Is this the end of expensive office space in New York??

David Goldsmith

All Powerful Moderator
Staff member

The Flatiron fiasco: How a key blunder left a New York icon in limbo​

Jacob Garlick’s questionable $190M bid was enabled by unusual auction conditions
MAR 30, 2023, 11:52 AM
For two days, Jacob Garlick was a New York City celebrity.
The 31-year-old from Northern Virginia came out of nowhere to outmuscle real estate titan Jeffrey Gural in a Wednesday afternoon auction for the Flatiron Building.

But by Friday, Garlick had blown a deadline to come up with a $19 million deposit — 10 percent of his winning $190 million bid. Now the property will likely head back to auction.
With Gural noncommittal about exercising his second-place bid, the century-old building’s future is murkier than ever.

Garlick is a mystery even to the most hardcore New York real estate insiders. Attempts to reach him since last week have been unsuccessful. Developers, attorneys and brokers say they’d never heard of him before the auction. His company’s website is vague. His Twitter account is suspended. A good chunk of his LinkedIn activity consists of engagement with videos of Gary Vaynerchuk.
Nonetheless, he showed up on the steps of the New York County Courthouse in Lower Manhattan on a mild March day and won an auction for a Big Apple landmark, claiming it had been his dream to own the building since he was 14 years old.
But Garlick’s coup and the fracas that ensued may never have been possible without a key lapse in the proceeding: Bidders were not required to put down any deposit before participating in the auction, according to court filings.

“It’s highly unorthodox to do an auction without requiring a deposit”, said Greg Corbin, a bankruptcy specialist at brokerage Rosewood Realty Group. “Over the past 15 years of conducting distressed asset auctions, only once have we allowed people to bid without providing funds up front.”

“I’ve never seen that before,” said real estate attorney Adam Leitman Bailey, who said he generally asks for proof of funds before an auction.
The Flatiron Building wound up on the auction block because of a dispute between its majority owners group and Nathan Royce Silverstein, who owned 25 percent. The property was vacant and losing hundreds of thousands of dollars a month, but the owners could not agree on how to finance a costly renovation.

To resolve the impasse, they agreed to something called an interlocutory judgment, which laid out the bidding process for an auction and conditions for a sale.
The judgment required that bidders provide a court-appointed referee with their name, address, phone number, companies and the names of any shareholders or officers, according to the documents.

Only after the auction would a winning bidder need to show proof of their finances to the referee and put down a 10 percent deposit within two days, according to a notice of sale filed as part of the interlocutory judgment. The winner would then need to post the remaining balance within either 10 days after the court confirmed the sale or 90 days after the auction date, whichever came later.
But because there was no deposit required before the auction, anyone who happened to be in Lower Manhattan that afternoon might have placed a bid – whether or not they had the ability and desire to actually follow through.
It’s unclear why attorneys for the feuding property owners or the judge didn’t require a deposit up front.

It’s possible the majority owners, who didn’t hire a broker to market the property, couldn’t imagine anyone outbidding them for a vacant, money-bleeding office building. The building needs an extensive renovation that will cost upwards of $100 million, according to Gural. Under the terms of a partition sale, the existing owners could use their equity in the building as part of a bid, and with a 75-percent stake, the Gural-led group was the clear favorite.
Under the interlocutory judgment, Garlick could still be on the hook for the $19 million deposit and any costs associated with restarting the auction process. But it’s unlikely he’ll have to pay up, according to legal experts. For starters, who would pursue him? And if he couldn’t put down the deposit, going after him may not be worth the effort.

With Garlick out of the picture, Gural has a chance to buy the property at his final bid of $189.5 million. If he doesn’t make that offer, it will likely go back to auction.

The burning question for New York real estate observers remains unanswered: What was Jacob Garlick thinking? Was he connected to Silverstein, the property’s minority owner? Did he get too amped at the auction and bid too high? Did his financing fall apart?
Was he just a delusional gambler hoping that once he told his friends he could own the Flatiron Building, they would chip in on the deposit? Or maybe Garlick, like so many others, just wanted a brief moment as a King of New York.
If what he wanted was his 15 minutes of fame on the New York skyline, he certainly achieved that.

David Goldsmith

All Powerful Moderator
Staff member

Manhattan office vacancy finds no relief in first quarter​

Completed space at 660 Fifth Ave added to market’s availability woes
MAR 31, 2023, 9:53 AM
The completed renovation of a prominent Fifth Avenue property has sounded a familiar refrain to many landlords: too much empty office space.
Manhattan closed out the first quarter with a 16.1 percent office vacancy rate, according to JLL data reported by Bloomberg.

The brokerage, which tracks 470 million square feet, found a mere 4.6 million square feet of office space was leased in the first quarter. Average asking rents also declined across office qualities, including trophy offices, Class A offices and Class B offices.
JLL’s data on Manhattan’s office vacancy rate was touted as a record high, but the report adds to a consistently dim picture, following higher vacancy rates. Colliers recorded a 16.9 percent vacancy rate in the fourth quarter and a 17.3 percent rate in the first quarter of 2021.

The recent data highlights space that debuted on the market and kept the vacancy rate high in the first quarter, including the completion of Brookfield Properties’ renovation of 660 Fifth Avenue. The $400 million improvement project brought 1.5 million square feet online.

Some of that space is already being leased. In August, asset manager 400 Capital Management signed a lease for 25,000 square feet and is expected to move in next year. Prior to that, Australian financial services company Macquarie Group became the revamped building’s first tenant, signing a lease for 220,000 square feet.


David Goldsmith

All Powerful Moderator
Staff member

Midtown megadeals fail to spark Manhattan office comeback​

Major renewals in January helped Q1 leasing surpass brutal Q4, but vacancies still piled up

Manhattan’s office market began the year by rebounding from a dreadful fourth quarter of 2022, but that was about where the good news ended.
Tenants took 7.4 million square feet of office space in the first quarter, a 49 percent increase from the fourth quarter, according to a Colliers report released Monday, but still about 270,000 square feet short of last year’s first quarter. Net absorption was negative 1.2 million square feet and average asking rents declined in all three submarkets tracked by the report.

What’s more, the uptick in leasing was largely driven by just five large deals that accounted for nearly a third of leasing volume. Those transactions primarily occurred in January, before deal volume slowed in February and March, and mostly involved tenants renewing or extending existing leases.
Midtown was the only market to see leasing volume increase year-over-year, but nearly half of that volume came from just a few deals recorded in January: Fox and News Corporation’s combined 1.1 million-square-foot renewal at 1211 Sixth Avenue, and two leases signed by Ken Griffin’s Citadel at 350 Park Avenue and 40 East 52nd Street.

Overall, Manhattan’s office leasing volume was more than 6 percent below the borough’s five-year rolling average of 7.9 million square feet and 11 percent below its ten-year rolling average of 8.3 million square feet.

The average asking rent declined by 1.3 percent to $74.42 a foot. Quarterly declines were consistent across Midtown, Midtown South and Downtown, as well as Class A, B and C buildings. Midtown’s average asking rent dropped to $78.35, its lowest since June 2015, although Midtown South, specifically, did see its average increase year-over-year, from $79.95 per square foot in the first quarter of 2022 to $80.33 now.
Manhattan’s availability rate increased for a second straight quarter, climbing 0.2 percentage points to 17.1 percent. Midtown South reached a record high of 17.2 percent.

Distress is coming for Class A offices

FIRE and TAMI tenants accounted for more than 70 percent of office leases signed in Manhattan last quarter. While that trend was consistent in Midtown and Midtown South, tenants in professional services and the public sector made up close to 60 percent of Downtown office leases.

Investors remained mostly on the sidelines too. Only five deals for office properties were recorded in the quarter, totaling $980 million — an 85 percent year-over-year decline. Among the deals that did occur were Brookfield buying out Blackstone’s minority stake in One Liberty Plaza at a $1 billion valuation and Pearlmark’s forced sale of Tower 56 at 126 East 56th Street for $110 million.


David Goldsmith

All Powerful Moderator
Staff member
If the Big Tech firms are downsizing and the Banks are downsizing and the law firms are downsizing and the Wall Street firms are downsizing...
Who is going to be taking big spaces in NYC.

JPMorgan shed 2M sf in NYC last year​

Bank consolidating even before finishing Midtown HQ tower

JPMorgan Chase is developing one of the most prominent office projects in Manhattan — and slashing space left and right as it prepares to consolidate there.
JPMorgan cut its New York City office footprint by 22 percent last year, Crain’s reported. Regulatory filings revealed the depth of the bank’s office shift, a continuing trend from previous years.

The bank shrank its space by nearly 2 million square feet, a staggering amount for one of the city’s largest commercial tenants. The reductions include the subletting of 700,000 square feet at 4 New York Plaza and the sale of the 350,000-square-foot 3 MetroTech Center in Brooklyn, which New York University picked up for $122 million.
The bank is down to 6.8 million square feet of New York City offices, only three years after it occupied 9 million.

JPMorgan is focused on centralizing its operations around one office, 270 Park Avenue. The 2.5 million-square-foot development is expected to be completed in 2025.
“We remain committed to New York City and are planning for the next 50 years with our new headquarters,” a bank spokesperson told Crain’s.

The 60-story, 1,388-foot-tall tower in Midtown East will be able to accommodate up to 14,000 employees, more than half of the bank’s total. It will have flexible floorplans, a nod to the remote and hybrid work patterns that have emerged since the pandemic scattered office workers to wind.
The tower project was paused last month by the Department of Buildings after a carpenter fell to his death at the site. The stop-work order was partially lifted to allow for safety-related measures to be enacted, but it’s not clear when work will fully resume.

JPMorgan has exhibited a pattern of cutting office space since the onset of the pandemic. In 2021, the bank slashed its footprint in the city by 400,000 square feet. The year before, it cut 300,000.
Other banks and financial institutions, such as Wells Fargo, are making similar moves in the city, though Bank of America’s footprint remained the same last year.

David Goldsmith

All Powerful Moderator
Staff member

Concessions are king at the top of Manhattan’s office market​

Months of free rent, improvement allowances abound in triple-digit lease asks
There’s no such thing as free rent — unless you’re a Manhattan office tenant.
Concessions continue to abound in the borough’s office landscape, according to CBRE data reported by the Commercial Observer. While no longer at the peaks seen in 2022, discounts don’t appear to be disappearing anytime soon, muddying the overall picture of the office market.

Landlords in the first quarter inked 28 deals with starting rents of $100 per square foot or more, according to CBRE, slightly higher than the five-year quarterly average. CBRE’s data includes deals for at least 25,000 square feet and 10 years.
But rising prices have been outpaced by the concessions tenants are scoring from landlords desperate to fill their vacant spaces. During the first quarter, an average tenant landed 16 months of free rent on their leases, down only one month from last year’s peak, according to CBRE. Prior to the pandemic, the average was 13 months.

“There are some buildings that are either brand new or have gone through a revitalization, so even offering very high concessions, net effectively, some of those deals are still ahead of where they were 15 years ago,” Frank Wallach, an executive at Colliers, told the outlet “But, on an overall basis, the concessions have increased at a faster rate than the rent.”
Tenant improvement allowances are also hovering near record highs. The perk peaked last year at an average of $147 per square foot, and only declined to $145 per square foot in the first quarter, CBRE revealed. The pre-pandemic average was $104 per square foot.

Trophy office buildings, the beneficiary of tenants’ flight to quality, are head of the class when it comes to concessions.

Tenants are more likely than ever to land a lease below the $100 per square foot threshold at Class A buildings, but the properties remain above prices at Class B or C properties.

The pandemic and murky future of the city’s office market are big factors driving concessions. There are other forces at play, though, including rising construction costs and the desire of some landlords to save face with their lenders.
Tenants took 7.4 million square feet in the first quarter, up 49 percent from the fourth quarter, according to Colliers. The uptick, however, was largely driven by renewals and extensions and the availability rate ticked up slightly to 17.1 percent.

David Goldsmith

All Powerful Moderator
Staff member

SL Green posts worst occupancy drop since pandemic​

CEO Marc Holliday expects things to “come around” by late 2023

Manhattan’s largest office landlord is emblematic of the continued struggles of the market, seeing its decrease in occupancy accelerate.
Occupancy across SL Green’s 25 Manhattan buildings dropped to 90.2 percent in the first quarter, Crain’s reported. That was a decline of 280 basis points year-over-year, nearly twice the rate of decline from 2021’s first quarter to 2022’s first quarter.

Shares for the office landlord on Thursday fell 4 percent to nearly $25 per share. The stock is trading at its lowest levels since the previous financial crisis in 2009.
Despite the dive, executives sounded an optimistic note about SL Green’s future. Chief executive Marc Holliday noted during a conference call that the pipeline of expected leasing activity jumped by 70 percent in the first quarter. A spokesperson for the company said it expects occupancy to be back up to 92.4 percent by year’s end.

“Things are coming around in the right direction,” Holliday said during the call.
The company’s forecast comes after a quarter of financial difficulty. Funds from operations declined 7 percent in the first quarter to $105 million, beating Wall Street expectations, but possibly due to recoveries from litigation in a case against retail tenant Victoria’s Secret. Borrowing costs for the company, meanwhile, tripled to $42 million.

Holliday previously aired a sobering message during the company’s investor day in December, when he called the city a “challenging office leasing market” and admitted the hybrid work model persisted far longer than he anticipated.

with a 16.1 percent office vacancy rate, according to JLL. Only 4.6 million square feet of office space was leased during the quarter.

SL Green made headlines in the first quarter as more details surfaced around its proposal to bring a casino to Times Square. Caesars Entertainment and Jay-Z’s Roc Nation are on board with the proposal, which is competing for one of three gaming licenses expected to be handed out by the state this year.

David Goldsmith

All Powerful Moderator
Staff member

Inside the Greek tragedy at the Flatiron Building​

A partnership spat, a botched auction and a mysterious outsider who briefly became the most talked-about man in NYC real estate

Real estate is high drama playing out on the skyline. But rarely does it rise to the level of Greek tragedy that it has at the Flatiron Building.
After coming out of nowhere to win a live auction for the iconic property in March, then failing to produce a deposit to secure his $190 million bid, a complete outsider, Jacob Garlick, spent the weeks that followed scrambling to show that he had the money.

Even as its owners prepare to restart the auction process that he dramatically derailed, the 31-year-old with zero track record in big-ticket real estate has maintained that he’s still in the running to buy the property.
Nobody seems to believe him.

GFP Real Estate’s Jeffrey Gural, who has long held a stake in the office building and was the runner-up in the March 22 auction, said there was only one scenario in which Garlick’s bid should even be considered: if he wired the entire $190 million into an escrow account.
“Why would you take anything he is saying seriously?” Gural said.
According to Gural, immediately after Garlick won the auction on the steps of the New York County Courthouse — which, unusually, did not require participants to post an upfront deposit or proof of funds — Garlick turned to him and asked if he wanted to partner in the deal. Later, Gural said, Garlick even asked him if he would put up the $19 million deposit in exchange for a 10 percent stake in the vacant building.
“It was such a ridiculous proposal,” said Gural. “It concerned me. It was a red flag that he didn’t have the money.”
In Gural’s telling, Garlick’s group kept promising that the money was coming. It was to be wired from one bank, then from another. The deadline arrived, but the money never did.

Now the building will be auctioned off again on May 23, on the same courthouse steps in Lower Manhattan where Garlick’s 15 minutes of fame began.

Cracks in the facade

Garlick’s wild ride only came about because of a partnership spat between the building’s owners.
Sorgente Group, GFP Real Estate and ABS Real Estate Partners, who together controlled a 75 percent stake, could not see eye to eye with the remaining 25 percent owner, Nathan Silverstein, about the landmarked property’s future.
The majority owners sued, claiming they simply could not go on co-owning the property with Silverstein, who they said had proposed physically splitting up the building. Gural, in court filings, called that idea “preposterous.”

It’s highly unorthodox to do an auction without requiring a deposit.
“It boggles the mind to suggest that we could nevertheless agree on a plan to physically divide this building into five smaller, independent properties, none of which would be marketable — and then agree on a plan as to how that work would be financed,” Gural said.
The building’s tenancy-in-common ownership structure, which gave each of the stakeholders veto power over decisions at the property, led to a stalemate.
By that point, the building’s longtime anchor tenant, Macmillan Publishers, which occupied all 21 floors, had announced plans to move out.
In 2019, co-working startup Knotel was in talks to lease the entire property, but a deal never materialized. Silverstein blamed Newmark, which GFP Real Estate had split off from only two years earlier, for failing to market the building after Macmillan left and said Gural was negotiating to lease it to Knotel at an “exceptionally low cost.” He also claimed in court filings that Newmark CEO Barry Gosin held a large stake in Knotel. The co-working firm filed for bankruptcy in 2021 and was acquired by Newmark.

The majority owners eventually sought a partition sale, which would put the building up for auction but provide them an advantage by allowing them to buy it back using their existing ownership interests as part of a bid.

“I was hoping that we would be able to buy [Silverstein’s] interest at a lot lower price,” Gural said.
Garlick, who seemed to want the property no matter what, price be damned, spoiled those plans.
Insiders speculated that Garlick was connected in some way to Silverstein. Garlick, the theory went, was there to drive up Gural’s bid, giving Silverstein a bigger payday as a minority owner.

Silverstein confirmed to The Real Deal that he is a “distant relative” of Garlick, but said he’s only ever met him once.
Others involved in the auction said that Garlick’s continued effort to seal the deal after flopping on the deposit was news to them. Matthew Mannion, the auctioneer, and Peter Axelrod, the court-appointed referee, both said last month that they were not aware that he was a realistic contender to acquire the building.
Gural added that Garlick could be liable for the deposit regardless.
“I hope he has $19 million,” he said.

Highly unorthodox”


The fracas Garlick set off might never have been possible without a key lapse in the proceedings: Bidders were not required to put down any deposit before participating in the auction, according to court filings.

“It’s highly unorthodox to do an auction without requiring a deposit,” said Greg Corbin, a bankruptcy specialist at brokerage Rosewood Realty Group. “Over the past 15 years of conducting distressed asset auctions, only once have we allowed people to bid without providing funds up front.”
“I’ve never seen that before,” said real estate attorney Adam Leitman Bailey, who noted that he generally asks for proof of funds before an auction.
Those present at the auction said Garlick, wearing a charcoal suit with a patterned tie and pocket square, stood just a few feet from the auctioneer, like a prizefighter steeling himself for a title bout. He rarely broke eye contact, calmly raising his paddle to outbid Gural until the price hit $190 million.
Garlick told NY1 on the scene that owning the historic building had been his “lifelong dream since I’m 14 years old.”
“I’ve worked every day of my life to be in this position,” he said.

That night, he had a celebratory party at the Ritz Carlton in NoMad with the same entourage that had accompanied him to the auction, according to witnesses.
Reality came knocking two days later, when Garlick failed to cough up the $19 million deposit. As runner-up, Gural had the option to buy the building at his final bid of $189.5 million, but declined to make the deal at that price.
The building, which Gural estimates needs a $100 million renovation, is now set to be auctioned again unless a deal can be made with Silverstein to buy out his stake.
“I’m not Nathan’s favorite person,” said Gural. But “the reality is, we have an empty building.”


David Goldsmith

All Powerful Moderator
Staff member

Manhattan office market reaches record 94M sf available​

Tenants took 1.5M sf in April: Colliers

The clouds failed to part for the Manhattan office market in April, marking another dreary month for commercial landlords in the borough.
A record 94 million square feet of office space was available last month, according to Colliers data reported by Crain’s. Tenants leased just 1.5 million square feet in the period, far below the monthly average from the three previous years.

The 17.4 percent availability rate also matched a record from February 2022, and marked a nearly 75 percent increase in available office space since March 2020.
Only two leases signed last month exceeded 100,000 square feet and just one additional lease surpassed 50,000 square feet. All three were renewals or extensions (or both).

Midtown was the star of the report as leasing volume rose from the previous month, but was still down year-over-year.
The neighborhood counted 891,000 square feet leased in the period to reach an availability rate of 15.6 percent. Average asking rent was $78.74 per square foot.

Trailing were Midtown South and Downtown, both of which also were down year-over-year.
For Midtown South, April was the slowest month in more than two years and the availability rate reached a record 17.9 percent, partially because of the space that came online at L&L Holding Company and Columbia Property Trust‘s Terminal Warehouse at 261 11th Avenue, and Vornado Realty Trust’s Penn 2. While those additions boosted the availability figure, they also helped boost the average asking rent to $81.77 per square foot.

Meanwhile, availability Downtown remained a stubborn 20.5 percent amid the slowest month of the year so far in the neighborhood. The asking rent was $58.69 per square foot and has fallen by 10.8 percent since the first month of the pandemic.

David Goldsmith

All Powerful Moderator
Staff member

SL Green, Vornado plan office sales despite dreadful market​

Landlords will raise cash to buy back stock, reduce debt

The sales market for office properties is at a virtual standstill. Yet some of New York’s biggest office owners are turning to it to raise cash.
SL Green Realty and Vornado Realty Trust are planning large-scale asset sales this year — a move others are resisting. But with their stock prices plummeting and debt costs mounting, both New York-focused REITs are under pressure to buy back shares and shore up their balance sheets.

“SL Green and Vornado both have uses for capital,” said Truist Securities REIT analyst Michael Lewis. “These two companies are going to have to be strategic and thoughtful about it.”
It’s a tough time to be selling offices. Manhattan office sales totaled just $470 million in the first quarter — down a stunning 85 percent from $3 billion a year ago, according to Ariel Property Advisors.

The first quarter had just one office sale. It was priced at $650 per square foot, down from an average of $865 in the fourth quarter across seven deals. In the first quarter of last year, the average price was north of $1,160.
But there are factors beyond price that influence these public companies’ decisions on whether to sell.

SL Green’s calculus

SL Green is looking to raise cash to achieve the largest single-year debt reduction in the company’s history and to buy back its stock, which is down 78 percent since the pandemic hit.
At the REIT’s institutional investor conference in December, company executives outlined a plan to sell $2.4 billion worth of properties. The largest piece is a 75 percent stake in its office tower at 245 Park Avenue. Selling the stake would remove about $1.3 billion of the property’s mortgage from SL Green’s books.

The property has a low-cost mortgage that could be passed on to a buyer — a key selling point at a time when finding affordable financing is difficult.
Other planned sales include a joint-venture interest in its new, signature skyscraper One Vanderbilt; and 750 Third Avenue, a mostly vacant, 730,000-square-foot office tower that SL Green says is a strong candidate for a full or partial residential conversion.
The REIT last month refinanced another office property nearby — 919 Third Avenue — with a $500 million loan.
CEO Marc Holliday acknowledged the tough sales environment on the company’s April earnings call, but said he believes things are improving.
“It’s still got a long way to go this year. And I think the market is coming around and I think the assets we’ve selected are the right ones,” he said.

In addition to paying down debt, the REIT is also buying back stock. The company has $122 million left under its $3.5 billion repurchase program before it must ask the board for authorization to buy more stock.

SL Green sees its stock as underpriced. Wall Street investors value the company’s shares at a rate that implies its portfolio is worth $330 per square foot. If the company can sell properties above that price, its executives believe stock buybacks would be a bargain.

Vornado’s strategy

Vornado recently shifted its tone on sales.

Acknowledging the volatile financing market, executives in February said they weren’t looking at selling assets. But the company’s stock price has fallen by half since Groundhog Day. Vornado responded by suspending its dividend for 2023 and authorizing a $200 million share buyback.
On its May earnings call, the company pivoted, saying it will look to sell a mix of retail and office assets. It declined to say which ones.
CEO Steve Roth, however, resisted the idea of being a forced seller.
“We are not a distressed seller. We are not a weak seller,” he said. “In fact, we are focusing on a very select pool of assets … where we consider ourselves to be offensive sellers.”
Vornado will use some of the proceeds of those sales to fund the share buyback program — another reversal by Roth, who had long opposed buying back the REIT’s stock. The firm’s justification is similar to SL Green’s: It says its stock is selling at a discount relative to the value of its assets.

“While the market may not be strong, or as strong as it was, and pricing has been impacted, our share price has been impacted more,” CFO Michael Franco told analysts on the call.
The company’s balance sheet could also be motivating it to sell. Goldman Sachs analysts warned this month that rising interest costs and reduced rents from tenants relocating could squeeze Vornado’s debt buffer.
The analysts said the REIT could be trending dangerously close to breaching its debt covenants, questioning whether this was putting pressure on the company to sell properties.

Truist’s Lewis said he’s optimistic about the companies’ plans, but said they need to be clear-eyed about the market.
“Nobody should be shocked by office assets being down by 30 percent,” he said.


David Goldsmith

All Powerful Moderator
Staff member

Gural Finally Secures Flatiron Building for $161.5M in Redo Auction​

Gural and partners plan to convert the upper portion of the famed building to residential.​

BY MARK HALLUM MAY 23, 2023 3:27 PM​



The second auction for the Flatiron Building went off without interference from Soundcloud DJs Tuesday afternoon.
Jeff Gural and his partners — sans Nathan Silverstein — managed to retain the property with a winning bid of $161.5 million, a price that was driven up only by bidders who had presented the court-appointed referee with a $100,000 deposit, with plans to convert part of it to residential.

“It’s a relief, we finally own the whole building and buy out Nathan’s share, so it’s a good day for us,” Gural said following the auction.

There was no Jacob Garlick in sight on the front steps of the courthouse at 60 Centre Street, where just two months prior he outbid the current owners at $190 million, something that came to be viewed as a suspicious attempt to snag the historic landmark when he failed to pay the $19 million deposit that was due two days after the bidding closed.

Gural said he bears no animosity toward Silverstein or Garlick. In fact, he feels sorry for the latter, saying he believes Garlick genuinely wanted to own the property. Now the new owners plan to make the top half of the landmarked building residential while keeping the lower half as office space.
“If we were to condo the building as residential, we’d make a lot of money,” Gural stated regarding how long it could take the partners to make the building profitable. “The problem with that is that you don’t own it anymore, and you have to pay taxes at ordinary income rates. So making a profit for us at the level that we own is not difficult. People will buy.”
Even without the drama of an unknown person in New York City real estate buying the building, the auction of 175 Fifth Avenue drew a hardy crowd of spectators.
Eli Lever, an executive with housing development company 21B Group, was one hopeful buyer who went to the bank for a cashier’s check for $100,000 and posted a redacted photo of it to Twitter with the caption, “Bidding funding secured!”

Gural’s GFP Real Estate has owned the property in partnership with Newmark, Sorgente Group, ABS Partners Real Estate and Silverstein, who had a majority stake, since 2006.
But, Silverstein fell out of favor with the other partners after publishing house Macmillan departed in 2019, leaving all 21 floors vacant. With the building needing up to $100 million in renovations, and Silverstein allegedly stonewalling those plans,, the other four partners took him to court in 2021. A judge set a partition auction for March 22.
The rest is history. Garlock drove the price up to $190 million, ghosted on the deposit and Gural declined the option to purchase the building at $189.5 million, and so May 23 became the date for the second auction.
But Garlick hasn’t exactly gotten away with wasting the Flatiron owner’s time.
As contingent in the original auction, a failure to pay would result in the winning bidder being required to pay the expenses to hold a second auction. But Gural and the other partners have gone a step further in suing Garlick’s firm, Abraham Trust, for damages and the full $19 million deposit as liquidated damages.

In the suit, the plaintiffs claim that Garlick knowingly breached that auction contract signed before bidding and drove the price up even without the financial capacity to cover the deposit, using 175 LLC to shield himself and Abraham Trust from liability.
They also suggest foul play in the complaint, stating that Garlick spent a few hours with Silverstein — a relative of his — the day before the auction.

David Goldsmith

All Powerful Moderator
Staff member

Remote work will destroy 44% of NYC office values​

Academics’ projections grow increasingly dire as work-from-home persists

With the return to office seemingly plateauing at about 50 percent occupancy, the long-term impact of remote work on New York’s office values looks even more dire than previously thought.
That’s according to an update from researchers at New York University and Columbia University, who revised a study they released last year measuring the effect of work-from-home on New York City’s office stock.

The update, published in May, now calculates that the city’s offices as a whole will lose 44 percent of their pre-pandemic value by 2029 — up from the estimated 28 percent when the authors first published the study a year ago.
“We now estimate a more persistent work-from-home regime, which has more of an impairment of office values even in the long run,” NYU’s Arpit Gupta, one of the authors, wrote in an email.

Even the most optimistic office evangelists have come to admit that remote work has proven more enduring than they expected.
“The hybrid work model has persisted far longer than I expected it to,” SL Green Realty CEO Marc Holliday acknowledged in December.

New York’s office buildings saw a notable uptick in physical occupancy after Labor Day last year, hitting nearly 47 percent. But that seems to have been somewhat of a ceiling. As of May, occupancy was slightly higher than 48 percent.
(For its occupancy figures, the NYU/Columbia study used data from the entry-swipe company Kastle Systems, which some have criticized as an incomplete measurement because it misses some large office portfolios with high occupancy rates.)

The authors found that companies that make little use of their office space are declining to renew leases or moving forward with only a portion of their space. They point to data from Cushman & Wakefield that show just shy of 78 percent of Manhattan’s office stock was contractually leased in the fourth quarter — a 30-year low.

Remote work is “shaping up to massively disrupt” office values, the authors wrote.
“Firms appear to demand substantially less office space when they adopt hybrid and remote work practices,” the authors wrote of their findings. “Such practices appear to be persistent.”