatement program, which replaced 421a. Affordable housing continues to be scarce; NYCHA's Housing Choice Voucher program has only placed 318 out of 12,000 applicants in affordable housing.
Irvine Company’s MetLife Building landed the largest CMBS deal of the three, a $1.5 billion loan issued by Bank of America and Wells Fargo.
RFR Holding got a $1.2 billion refinancing at the Seagram Building, aka 375 Park Avenue.
Ivanhoé Cambridge grabbed a $1.1 billion CMBS loan at 3 Bryant Park.
Gov. Kathy Hochul issued a request for proposals to redevelop the 12,800-square-foot Clinton Hill site at 1024 Fulton Street. The state is seeking a developer to build apartments with rents at or below 100% AMI, with at least 100 units, and a ground-floor community center. The selected developer will pay a nominal fee and may lease the site from the state. The site has been vacant since 1997 and plans to redevelop it have been stalled for years. The latest RFP requires that the development team be 51% owned by a nonprofit. The state budget for fiscal year 2024-2025 allocated $3.7 million to demolish the existing vacant building on the site.
Rialto has initiated foreclosure proceedings against Daryl Hagler's Cigar Factory creative office building in Astoria, alleging Hagler defaulted on a $20 million loan in October 2024.
TIAA declares SL Green’s 2 Herald Square lease terminated. SL Green refers to the complaint as “distortion of the facts” aka 1328 Broadway. TIAA alleges SL Green owes $16 million in back rent on its ground lease at the property, as well as $8 million in taxes and other fees adding up to $30 million owed. SL Green is seeking a reduction in ground rent due to the commercial real estate market’s downturn.
February was a major month for office leases in Lower Manhattan. Tenants leased 864,000 square feet in the district, more than doubling the leasing volume in the area for the entire fourth quarter.
On the whole, Manhattan’s office leasing volume was down about 13% month-over-month in February to 3.2 million square feet after a big January. Leasing velocity increased by 38% year-over-year and demand was 19% above the ten-year monthly average.
The availability rate tightened to the lowest level since March 2021, while sublet availability decreased to its lowest level since September 2020.
L+M Development Partners is suing Santander Bank for declining the deed in lieu of foreclosure at 320 St. Nicholas Avenue. L+M argues that the loan documents for the building give it the right to walk away from the property. The loan dates back to 2019 when Signature Bank originated $12 million to finance the conversion of four rent-regulated units into 12 apartments. But in 2023, New York amended the Housing Stability and Tenant Protection Act of 2019, removing landlords’ ability to generate new first rent on reconfigured apartments.