If retail landlords didn't have enough problems already

[David Goldsmith]

Downtown, Soho’s asking rent is down almost 65 percent from its peak of $977 per square foot in 2015 to $343 this fall.

Breaking Down Manhattan’s Retail Recovery

Average asking rents were flat or down in most Manhattan retail corridors this year, but Harlem and some downtown areas showed encouraging signs.

therealdeal.com

Manhattan retail rents stagnant even as foot traffic returns​

Pricey Midtown corridors fight vacancies as retailers are drawn Downtown​

Manhattan’s retail market is stabilizing as shoppers return to the city and generous pandemic-era concessions fade, but asking rents in most key corridors have stalled far below their pre-Covid peaks.
Just five of 16 Manhattan retail corridors tracked by the Real Estate Board of New York saw average asking rents increase from the spring to the fall, according to a report released this week. Two corridors saw asking rents flatline, while nine experienced declines.
The largest increase came along West 125th Street in Harlem, where the average asking rent jumped 15.1 percent from the spring and 24.1 percent year over year to $165 per square foot. Asking rent along the stretch, which was recently awarded the state’s first licensed cannabis dispensary, is now higher than it was in fall 2019, before Covid locked down the city.
The Central Harlem corridor was closely followed by Broadway between 14th and 23rd streets in Union Square and the Flatiron District, where the average asking rent rose 14.7 percent from the spring and has similarly surpassed 2019 levels.

Things were not nearly encouraging further up Broadway. The Times Square corridor, including Broadway and Seventh Avenue between West 42nd and 47th streets was home to the largest decrease from the spring. The average asking rent dropped 11 percent in Times Square, a submarket that still has large vacancies and has seen its average asking rent plummet 59 percent from its pre-pandemic peak of more than $2,400 per square foot.
Seven corridors saw their average asking rents increase from last fall, while nine experienced year-over-year declines. The steepest annual drop came Downtown along Broadway between Battery Park and Chambers Street, where average asking rent fell by more than 28 percent.

Like Times Square, many of Manhattan’s premier retail corridors have average asking rents well below their pre-Covid highs, the report shows. Average asking rent on Fifth Avenue between East 49th and 59th streets is down 33 percent from its peak of $3,900 per square foot. While it remains by far the borough’s priciest retail real estate, with average asking rent of nearly $2,600 per square foot, many flagship spaces remain empty as tenants tussle with leasing costs and buildout prices.
Madison Avenue’s “Gold Coast” between East 57th and 72nd streets saw its average asking rent drop by 9.6 percent from the spring and 7.3 percent from last fall to $695 per square foot.

Downtown, Soho’s asking rent is down almost 65 percent from its peak of $977 per square foot in 2015 to $343 this fall. The average asking rent in the West Village between Seventh Avenue South and Hudson Street stayed the same from the spring, but declined year-over-year by 9.6 percent.
There have been some encouraging signs. Fewer available storefronts in areas such as Prince and Greene streets in Soho or Bleecker Street in the West Village has pushed some retailers to pick up spaces in nearby corridors, like along Broadway in Soho. Keith DeCoster, REBNY’s Director of Market Data and Policy, said this “underscores (retailers) confidence in retail demand.”
The report also cited an uptick in retail foot traffic, both from residents and tourists, that benefited retailers over the last six months.

However, many obstacles still remain. Retailers are grappling with widespread staffing shortages, supply-chain issues and delayed build-outs that have plagued the industry’s recovery from the pandemic. And rising borrowing costs spurred by higher interest rates will continue to curtail shoppers’ spending next year, according to REBNY.
The borough’s largest leases signed in the last six months both occurred in Lower Manhattan. French department store Printemps will open a 54,400-square-foot store at Harry Macklowe’s 1 Wall Street, and the luxury fashion brand Alexander Wang inked a 46,000-square-foot lease for the top floor at the Howard Hughes Corporation’s 11 Fulton Street in July.

 

[David Goldsmith]

State of the Chains, 2022 | Center for an Urban Future (CUF)

CUF report finds most national retailers in the city haven’t come close to reaching their pre-pandemic levels

nycfuture.org

• 

REPORT COMMENTARY/OP-ED - DECEMBER 2022​

STATE OF THE CHAINS, 2022​

Our fifteenth annual ranking of national retailers in New York City finds a slight 0.3 percent uptick in chain stores across the five boroughs. However, despite the continued recovery from the sector’s steep contraction in 2020, this year’s bump in chain locations was a fraction of last year’s 2.7 percent increase.
by Jonathan Bowles, Charles Shaviro, and Sophia Annabelle Klein
Tags: chains economic growth data new york city boroughs

Read the full report by clicking here (PDF).

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The number of chain retail stores in New York City ticked up slightly over the past year, increasing by 0.3 percent. However, despite the continued recovery from the sector’s steep contraction in 2020, this year’s bump in chain locations was a fraction of last year’s 2.7 percent increase, and most national retailers in the city haven’t come close to reaching their pre-pandemic levels. In fact, the number of chain stores in the city in November 2022 was still 9.8 percent below the total from late 2019—or 782 fewer stores than before the pandemic.
The Center for an Urban Future’s fifteenth annual report tracking chain retail trends in New York finds that 57 percent of the retailers that were featured in our 2019 State of the Chains report have fewer locations today than they did before the pandemic, including 11 percent who no longer have any stores here. Additionally, all eight of the city’s largest chain retailers have fewer locations today than they did in 2019.
No borough has fully bounced back to its pre-pandemic chain store level, but Manhattan’s losses are significantly greater than those of any other borough—perhaps unsurprisingly, given diminished office occupancy. Today, there are still 14.4 percent fewer chain stores in Manhattan than in 2019—or 427 fewer stores. Staten Island (still down 1.5 percent) and Queens (6.8 percent lower today) have come the closest to reaching their pre-pandemic totals, while Brooklyn (-7.6 percent) and the Bronx (-9.5 percent) have further to go.
Over the past year, Brooklyn saw the largest one-year numerical increase in chain retailer locations, adding 33 stores—a 2.1 percent increase. Three of the four other boroughs experienced virtually no change in chain store locations between 2021 and 2022—Manhattan had a net gain of 3 chain stores (+0.1 percent), Queens added 4 locations (+0.2 percent), Staten Island experienced a contraction of 3 stores (-0.7 percent) while the Bronx had a net drop of 17 stores (-1.8 percent).
Although remote work and its effect on office occupancy levels in Midtown and other central business districts is a likely driver of the slow recovery in chain retail, our research suggests that the acceleration of online shopping is another factor. Indeed, for the fourth year in a row, chain retailers selling clothing, shoes, accessories, vitamins, and other merchandise have done worse than food retailers. The retail subsectors with the biggest year-over-year declines were all merchandisers: electronics (-8 percent), vitamin and food supplements (-7.8 percent), games and toys (-3.9 percent), beauty salons/equipment/supplies (-3.6 percent), pet supplies (-3.6 percent), office supplies (-3.1 percent), and shoes (-0.9 percent). Overall, 13 of the 19 chains that closed at least 10 percent of their stores in the past year were merchandise retailers. In contrast, a wide majority (19 of the 33 chains) that increased their footprint by at least 10 percent were food retailers.1

Number of Chain Stores by Borough, 2021 and 2022
Borough	2022	2021	Change (#)	Change (%)
Bronx	914	931	-17	-1.8%
Brooklyn	1621	1588	33	2.1%
Queens	1659	1655	4	0.2%
Manhattan	2649	2646	3	0.1%
Staten Island	456	459	-3	-0.7%
NYC	7300	7279	20	0.3%

This year’s State of the Chains report, based on data compiled from store locators between November 8, 2022, and November 29, 2022, finds that most of the national retailers with the biggest footprints in New York either contracted or saw minimal growth in store locations since 2021. Of this year’s top 15 retailers, 6 have fewer stores this year, 3 registered no change and 6 had increases. Overall, the top 15 retailers recorded a net change of 41 fewer stores than last year.
Dunkin’ Donuts is again the retailer with the most stores in the five boroughs, a title it has held all fifteen years since we started tracking chain store trends in New York. But whereas in 2008, the first year that this report was published, Dunkin’ had just six more stores than the second-place chain (Subway), today Dunkin’ has over 300 more stores than the number two retailer in the city, Starbucks, which boasts 316 store locations. However, despite adding five stores over the past year, growing from 615 to 620 in total, Dunkin’ still has fewer store locations now than it did before the pandemic (636 in 2019).
Starbucks now has the second-most chain stores in New York, its highest position in the fifteen-year history of this report. Over the past year, Starbucks had a net increase of six stores, from 310 to 316. Although Starbucks still has significantly fewer locations than it did pre-pandemic (351 in 2019), the coffee chain moved into second position on our list by surpassing Metro by T-Mobile, which reduced its footprint in the city by 16 locations, from 311 to 295.
The other retailers in the top ten include Subway (which now has 254 stores after registering a decline of 15 stores since 2021); T-Mobile (233 stores, -8); Duane Reade (227, -22); McDonald’s (191, no change); Baskin-Robbins (182, +7); CVS/Pharmacy (174, -1); and Popeye’s (137, +3).

Retailers Adding Stores Since Last Year​

• Food chains registered most of the biggest gains over the past year, including: Chipotle (adding 10 locations, from 95 to 105 stores), Wingstop (+9, from 19 to 28), Just Salad (+7, from 22 to 29), Taco Bell (+7, from 68 to 75), Baskin-Robbins (+7, 175 to 182), Chick-fil-a (+5, from 12 to 17), Pizza Hut (+5, from 34 to 39), Van Leeuwen (+4, from 17 to 21), Panera (+4, from 13 to 17), Sweetgreen (+3, from 34 to 37), Paris Baguette (+3, from 23 to 26), and Krispy Kreme (+3, from 10 to 13).
• All four bubble tea shops on our list added stores in 2022, including three by at least 15 percent. That includes Kung Fu Tea (increasing its footprint by 4 stores, from 26 to 30), Gong Cha (+4, from 25 to 29), Tiger Sugar (+2, from 5 to 7), and Vivi’s Bubble Tea (+1, from 25 to 26).
• There were several non-food retailers that added multiple store locations since last year, including: Tumi (+11, from 16 to 27), FedEx Office (+7, from 65 to 72), Target (+4, from 32 to 36), Burlington Coat Factory (+4, from 18 to 22), Victoria’s Secret (+3, from 9 to 12), and Bed Bath & Beyond (+2, from 10 to 12).

Retailers Shedding Stores Since Last Year​

• No retailer contracted more than pharmacy chain Duane Reade, which closed 22 stores over the past year, bringing its store total down to 227, from 249 last year.
• Metro by T-Mobile dropped the second-most store locations, closing 16 locations to fall to 295 from 311 last year.
• Two sandwich chains were also among the retailers shedding the most stores: Subway (-15, from 269 to 254) and Pret A Manger (-14, from 62 to 48).
• 7-Eleven was the only other retailer with a double-digit decline in stores over the past year. It reduced its footprint by 11 stores, from 116 to 105.
• Most of the notable year-over-year declines in chain stores were among retailers selling clothing, shoes, accessories, vitamins, and other merchandise, including: Danice Stores (-8, from 18 to 10), Mandee (-7, from 9 to 2), Footaction (-4, from 10 to 6), Vitamin Shoppe (-4, from 29 to 25), Anthropologie (-2, from 6 to 4), Dashing Diva (-2, from 6 to 4), DSW (-2, from 9 to 7), Sally Beauty (-2, from 14 to 12), Kiehl’s (-2, from 10 to 8), Best Buy (-2, from 17 to 15), Carter’s (-2, from 18 to 16), and Party City (-2, from 20 to 18).
• Some other food chains contracted over the past year, including Boston Market (-2, from 17 to 15), Milk Bar (-2, from 9 to 7), 5 Napkin Burger (-2, from 4 to 2), and TGI Fridays (-2, from 4 to 2).
• Three retailers closed all their remaining New York City stores since last year: department store Sears (-2), clothing and accessories store Strawberry (-1), and fast-casual restaurant chain Wichcraft (-1).

Retailers with Notable Changes Since the Pandemic​

A majority of national retailers in our list still have fewer store locations than 2019, but some of the notable contractions since the pandemic include:

• Metro by T-Mobile (-173, from 468 stores in 2019 to 295 in 2022)
• Duane Reade (-90, from 317 to 227)
• GNC (-53, from 99 to 46)
• NY Sports Clubs (-32, from 53 to 21)
• 7-Eleven (-36, from 141 to 105)
• Starbucks (-35, from 351 to 316)
• Baskin-Robbins (-35, from 217 to 182)
• Subway (-33, from 287 to 254)
• GameStop (-20, from 61 to 41)
• Mattress Firm (-17, from 68 to 51)
• AT&T (-17, from 136 to 119)
• Dunkin’ Donuts (-16, from 636 to 620)
• M·A·C Cosmetics (-12, from 34 to 22)
• Dollar Tree (-12, from 84 to 72)
• McDonald’s (-12, from 203 to 191)
• T-Mobile (-12, from 245 to 233)
• Children’s Place (-13, from 35 to 22)
• Aldo (-10, from 24 to 14)
• Victoria’s Secret (-10, from 22 to 12)
• Vitamin Shoppe (-10, from 35 to 25)
• Rite Aid (-10, from 119 to 109)

Several national retailers have bucked the larger trends and added a significant number of stores since 2019, including:

• Popeye’s (+32, from 105 to 137)
• Taco Bell (+35, from 40 to 75)
• Chipotle (+26, from 79 to 105)
• Pizza Hut (+25, from 14 to 39)
• Enterprise (+21, from 25 to 46)
• Wingstop (+18, from 10 to 28)
• Jimmy Jazz (+18, from 26 to 44)2
• Tumi (+14, from 13 to 27)
• Target (+14, from 22 to 36)
• Sweetgreen (+12, from 25 to 37)
• Shake Shack (+11, from 25 to 36)
• Gong Cha (+11, from 18 to 29)
• Foot Locker (+11, from 43 to 54)

Changes Over 15 Years​

• 7 of the 10 largest chains from our first ever State of the Chains report (2008) have fewer store locations today than they did then.
• While Dunkin has had a net gain of 279 store locations in those fifteen years (from 341 to 620), the other nine retailers in that original top 10 had a combined decline of 473 stores.
• Two of the original ten largest chains— Radio Shack and Payless—have since shut down all their stores in the five boroughs.
• In that first State of the Chains report, long-since-closed video rental store Blockbuster still had 46 locations in the city.

Top Ten Chain Retailers in Each Borough
Bronx	Brooklyn	Manhattan	Queens	Staten Island
Dunkin' (90)	Dunkin' (136)	Starbucks (191)	Dunkin' (195)	Dunkin' (38)
Metro by T-Mobile (69)	Metro by T-Mobile (108)	Dunkin' (161)	Subway and T-Mobile (71)	CVS/Pharmacy (18)
T-Mobile (44)	T-Mobile (58)	Duane Reade (96)	Metro by T-Mobile (66)	Subway (16)
McDonald's (40)	McDonald's (50)	Subway (84)	Baskin Robbins (61)	Metro by T-Mobile (15)
Subway (37)	Duane Reade (48)	CVS/Pharmacy (66)	Duane Reade (54)	Starbucks (14)
Popeye's and Baskin-Robbins (26)	Starbucks, Subway, and Popeye's (46)	FedEx Office (58)	Starbucks (49)	Burger King and Carvel (11)
Duane Reade (19)	Baskin-Robbins (43)	Chipotle (57)	CVS/Pharmacy (48)	T-Mobile, Duane Reade, 7-Eleven and Verizon (10)
Rite Aid (18)	Key Food (35)	UPS Store (51)	McDonald's (45)	Baskin-Robbins (8)
Burger King and Domino's (17)	Rite Aid and Burger King (34)	T-Mobile (50)	7-Eleven (42)	McDonald's, Dollar Tree, and Domino's (7)
Stabucks and Rainbow (16)	AT&T (29)	McDonald's (49)	Popeye's and Key Food (37)	Wendy's and Autozone (6)

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Borough Trends​

Starbucks has more stores in Manhattan than any other national retailer, with 191 total locations. In all other boroughs, Dunkin’ is the top retailer with 195 locations in Queens, 136 locations in Brooklyn, 90 locations in the Bronx, and 38 locations on Staten Island.
Brooklyn and the Bronx share the same list of top three chain retailers: Dunkin’, Metro by T-Mobile, and T-Mobile. The top three retailers in Queens are Dunkin’, Metro by T-Mobile, and T-Mobile (the same three from 2020). Manhattan’s three biggest retailers are: Starbucks, Dunkin’, and Duane Reade. Finally, Staten Island’s top three are: Dunkin’, Subway, and Metro by T-Mobile.

Zip Code Trends​

For the fourth consecutive year in our study, zip code 10001, home to Hudson Yards and the area around Penn Station, claims the top spot for chain store locations with 189 stores. The area saw an increase of six stores, rising 3.3 percent from 183 stores in 2021 to 189 stores in 2022. In second place for the third year in a row was zip code 10314 (New Springville), home to the Staten Island Mall, with 161 stores (increasing from 160 in 2021), and a full 35.2 percent of the total store locations located on Staten Island. Coming in third was 11201 (Downtown Brooklyn), remaining Brooklyn’s most dense zip code for chain retailers with 155 store locations, an increase of 3.3 percent from 150 in 2021. The zip code with the fourth-most chain store locations was 10019 (Mid-town West) at 148, just surpassing zip code 10003 (East Village), which had previously ranked fourth in 2021. 10003 saw a decline of 7 chain locations (-4.9 percent), as it dropped from 143 to 136.
In Queens, 11373 (Elmhurst), home to the Queens Center Mall, was the top zip code for chain retailer locations with 128 stores (up from 125 in 2021). In the Bronx, zip code 10475 (Baychester / Co-op City), home of the Bay Plaza Shopping Center, has the highest number of chain stores of any zip code in that borough with 89. 11373 (Elmhurst) saw a year-over-year increase of 3 locations (+2.4 percent), while 10475 had a year- over-year decrease of 1 location (-1.1 percent).
After last year’s study, 2022 saw much less growth per zip code. In 2021, 103 zip codes (47 percent) saw an increase in the number of chain store locations and 18 different zip codes saw growth in chain store locations of 15 percent or higher. This year, 67 zip codes (30.5 percent) saw an increase in the number of chain store locations, only five zip codes saw growth of 15 percent or more, and just four zip codes added more than 5 chain store locations. 64 zip codes (29.1 percent) saw a decrease, while the remaining 89 of the city’s zip codes (40.5 percent) maintained their 2021 numbers.

Where the Change is Occuring
The largest national retailers have locations all over the city. The following shows where the ten largest retailers added locations or contracted over the past year. For example, the number of Dunkin’ locations increased by 5 stores citywide since last year, including a net decrease of two stores in Brooklyn and a net increase of four stores in Queens, two in the Bronx, one in Manhattan, and zero on Staten Island.
Retailer	Number of Stores, 2022	Difference, 2021-22	Brooklyn	Bronx	Queens	Manhattan	Staten Island
Dunkin'	620	5	-2	2	4	1	0
Starbucks	316	6	-1	0	1	4	2
Metro by T-Mobile	295	-16	1	-4	-9	-4	0
Subway	254	-15	-1	-4	0	-8	-2
T-Mobile	233	-8	-2	-2	-2	-2	0
Duane Reade	227	-22	-4	-8	-3	-7	0
McDonald's	191	0	0	0	0	0	0
Baskin-Robbins	182	7	24	-7	-1	-5	-4
CVS/Pharmacy	174	-1	-1	1	-1	1	-1
Popeye's	137	3	-3	0	3	3	0

The largest increase was in the 10007 (Lower Manhattan / TriBeCa) zip code, where seven stores (+9.5 percent) were added in 2022. Following 10007 were 10016 (Murray Hill, +6.3 percent), ) 11234 (Flatlands, +4.7 percent), and 10001 (Garment District / Koreatown, +3.3 percent), adding six locations each. Tied for fifth place, 11430 (JFK Airport, +13.5 percent), 11226 (East Flatbush / Flatbush, +7.2 percent), and 11201 (Brooklyn Heights, +3.3 percent), each added five locations.
Of the 67 zip codes that saw a year-over-year increase from 2021 to 2022, 21 zip codes (31.3 per- cent) were located within Brooklyn. Queens just barely surpassed Manhattan, historically the leading borough in this statistic, with 20 zip codes seeing gains (29.9 percent), while Manhattan followed with 19 (28.3 percent), far less than the borough’s 33 such zip codes in 2021. In the Bronx, four zip codes (6 percent) saw increases in chain store locations, while Staten Island had 3 (4.5 percent).
Of all national retailer locations in New York City, 36.3 percent are located within Manhattan, a plurality that has held since the beginning of the State of the Chains reports. Queens ranks second with 22.7 percent, followed closely by Brooklyn which contains 22.2 percent of total chain store locations in the five boroughs. The Bronx contains 12.5 percent and 6.2 percent are in Staten Island.
Manhattan continued to rank the borough with the highest concentration of chain store locations, with 116 locations per square mile in 2022, far beyond that of the other boroughs. There are 22.9 chains per square mile in Brooklyn, 21.7 per square mile in the Bronx, 15.3 per square mile in Queens, and 7.8 per square mile on Staten Island. Overall there are 24.1 chain stores per square mile across NYC, up from 23.6 last year.

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Click here to read the full report and view our comprehensive rankings of national chains in New York City by their number of store locations, the number of store locations in each zip code, zip codes with the most and least number of chains, and zip codes with the most and least number of chains by borough.

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Notes

1. This analysis includes retailers that registered an increase or decrease of 10 percent or more and had a net change of at least 2 stores.
2. Jimmy Jazz was acquired by German brand Snipes in 2021, and the growth of Jimmy Jazz stores reflects the footprint of the combined company.

 

[David Goldsmith]

Joe Sitt’s Thor Equities Faces Foreclosure in Meatpacking

Debt buyer Maverick Real Estate Partners is seeking to foreclose on a retail property in the Meatpacking district owned by Thor Equities.

therealdeal.com

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Sitt’s Thor Equities faces foreclosure on Meatpacking property​

Maverick Real Estate Partners, praised by Sitt last month, is now suing him for defaulting on loans​

Sometimes a friend becomes a foe.
In a statement to The Real Deal last month, retail magnate Joe Sitt said he’d “only had good experiences” with Maverick Real Estate Partners, a prolific debt buyer whose funds Sitt’s Thor Equities had invested in and who he praised as “honest and upstanding.”

That may have changed this week.
Maverick is seeking to foreclose on a retail building owned by Thor Equities at 446 West 14th Street in the Meatpacking District, alleging Thor defaulted on a $25.5 million consolidated loan secured by the property.
A complaint filed in state court Monday shows that Maverick is also suing Sitt for personally guaranteeing the loans, which Maverick bought from Granite Point Mortgage Trust late last year.
Thor bought the Meatpacking property in March 2007 for $23.4 million, records show. Gucci opened a temporary pop-up at the building in 2021.
Maverick, led by David Aviram and Ted Martell, has acquired distressed loans secured by properties owned by some of the city’s biggest dealmakers, including Joe Chetrit, Steve Croman and Ben Ashkenazy.
Critics have accused the firm of being overly aggressive, particularly in how it classifies defaults in order to impose high interest rates that leave borrowers with little chance of refinancing. Maverick has maintained that it simply follows the terms of the loan documents on the debt it purchases and has no interest in owning or managing real estate.

Sitt’s Thor Equities is among the city’s largest retail landlords. Some of its holdings have faced hard times in recent years because of Covid and other challenges have hampered the retail sector.
Last year, Thor lost a 27,000-square-foot property at 700 Eighth Avenue in Midtown through foreclosure to a debt fund controlled by Albert Behler’s Paramount Group. In December, it avoided foreclosure on two retail condos at 115 Mercer Street in Soho by unloading them to a special servicer.
The firm has started to pivot to industrial real estate instead. Last year it acquired three industrial properties in New Jersey, including a 330,000-square-foot warehouse in Passaic for which it paid $52 million. Thor also launched Thor Digital, a division focusing on buying and developing data centers across Europe.
Thor Equities and an attorney for Maverick did not immediately return a request for comment.

 

[David Goldsmith]

Vornado Joint Venture Defaults on 697-790 Fifth Avenue Loan

Vornado Realty Trust said its joint venture defaulted on a $450 million loan at 697-790 Fifth Avenue, part of a struggling Midtown portfolio.

therealdeal.com

Vornado-led JV defaults on $450M loan at 697-790 Fifth Ave​

REIT touts strength over debt-laden peers despite Midtown portfolio’s struggles
Steve Roth’s Vornado Realty Trust expects 2023 to be a “down year,” but one that will spotlight well-heeled landlords — even as the firm acknowledges it may need to turn some of its properties over to lenders.
Michael Franco, the REIT’s president and CFO, predicted that there will be a “heightened focus on quality of the landlord” among tenants and brokers savvy enough to avoid buildings with over-leveraged owners, who may be unable to invest or hold onto their properties.

Franco said such a dynamic will play in Vornado’s favor on the firm’s fourth-quarter earnings call Tuesday. It will not, however, shield it from high interest rates, slowing leasing activity and a lack of cheap construction financing.
At its retail properties, the firm is negotiating to keep tenants in place, offering discounted renewals to those with expiring leases or with options to leave early, such as Swatch and Levi’s at 1535 Broadway. In some cases, it is considering walking away from properties altogether.

Vornado reported that its joint venture with Crown Acquisitions and other investors defaulted on a $450 million non-recourse loan at 697-703 Fifth Avenue that matured in December. Franco said the asset was “not refinanceable,” and that the venture is negotiating with its lender to restructure the loan. If that’s unsuccessful, Vornado will hand over the keys to the property, an increasingly common move by commercial landlords. Still, Franco said he believes it is also in the lender’s best interest to work something out.
“We have the option to walk away,” he said. “Do I think that will happen? Probably not.”
The building is part of a struggling portfolio of seven retail properties along Fifth Avenue and near Times Square once valued at $5.6 billion but now worth $4 billion after Vornado announced a $600 million writedown earlier this month.
Vornado reported $493.3 million, or $2.57 per share, in net losses for the quarter, which can largely be attributed to its impairment loss on the retail properties, which include 640, 655, 666, 689 and 697-703 Fifth Avenue; and 1535 and 1540 Broadway. The latest writedown follows a $306 million loss in 2020.

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“It is a very thin market, there are very few transactions on Fifth Avenue and Times Square,” Roth said Tuesday. “There is not the same lust for space that there was five years ago, but that will come back for sure.”

It has been a rough few weeks for the firm. In January, Vornado’s stock was booted from the S&P 500 because its stock was “more representative of the mid-cap market space,“ S&P Dow Jones Indices wrote in a late-December press release.
The REIT also slashed its dividend nearly 30 percent. Roth had previously warned that the board would “right-size dividends” this year in light of expected drops in taxable income, but the size of the cut was larger than some analysts projected.
But the firm reported higher-than-expected funds from operations, a key earnings metric used by REITs, at $139 million, or 72 cents per share, on an adjusted basis in the fourth quarter. Revenue hit $446.9 million for the quarter and $1.8 billion for the year.
Vornado executives reiterated on the earnings call that the environment for new construction is hostile — a sentiment that has raised doubts about the company’s involvement in the state’s Penn Station megadevelopment. The REIT recently reached a deal with Rudin Management and Ken Griffin’s Citadel that would pave the way for a 1.7-million-square-foot tower at 350 Park Avenue. If Vornado decides to stay on as a developer on the project, it already has Citadel as the anchor tenant and will use the land value as equity. Or it could cash out, “taking the money and run,” Roth said, but that will not be decided for a few years.
“Construction financing is very expensive if available, which it generally is not,” Franco told analysts on the call when asked about the timing for the Park Avenue property and the Penn developments. “Today is not the day that we have to line that up.”

 

[David Goldsmith]

The hits keep coming for Thor Equities.

Barry Sternlicht Files Foreclosure Action Against Thor Equities

Barry Sternlicht’s LNR Partners and Wilmington Trust filed to foreclose on Thor Equities’ 597-599 Fifth Avenue and 3 East 48th Street.

therealdeal.com

Sternlicht’s LNR eyes foreclosure of Thor Midtown properties​

Joe Sitt’s firm allegedly defaulted on $105 million loan

Barry Sternlicht is coming for two more pieces of Joe Sitt’s Manhattan real estate.
Starwood Capital Group’s special servicing arm LNR Partners and Wilmington Trust, acting as a trustee for CMBS bondholders, filed a pre-foreclosure action last week against Thor Equities’ 597-599 Fifth Avenue and 3 East 48th Street over a $105 million CMBS loan that Sitt and his real estate firm allegedly defaulted on more than two years ago.

In the complaint, first reported by PincusCo, LNR and Wilmington Trust ask the court for permission to sell the adjacent mixed-use Midtown properties and to order Thor to make good on the $124 million it owed as of December. The sum includes loan payments, accrued and unpaid interest, late charges and other fees.
The lender had been pursuing both foreclosure and receivership proceedings while discussing possible alternatives with Thor, according to an SEC filing in December.

In 2014, UBS provided Thor with the $105 million loan, which consolidated debt on the properties. Sitt, Thor’s founder and chairman, guaranteed the loan, and the note was assigned to the CMBS trust and Wilmington as the trustee that same year.
After Thor allegedly missed multiple monthly payments, the real estate firm and its lender reached a loan modification agreement in May 2020 that deferred interest payments and reserve deposits. Thor agreed to make the deferred payments over a 12-month period from July 2020 through June 2021.
However, Thor allegedly stopped making monthly payments again in August 2020 and every month thereafter, putting the loan back into default. Thor was notified that fall that the loan had gone into special servicing.

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Since then, Thor has allegedly failed to make good on its debt, and the servicer rejected its attempt to pay off part of the loan at a discount. The outstanding principal, interest and other costs are now due in full, according to the complaint.

Thor, LNR and attorneys representing the plaintiffs had yet to respond when reached for comment.
LNR replaced Midland Loan Services, a division of PNC Bank, as the loan’s special servicer this past fall.
Sternlicht’s pre-foreclosure filing comes four months after LNR acquired Thor’s distressed retail property at 470 Broadway in Soho for $25 million.
Thor acquired the 12-story 597-599 Fifth Avenue and the six-story 3 East 48th Street in 2011 for $108.5 million from A&A Acquisitions.

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[David Goldsmith]

Vornado Loses MAC Store in Times Square

MAC Cosmetics shuttered its 1,700-square-foot store at the Vornado-owned retail space at 1540 Broadway in Times Square.

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MAC shutters Vornado-owned Times Square store​

Cosmetics brand operated 2K sf flagship at 1540 Broadway
MAC Cosmetics’ Times Square departure
The cosmetics company closed its flagship 1,700-square-foot store at 1540 Broadway, the New York Post reported. The retail portion of the building is owned by real estate investment trust Vornado Realty Trust.

MAC opened in 2010 at the space, which included makeup counters and product displays, and operated next to a prominent Disney Store.
The store closed due to a “changing retail landscape,” a representative told the Post. The company maintains six other locations in the borough.

Vornado did not immediately respond to a request for comment from The Real Deal.
The property was one of seven buildings highlighted by Steve Roth’s REIT last month, when it wrote down its real estate portfolio by $600 million. About 80 percent of the reduction came from Midtown properties. Four years ago, the properties were valued at a combined $5.6 billion, but have since dropped 30 percent.

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MAC was among the many to try to sublease its stores in the midst of the pandemic. In 2021, the company put four locations on the sublease market, including three in Manhattan (the other was in Brooklyn). Its parent company said the four locations closed prior to the pandemic, spanning 10,000 square feet across the city.
The Times Square closure is a sharp pivot from a decade ago, when MAC was willing to pay big bucks to seize the Manhattan retail market. In 2012, it reportedly paid a record amount for a 1,400-square-foot lease at Vornado’s 691 Fifth Avenue. The asking rent for the space was $3,000 per square foot.

Jewelry brand Pandora in December leased space in the office portion of 1540 Broadway. The company agreed to a 27,000-square-foot lease to relocate its headquarters to the 35th floor of the building, owned by Edge Fund Advisors and HSBC.
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[David Goldsmith]

An entity tied to the Vanbarton Group sold the retail condominium at The Astor, 235 West 75th Street on the Upper West Side, for $38.7 million to an entity connected to Waterfall Asset Management.
The sale represents a significant loss for Vanbarton, which paid almost $104 million in 2016 for the 31,200-square-foot retail condo. The space was once home to Barney’s New York and Lululemon.

I-Sales Recap: Vanbarton Sells UWS Retail Condo for $39M

Five transactions involving mid-market commercial properties valued between $10 million and $40 million hit New York City records.

therealdeal.com

 

[David Goldsmith]

Ben Ashkenazy’s Former 115 Seventh Avenue For Sale

Argentic Investment Management is looking to sell 115 Seventh Avenue for around $30 million.

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Ashkenazy’s lender looks to unload Chelsea space at steep discount​

Argentic eyes $30M for former Barneys space after foreclosing

The original Barneys retail space that Ben Asheknazy bought for $57 million years ago could sell for half that amount after his lender took over the Chelsea property.
Argentic Investment Management, which took control of the seven-story building at Seventh Avenue and 17th Street last March, is putting the property up for sale and eyeing a price of around $30 million, The Real Deal has learned.

The vacant, 40,000-square-foot building at 115 Seventh Avenue could be repositioned for residential, retail or office use — or be torn down for a ground-up project.
The property has an additional 15,000 square feet of air rights, according to marketing materials from Meridian Investment Sales, where a team led by David Schechtman is handling the sale. The development rights could bring a new, mixed-use building up to roughly 55,000 square feet.

Barney Pressman opened the original Barneys New York store at the location in 1923. By the time Ashkenazy bought the building in 2014, it was being used by the Rubin Museum of Art to display a collection of Tibetan and Himalayan art.

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The Rubin museum sold the property to Ashkenazy for $57 million, and Barneys opened a glitzy store next door at 101 Seventh Avenue. That store shuttered in 2020 (and recently housed a Spirit Halloween) after Barneys went bankrupt — an unceremonious end that the iconic retailer blamed, in part, on Ashkenazy’s hiking the rent at Barneys’ flagship, 660 Madison Avenue.
Ashkenazy has said the company was brought down by other financial problems.
It’s not clear that the investor ever found a tenant to occupy the 115 Seventh Avenue space in the decade he owned it. Google’s street view shows a progression of aging signs advertising the space for lease. The Ashkenazy Acquisitions website and a spokesperson provided no update.

Argentic, led by CEO Doug Tiesi, filed to foreclose in September 2020, claiming Ashkenazy had failed to repay the property’s $46 million loan. About a year ago, Argentic took control of the property — one of many where Ashkenazy has struggled with lenders.

could have tapped to renovate empty space and market it to a new tenant, though it’s unclear if the firm did so.​

The property generated $30.9 million in revenue, or $54 per square foot, according to PincusCo’s analysis of the most recent income and expense figures. Tenants at the building include Chase Bank, which occupies ground-floor retail space.
Chetrit purchased the 21-story building in 2019 for $422 million, a drastic premium compared to what it is selling it for today. China’s HNA Group was the seller as it looked to get out from under a pile of debt.

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[David Goldsmith]

Thor Equities Facing Foreclosure at 440 Broadway in Soho

Joe Sitt’s Thor Equities allegedly defaulted in January on a loan tied to the retail property at 440 Broadway in Soho.

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Thor Equities’ 440 Broadway facing foreclosure​

Joe Sitt’s firm allegedly owes $10M on loan at Soho property leased to Foot Locker

Thor Equities’ Manhattan retail portfolio is facing more distress.
A foreclosure action was filed Thursday against an entity tied to Thor, accusing Joe Sitt’s real estate firm of defaulting on a $13.3 million loan tied to 440 Broadway in Soho.

Thor allegedly failed to pay up when the CMBS loan came due in January, according to the complaint brought by U.S. Bank as a trustee for bondholders and Midland Loan Services as special servicer.
As of Monday, the firm owed the outstanding principal balance of $10.4 million, plus accrued interest at a default rate of 8.93 percent. Thor is negotiating with the lender for an extension, according to a source familiar with the filing.

Morgan Stanley provided Thor with the $13.3 million loan tied to 440 Broadway in 2012. Sitt “absolutely and unconditionally” guaranteed “prompt and unconditional” payment of the guaranteed recourse obligations of Thor, according to the complaint. The loan documents were assigned to the CMBS trust in 2013.
Thor bought the two-floor retail property in 2008 for $12 million. The building, tucked in between buildings two and three times its size on the popular retail strip, has been home to a 9,000-square-foot Foot Locker store since 2013.
The store remains open. But last July, after the sports apparel retailer failed to renew its lease within 12 months of its expiration, the loan entered into a cash management sweep period that ran through January, according to the complaint. The arrangement provides the lender control over the cash proceeds of the borrower’s operations at a mortgaged property.

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All excess cash during that period, which totaled almost $375,000, was required to remain in a separate account. But the plaintiff accused the master servicer of sending some of that money to Thor in an “erroneous application” of the process.

Thor was asked to return the money, but allegedly hasn’t done so, which the special servicer says constitutes a default on the loan. Thor is also accused of failing to deliver certain reports and financial statements as required by the loan agreement.
This isn’t the first time Thor has run into trouble with its loan at 440 Broadway. The firm allegedly defaulted on it in May 2020, two months after pandemic shutdowns began, but it reached a reinstatement agreement later that year.
In the deal, Sitt agreed to make its payments on time, which would cure the default. But the January maturity date remained.
The plaintiffs are asking for the court’s permission to foreclose upon and sell the property and use the money toward the loan balance. They have also asked that a receiver be appointed to manage the property, and that Sitt be held personally liable for all payment obligations if a foreclosure sale does not satisfy the amount due.
Thor did not comment by the time of publication. Attorneys representing the plaintiff and Midland Loan, a division of PNC Bank, did not respond to requests for comment.