Commercial Observer – April 8, 2025

Going to the M.A.T.

CBRE’s Mary Ann Tighe continues to be the go-to for New York real estate’s biggest players

Andrew Coen, Isabelle Durso,

Brigitte Baron

Partnerships Director

Sona Hacherian Strategic Account Director

Mark Rossman, Olivia Cottrell Partnerships Director

MARKETING & EVENTS

Hayley Soutter Director, Marketing and Strategic Partnerships

Samantha Stahlman

Faith Akinboyewa

Events Manager

DESIGN,

Jeffrey Cuyubamba

Rohini Chatterjee

Visual Designer

Jim Sewastynowicz

Eliot Pierce Senior Vice President of Product and Operations

Francesca Johnson

Brianna Scottino

Coordinator

Ramon Encarnacion

OBSERVER

James R Freiman

News

Strongest Quarter Since 2019 for Manhattan Office Market

In 2020, Manhattan’s full-year office leasing volume amid the COVID-19 pandemic dropped more than 50 percent to roughly 19 million square feet. Last year, leasing volume hit 33.3 million square feet.

The contrast is part of a stable of numbers that brokerage Colliers released last week.

Leasing volume during the first quarter of 2025 reached 11.4 million square feet —  Manhattan’s strongest quarterly performance since the 13.2 million square feet leased during the fourth quarter of 2019, just before the pandemic. It was also the borough’s fourth consecutive increase in quarterly leasing.

Manhattan’s top five leases of the first quarter included trading firm Jane Street’s expansion to nearly 1 million square feet at Brookfield’s 250 Vesey Street, the United Nations’ renewal for 425,190 square feet at 2 United Nations Plaza, media company Horizon Media’s 360,000-square-foot deal at 75 Varick Street, Universal Music Group’s new lease for 336,000 square feet at Penn 2, and law firm Mayer Brown’s expansion to 330,662 square feet at 1221 Avenue of the Americas

But, even with strong leasing and demand in the market, Manhattan still has an “oversupply of space” compared to early 2020, and the market is “still trying to catch up” to the amount of leasing activity in 2019, according to Franklin Wallach, head of research at Colliers.

“Manhattan has always been such a complex and not homogenous market,” Wallach told Commercial Observer. “It’s not one size fits all, and there are pockets of the market that are much, much closer to recovery, and there’s other areas that are much further behind.”

Overall, Manhattan’s office availability rate decreased to 16.1 percent in the first quarter of this year from 16.5 percent during the fourth quarter of 2024, according to Colliers. Manhattan’s average asking rent for office space increased during the first quarter of 2025 to $74.53 per square foot, following six consecutive quarterly decreases.

In Midtown specifically, the availability rate dropped to 15 percent as more and more companies look to the neighborhood due to its concentration of Class A office space and its easier access to public transportation.

“Pre-pandemic, Midtown was looking at millions of square feet of tenants migrating to Hudson Yards, Midtown West, [Midtown] South proper, Lower Manhattan,” Wallach said. “That’s a very different story today. The combination of new construction in Midtown with Class A gut renovation to look and feel like new construction has really helped turn Midtown around.”

Meanwhile, Lower Manhattan has “not yet caught up” to Midtown demand but did host 2 million square feet of leasing during the first quarter, mainly due to Jane Street’s expansion at 250 Vesey Street. Similarly large deals could represent an “interesting turning point” for Lower Manhattan, Wallach said, even as the area’s availability rate expanded by about 72 percent since March 2020.

The increase in leasing activity this year has largely been due to a mix of industries seeking office space, such as technology,

social media, artificial intelligence, law, financial services and media, Wallach said.

“One of the best things we can do to strengthen the New York economy is make

sure that it appeals to a range of different industries, not just one key industry,” he said. “And New York absolutely has.”

Durso

Queens Tops Self-Storage Sales Nationally: Report

There were $101.3 million in sales of self-storage properties in Queens in 2024, more than in any other place in the nation, according to a report from tracker StorageCafe. Those sales totaled 260,732 square feet.

Cerritos, a city in Los Angeles County, and Miami ranked second and third in total sales last year. Brooklyn came in at No. 4, with $60.1 million in sales and 269,872 square feet sold. There was $17 million in self-storage sales in Manhattan totaling 39,264 square feet.

In addition, all three boroughs had an “extremely low” storage availability per capita at the start of 2025 — 1.3 million square feet in Queens, 1.6 million square feet in Brooklyn and 1.1 million square feet in  Manhattan — contributing to an “environment of sustained demand, limited supply and strong pricing power,” StorageCafe said in its report.

The self-storage market generated $3 billion in sales nationally across 822 properties in 2024, with transactions totaling more than 51 million square feet, according to StorageCafe. —I.D.

BIG DEAL: Jane Street’s 250 Vesey Street expansion was one of the first quarter’s largest deals.

GOING LONG: Brooklyn and Queens were both among the five most active U.S. markets.

—Isabelle

Feil Plans to Convert Midtown Office Building to Residential

Slate Property Group has partnered with New York Mets owner Steve Cohen and Hard Rock International to build affordable housing in Queens in an effort to sweeten Cohen and Hard Rock’s bid to build a casino near Citi Field

Cohen and Hard Rock, in a joint venture called Queens Future, have tasked Slate with creating more than 450 long-term affordable housing units in Corona as part of its $8 billion Metropolitan Park project, according to an April 2 announcement. The partnership’s proposed memorandum of understanding (MOU) is contingent on Cohen and Hard Rock winning one of New York City’s three casino licenses, which are set to be awarded later this year.

If they win the bid, Queens Future would provide financing to Slate and a “yet-to-benamed local nonprofit organization” to develop and manage the affordable housing units. Those units would be built on the current parking lot at 54-19 100th Street, nearly 2 miles from the Metropolitan Park site, according to the announcement.

The 100th Street site, which is adjacent to another affordable housing development, is set to feature community space and amenities for residents, on-site parking, an outdoor area and a children’s

The Feil Organization has resurrected plans to convert an office property just south of Central Park into apartments, the latest conversion project to hit Midtown.  Feil wants to turn the 14-story building at 140 West 57th Street into 47 residential units, according to plans filed late last month with the New York City Department of Buildings. The initial cost for the project is $17 million.

Brian Altman, head of construction management and project development at Feil, filed the plans, while MdeAS Architects was listed as the architect for the project, according to the filing. A joint venture led by Feil has closed on a construction financing package to move forward with the conversion, according to a source with knowledge of the deal.

Altman and a spokesperson for MdeAS did not respond to requests for comment. The New York Post first reported the news.

Feil, which bought the building between Avenue of the Americas and Seventh Avenue from Macklowe Properties in 2009 for $59 million, had gone back and forth on a potential office-to-residential project at the site since 2016, when it first submitted plans for a conversion, PincusCo reported. Those plans never moved forward, and Feil appeared to instead want to renovate the building in 2020 and keep it as offices

The Midtown property, known as the Beaufort, was built in 1907 as apartment studios for artists, but it eventually changed to commercial use, according to PincusCo. The building sits half a block east of famed music venue Carnegie Hall

Current tenants of 140 West 57th include video production service Perdido Productions on the fourth floor and grocery store Morton Williams Supermarket in ground-floor retail space. —I.D.

Nuveen Names Chad W. Phillips Global Head of Real Estate

Nuveen appointed Chad W. Phillips as global head of Nuveen Real Estate, where he succeeds Chris McGibbon, who has been with the firm for 25 years, including the last six years as global head. McGibbon recently announced his intention to retire in June 2025.

playground, the developers said.

Queens Future’s proposed MOU would ensure the housing units remain affordable for at least 60 years, create opportunities for “local and diverse hiring” during the construction phase, and provide 100 percent affordable housing units for a range of incomes, with a specific number of units set aside as “deeply affordable,” the

announcement said.

The news of the partnership comes after Cohen and Hard Rock gained a new ally last week in state Sen. John Liu of Queens, who announced that he would introduce legislation to advance the Metropolitan Park project by rezoning the land near Citi Field in exchange for waterfront parkland on Flushing Bay. —I.D.

Phillips has been with Nuveen since 2019, and most recently was the firm’s global head of health care, office, retail and mixed-use, where he managed a 100-person team and $50 billion of assets and led the firm’s investment and fundraising strategies across those asset classes.  Now Phillips finds himself managing $141 billion in assets across a global platform that spans 30 cities across the U.S., Europe and Asia.

Phillips started as global head March 31, but McGibbon is staying with the firm until June 30 to help with the transition. Phillips was previously managing director of Guggenheim Real Estate for 14 years before he joined Nuveen six years ago. He filled previous roles as portfolio manager, managing director and head of the U.S. office. —Brian Pascus

Steve Cohen, Hard Rock Add Affordable Units to Casino Bid

HERE’S THE PLAN: Feil and partners would turn the 14-story building into 47 units at an initial cost of $17 million.

SWING! Steve Cohen (top) and Hard Rock Chairman Jim Allen with a rendering of the project.

MICHAEL

BRIEFS

PGIM Closes $2B Data Center Investment Fund

New Jersey-based global investment giant PGIM Real Estate is creating a 10-figure capital fund to capitalize on the growing demand for computing capacity — demand that is only growing with the evolution of AI and other technologies.

PGIM Real Estate, the real estate investment branch of Prudential Financial, has closed a $2 billion fundraising campaign for its Global Data Center Fund, which it secured from “a range of global investors,” the firm said April 2. Details about the fund were first reported by Private Equity Real Estate (PERE) last May, and its closure was first reported by Bloomberg It’s the largest closed-end fund raised by PGIM to date, per PERE.

The fund, overseen by a management team led by PGIM’s Morgan Laughlin, will focus on low-latency hyperscale data centers, which can range past 1 million square feet. More than $450 million of capital from the fund has already been committed to data center developments, per PGIM, and the firm expects to use the remaining funds for pipeline projects within the next 18 months. The firm said it also entered into a partnership with a “leading global bank” to raise assets for the fund, though did not disclose the bank’s name.

—Nick Trombola

Los Angeles Office Market ‘Has Bottomed,’ Gravitates West

The Los Angeles office market recorded 3.4 million square feet of office leasing in the first quarter of 2025, according to Savills. That’s lower than the previous quarter, but better than the 3.2 million from the same period last year, and higher than the 2.9 millionsquare-foot five-year quarterly average.

“Elevated leasing activity seen in Q1 2025 has provided cautious optimism that the market has bottomed,” the report states. “On the other hand, most activity remains renewals as occupiers have firmed up their return-to-office plans in recent months.”

The average asking rent also ticked down from the previous quarter to $3.94 per square foot per month, which was also the same as it was at this point last year. However, the average asking rate for Class A space ticked up 1.7 percent to $4.20 per square foot.

Similarly, Downtown L.A.’s average asking rent was 7.6 percent below the region’s average, while the submarkets of Beverly Hills, Santa Monica, West Hollywood and Culver City continued to see record-high asking rents amid the larger flight to quality. Century City remains the most expensive market with an average asking rent of $7.27 per square foot.

L.A.’s overall office availability — which is the estimated rate of vacant space, open sublease space and soon-to-expire leases

that aren’t being renewed — was down slightly over the first part of the year, but still is at a high 27.9 percent and hasn’t improved since last year.

Downtown L.A.’s availability is much higher at 37.7 percent, while Century City and Beverly Hills had closer to just 21 percent and 20 percent availability, respectively.

Savills reported that available sublease space decreased by 800,000 square feet year-over-year, lowering availability a bit. Also, the report notes that a wave of

owner-users acquiring office buildings, along with new office-to-residential conversions, are a large reason why availability fell since 2024.

“As a result, the Los Angeles office market’s inventory has decreased by nearly 6 million square feet compared to a year ago as demand continues to flow to the best properties in the most desirable submarkets,” the report said.

The tech, entertainment and media sectors that for years drove L.A.’s economy and office real estate market alike are not nearly the same as they have been historically. Those companies aren’t expected to make big new lease deals this year, either. Instead, Savills is looking to health care, education and retail occupiers for demand growth this year.

In the first quarter, the two largest leases were two relocations: Regal Medical Group ’s 157,000-squarefoot deal with Brookfield in West San Fernando Valley, and Spin Master ’s 132,300-square-foot deal with Tishman Speyer in Playa Vista. Also, the County of Los Angeles continues to bolster the region’s stat sheet with three leases — all renewals — for more than 191,000 square feet of office space in the San Gabriel Valley during the first three months of 2025. The government entity also signed a 43,800-square-foot office expansion at J.H. Snyder’s SAG-AFTRA Plaza —Gregory Cornfield

Apollo Global Negotiating Lease for Four Floors at 590 Madison

Apollo Global Management is negotiating to bring its Bryant Park employees nearer its 9 West 57th Street mothership with a new deal for four floors at 590 Madison Avenue totaling just under 100,000 square feet.

The group is now at Salesforce Tower at 1095 Avenue of the Americas — also known as 3 Bryant Park — where Apollo’s been subleasing 71,291 square feet from MetLife since 2018.

Before then, the asset manager was at 730 Fifth Avenue in the Crown Building, which was being emptied for the Aman residential condominium makeover, providing Apollo with a hefty $20.3 million buyout, public records show.

Apollo’s broker, Stephen Siegel of CBRE, told the New York Post at the time, “The [buyout] number is confidential, but it was significant enough to pay for the 3 Bryant Park move.”

Simultaneously, Siegel also represented Apollo in its 15-year expansion at 9 West 57th from 135,000 to 175,000 square feet in 2018. He and his team, which includes Michael Geoghegan and Michael Wellen, are now repping Apollo for the lease at the 42-story 590 Madison. Another CBRE team led by Siegel and Evan Haskell is representing owner the State Teachers Retirement System of Ohio (STRS Ohio) along with Jeffrey Sussman, who is in-house at managing agent Edward J. Minskoff Equities

The lease is still being negotiated and may not be finalized. A spokeswoman for Apollo said the possibility of a lease was “not accurate,” while the other parties either declined comment or did not return requests for comment.

The move by IBM out of its 1 million-square-foot namesake tower at Madison and East 57th Street to SL Green Realty’s One Madison Avenue at East 23rd Street presented the opening to bring Apollo’s workforce closer together. LVMH has already leased 150,000 square feet in 590 Madison, but sources say the fashion conglomerate is so far not leasing the Bonham’s Auction retail space, which will be available when Bonham’s moves to 111 West 57th Street

590 Madison as of April had 187,877 square feet available on the full ninth through 16th floors with another roughly 60,000 square feet in several upper floors.

A portion of the land under that building is also owned by STRS Ohio, which is once again exploring a sale of the entire tower through Will Silverman and Gary Phillips of Eastdil that had an expected price tag of $1.1 billion. Market sources say that pricing was ambitious and may end up closer to $800 million to $900 million. Other sources, closer to the offering and the uptick in leasing, said the trophy tower will absolutely trade for over $1 billion. Additionally, STRS Ohio may pool some assets for a larger portfolio sale. —Lois Weiss

NOT YET: Apollo, under CEO Marc Rowan, hedged on a move.

LOOKING UP: The market improved annually.

Lease Deals of the Week LEASES

Universal Music Group

336,000 Relocation and Expansion

A deal by Universal Music Group (UMG) for new digs at Vornado Realty Trust’s Penn 2 office tower has been finalized after weeks of negotiations.

UMG signed a lease for 336,000 square feet at the 31-story Midtown building, according to Colliers’ first-quarter 2025 office report.

The deal represents a relocation for UMG, which will leave its current 242,505-square-foot office at Jack Resnick & Sons’ 1755 Broadway, where its lease isn’t set to expire until 2028, as Commercial Observer previously reported.

The length of the lease and asking rent were unclear, but Vornado CEO Steven Roth said during the company’s fourth-quarter earnings call in February that Penn 2 is leasing in the range of $100 per square foot.

It’s also unclear who brokered the deal. Vornado declined to comment, while spokespeople for UMG, Colliers and Cushman & Wakefield, which handles leasing for Vornado at Penn 2, did not respond to requests for comment.

News of the deal comes after Vornado recently completed a redevelopment of Penn 2 — which sits directly above Pennsylvania Station — that includes a new facade, lobby and rooftop lounge, according to the landlord’s website. It also added a 430-foot glass canopy leading into the 1.8 million-square-foot office tower dubbed the Bustle

Other tenants of Penn 2 include professional sports’ Major League Soccer. —Isabelle Durso

Law firm Goodwin Procter signed the final contract for a major relocation of its New York City office.

Boston-based Goodwin, which serves clients in various industries including real estate, life sciences and technology, finalized a 20-year lease for 250,000 square feet across multiple floors of BXP’s 200 Fifth Avenue, according to the law firm.

News of the lease comes just weeks after Commercial Observer reported Goodwin was in negotiations for the deal, which will see the firm move from its current 216,419-square-foot office at The New York Times Building at 620 Eighth Avenue

Goodwin’s lease at 620 Eighth Avenue, where it has been a tenant since 2008, ends in 2028. The firm said it plans to move into its new digs in late 2026.

The asking rent was unclear, but a report from Colliers found office rents in Midtown South averaged $78.09 per square foot during the first quarter of 2025.

Cushman & Wakefield’s Mark Weiss brokered the deal for the tenant, while C&W colleagues Bruce Mosler, Ethan Silverstein, Anthony LoPresti and Bianca Di Mauro represented the landlord. A spokesperson for C&W did not respond to a request for comment.

BXP owns a 27 percent interest and acts as the managing member in the joint venture that owns 200 Fifth, while institutional investors advised by J.P. Morgan Asset Management own the remaining 73 percent interest. —I.D.

Chicago-based law firm Kirkland & Ellis will expand its New York City presence with a second Midtown East office.

Kirkland, which serves a range of clients in private equity and corporate transactions, has signed a lease for 131,000 square feet at Paramount Group’s 900 Third Avenue, Bisnow reported, citing a report from JLL

The law firm’s new space will be right around the corner from its current 520,000-square-foot office at BXP’s 601 Lexington Avenue, where its lease runs until 2039, according to Bisnow.

Kirkland told Bisnow it is opening another location “in response to our growth and anticipated future needs.”

Cushman & Wakefield represented both the tenant and the landlord in the deal, Bisnow reported. Spokespeople for C&W, JLL, Paramount and Kirkland did not respond to requests for comment.

The length of the lease and asking rent were unclear, but a report from Colliers found office rents in Midtown averaged $80.47 per square foot during the first quarter of 2025.

Paramount, which is the majority owner of 900 Third Avenue, announced in January that it sold a 45 percent interest in the building between East 54th and East 55th streets to an unnamed buyer. The deal valued the property at $210 million. —I.D.

You could say they are into it.  Intuit, the financial technology firm behind TurboTax, Credit Karma and QuickBooks, has signed a 10-year expansion for an additional 77,000 square feet at the Edward J. Minskoff Equitiesowned 51 Astor Place

The company moved into the East Village building in August 2023 from a WeWork, CoStar reported at the time. Intuit currently occupies the 13-story property’s full third floor and will now expand to the full fifth, sixth and seventh floors, while also taking some retail space on the ground floor, for a total of 115,000 square feet.

“We are excited to support Intuit as it continues its growth in New York City,” Edward Minskoff, chairman and CEO of Edward J. Minskoff Equities, said in a statement.

Asking rent was not provided but a source close to the deal said rents at 51 Astor Place range between $190 and $215 per square foot.

JLL’s Paul Glickman, Mitchell Konsker, Benjamin Bass and Cynthia Wasserberger represented the landlord along with Edward J. Minskoff’s Jeffrey Sussman and Matt Pynn Bart Lammersen, Justin Haber and Kyle Riker, also of JLL, handled it for Intuit.

“51 Astor Place is a market-leading asset with best-in-class ownership and the highest-quality tenant services and amenities,” Glickman said in the release. “This is an ideal property for employers seeking to attract and engage talent in a competitive market.” —

Amanda Schiavo

A trampoline park is hopping into The Shops at Skyview mall in Flushing, Queens.

Sky Zone Trampoline Park, which operates entertainment parks in more than 300 locations across the globe, signed a lease for 49,733 square feet on the fifth floor of the shopping center at 40-24 College Point Boulevard, which is owned by Blackstone subsidiary ShopCore Properties, according to the landlord.

Sky Zone has New York outposts in New Rochelle and Yonkers, and is also gearing up to jump to the city with an outpost at 4720 Third Avenue in the Bronx, according to its website. It plans to open its Queens space in the summer of 2026, according to a press release.

The length of the lease and the asking rent were unclear, but a report from Matthews Real Estate Investment Services found retail rents in Queens averaged $60 per square foot in 2024.

Charter Realty ’s William Cafero brokered the deal for Sky Zone while Ripco Real Estate’s Jeremy Isaacs represented the landlord. Skyzone declined to comment, while Cafero and a spokesperson for Ripco did not respond to requests for comment.

Other retail tenants of the 700,000-square-foot Shops at Skyview include Sephora, Foot Locker, Bath & Body Works, Adidas, Old Navy and Target I.D.

Lease Deals of the Week

A commercial bank is growing at AmTrustRE’s 360 Lexington Avenue. Webster Bank signed a renewal for its existing 30,621-square-foot space and tacked on an additional 15,397 square feet, according to the landlord. The expansion brings Webster’s footprint at the property to 46,018 square feet across three full floors.

Michael O’Connor, head of corporate real estate at Webster, said in a statement that 360 Lexington is “an ideal location and will help [the company] better serve the growing needs of our customers.”

The Connecticut-based bank previously had 22,522 square feet on the entire fifth and part of the sixth floor and expanded by 8,099 square feet — taking over the entire sixth floor — in 2022, as Commercial Observer previously reported.

Aside from Webster’s deal, Signers National signed a new lease for approximately 15,000 square feet across two floors of the 24-story building, AmTrust said.

The lengths of the leases and asking rents were unclear, but a report from Colliers found office rents in Midtown averaged $79 per square foot in February.

JLL’s Jeff Szczapa and Drew Saunders brokered the deal for Webster, while Mitchell Konsker, Benjamin Bass, Barbara Winter and Thomas Swartz, also from JLL, represented the landlord..

A spokesperson for JLL did not respond to a request for comment.

The New York Post first reported the news. —I.D.

Credit data firm Octus has signed a 43,000-square-foot lease at 295 Fifth Avenue, where it plans to move its New York City headquarters.

The company, formerly known as Reorg, will move to the sixth floor of the Midtown South office building jointly owned by Tribeca Investment Group, PGIM Real Estate and Meadow Partners, according to representatives on both sides of the deal. Octus currently has its headquarters four blocks away on the 12th floor at 11 East 26th Street

The landlord did not provide the asking rent or the length of the lease, but the average asking rent for Midtown South was $77.19 per square foot in the fourth quarter of 2024, a report from Cushman & Wakefield said. The New York Post first reported the deal.

“New York City continues to benefit from companies that are investing in their workforce and recognize the vibrancy and lifestyle of the city is essential to attract talent, particularly in the competitive professional and financial services industries as well as at the technology firms that service those industries,” CBRE’s David Hollander, who brokered the deal for the landlord with Mary Ann Tighe, Peter Turchin, Brett Shannon, Liz Lash and Hayden Pascal, said in a statement.

Taylor Bell of Colliers handled the deal for Octus. Colliers did not respond to a request for comment. —Mark Hallum

Never doubt the B Team.

TileBar, a designer and retailer of tile and other home amenities, has taken a 12-year lease for 34,000 square feet across two floors at the Adams & Company-owned 53 West 23rd Street, the landlord said.

The tenant is leasing the entire third and fourth floor of the Class B building, which sits half a block west of the landmark Flatiron Building. Asking rent was $54 per square foot, according to the New York Business Journal, which first reported the deal.

TileBar will relocate its New York City offices to the Flatiron District building, but it’s unclear where it’s moving from.

Both TileBar and Adams were represented in-house by Adams’ brokers Jeff Buslik, Alan Bonett, Bradley Cohn and David Levy.

With this lease the office building is now 100 percent leased, Adams & Company said in a statement. The firm also noted that Manhattan’s Class B office market is performing strongly, despite strong demand for Class A properties, especially as more companies relocate to Manhattan from the outer boroughs.

“Companies like TileBar, relocating into Manhattan, underscore the strong demand for Manhattan office space,” Buslik said in a statement.

Other office tenants at 53 West 23rd Street include public relations firm LaForce, production company 4K Media and jeweler Tiffany & Co. —A.S.

A Korean barbecue restaurant is bringing its grills to The Shops at Skyview mall in Flushing, Queens.

Jongro BBQ signed a lease for 23,946 square feet on the sixth floor of the mall at 40-24 College Point, according to ShopCore Properties, the Blackstone subsidiary that owns the property.

Terms of the deal were unclear, but retail rents in Queens averaged $60 per square foot in 2024, according to a report from Matthews Real Estate Investment Services

Jongro BBQ currently has locations in Flushing and Manhattan’s Koreatown. It’s new space at Skyview — which will also include a food hall — is expected to open later this year.

“The Shops at Skyview is a pre-eminent destination in the heart of Queens with significant foot traffic driven by events and a collection of well-curated tenants, which makes it the perfect spot when we were looking to expand within the New York City market,” Aidan Lee, vice president of Jongro BBQ, said in a statement.

Ripco Real Estate’s Jeremy Isaacs represented the landlord. It’s unclear who brokered the deal for Jongro BBQ. A spokesperson for Ripco did not respond to a request for comment. —I.D.

Financial services firm CFG Merchant Solutions is relocating its office within the Financial District, Commercial Observer has learned.

CFG, which focuses on providing capital access to small and midsize businesses, has signed a 10-year lease for 20,585 square feet on the sixth floor of RXR’s 32 Old Slip, according to the landlord. Asking rent was $60 per square foot.

This should be an easy move for CFG, since it’s currently in a 7,778-square-foot office just a few blocks away at 180 Maiden Lane, which it took in 2018. The firm will head into its new spot at 32 Old Slip, also known as One Financial Square, by the end of this year.

CFG CEO Andrew Coon and CFG President Bill Gallagher said in a joint statement that the “increase in square footage” at 32 Old Slip will provide the firm with the “additional capacity necessary for the continued growth of our platform.”

JLL’s Michael Berman brokered the deal for the tenant, while RXR was represented in-house by Daniel Birney and Heidi Steinegger, as well as by CBRE ’s Ryan Alexander, Zachary Price, Alexander Benisatto and Nicole Marshall

“After a thorough search of the market, 32 Old Slip met the tenant’s objectives in terms of quality of building, location, views and strong ownership,” Berman said in a statement.

A spokesperson for CBRE did not respond to a request for comment. —I.D.

For the last 70 years we have been building a nationwide portfolio of more than 26 million square feet of retail and commercial space, and more than 5,000 residential rental units. We never lose sight of our ultimate goal: to leave our business, our clients, and the cities where we work even stronger than we found them. Everything we do is rooted in the strength of longevity and done with a long term vision of what the future can be.

We have recently completed the refinancing of our 20-story, 250,000 square feet office building at 257 Park Avenue South in Manhattan.

In partnership with Estreich and Company, we have secured a first mortgage through Goldman Sachs on the property owned by The Feil Organization.

Building our future legacy.

Finance

Alternative Finance Issue

+

24 Himmel

Meringoff’s Big Recap

Goes

Nuveen’s Jessica Bailey and Ali Cooley

FINANCE

Debt Deals of the Week

PMG Lands

$215M to Build Miami Condo Tower

PMG and some of the owners of the E11even nightclub have landed a $215 million construction loan from GoldenTree Asset Management for yet another condo tower near Downtown Miami after nearly selling out the planned units.

Called 38 West Eleventh Residences, the 44-story development is a partnership with Lion Development Group and Marc Roberts Companies, whose respective founders, Michael Simkins and Marc Roberts, own stakes in E11even, one of Miami’s most popular nightclubs.

Located at 38 Northwest 11th Street in Miami’s Park West neighborhood, the Sieger Suarez Architects -designed project will house 659 units, of which 99 percent have pre-sold, according to PMG. Owners will be allowed to list their units as short-term rentals without restrictions, using an Airbnb management system.

Construction is expected to be completed in the first quarter of 2028. PMG paid $30 million for the half-acre site in 2022, which sits one block west of E11even, according to property records.

The condo project once again teams PMG with Roberts and Simkins. Nearby, PMG is building two E11even-branded towers: the 449-unit E11even Hotel & Residences and 550-unit E11even Residences Beyond, which have nabbed $149 million and $262 million in financing, respectively. —Julia Echikson

Citigroup, Hudson Housing Capital Provide $166M Loan for Queens Housing Complex

Tishman Speyer has secured $166 million in construction financing to build Edgemere Commons A2, a 100 percent affordable housing property with 244 units in Far Rockaway, Queens, Commercial Observer has learned.

CitiGroup’s Citi Community Capital provided the senior credit, an $80 million construction letter of credit, while Hudson Housing Capital provided an equity investment by purchasing Low-Income Housing Tax Credits, funded by an investment from HSBC. The total financing package is being overseen and led by New York State Homes and Community Renewal (HCR).

Tishman Speyer’s affordable housing platform TS Communities, which began operations in 2020, is spearheading the Edgemere Commons project, an 11-building multiphase development that has seen two previous residential buildings: a 194-unit development by the Arker Companies and Slate Property Group that opened in 2024, and a building developed by TS Communities that is expected to open later this year.

All told, Edgemere Commons will deliver 2,050 apartment units upon completion in 2031.

“We’re proud to start the next phase of Edgemere Commons, a development that has benefited from years of collaboration, care and community input,” said Michelle Adams, a senior managing director at Tishman Speyer.

“We are grateful to all our local elected officials, as well as NYS Homes and Community Renewal for their hard work and commitment to this neighborhood.”

Located at 337 Beach 52nd Street, Edgemere Commons sits on the former site of Peninsula Hospital, which closed after Superstorm Sandy. The 18-story A2 tower being developed will hold units ranging from studios to three-bedrooms that are rented to people earning between 40 and 80 percent of the area median income (AMI), per Tishman Speyer.

Of the 244 apartments, 73 units will be reserved for supportive housing that will be managed by Breaking Ground, a social service provider. Amenities within the building include a recreation room, a skydeck, a laundry room, green space, and on-site parking.

“The project is another step forward in the city and state’s efforts to provide every New Yorker with quality housing that is affordable, with the services tailored to the specific needs of the tenants,” said Richard Gerwitz, Citi Community Capital director.

This is yet another large affordable housing project being developed by TS Communities. The firm is also building 160 Van Cortlandt Park South in the Bronx, a 339-unit, 100 percent affordable housing complex that will span 279,000 square feet.

“By partnering with Tishman Speyer and our other community partners, we are taking on the housing crisis and ensuring that hundreds of families in Far Rockaway will have access to safe, affordable homes in a strong and vibrant community now and in the future,” said RuthAnne Visnauskas, Commissioner of New York State HCR.—Brian Pascus

Hudson Bay Capital Supplies $335M Refi for Jersey City Apartments

Namdar Group has secured a $335 million debt package to refinance three newly built Jersey City multi- family assets, Commercial Observer has learned.

Hudson Bay Capital Management provided the balance sheet financing for the rental housing portfolio in Jersey City’s Journal Square neighborhood, sources told CO.

The deal closed late Thursday afternoon.

Newmark arranged the transaction with a team led by Jordan Roeschlaub along with Nick Scribani and Max Ralby

The three buildings include 833 units at 9 Homestead Place, 26 Van Reipen Avenue and 28 Cottage Street. Community amenities at the properties include a fitness center, a yoga room, a bowling alley, a game room, coworking space, a rooftop terrace and grilling stations.

Namdar landed an $80 million bridge loan from Scale Lending early last year to retire $73

million of construction financing and to fund the lease-up of 26 Van Reipen Avenue, CO previously reported. Completed in late 2023, the project consists of 235 apartments, retail space totaling 7,562 square feet, and 7,546 square feet of office space.

Scale, the lending arm of Slate Property Group, also provided a $160 million bridge loan to Namdar in July 2023 for 9 Homestead Place to retire $120 million of construction debt and fund lease-up costs, CO reported at the time. The 432-unit mixed-use building, which debuted in spring 2023, features 10,000 square feet of retail and 21,000 square feet of office space master- leased to CMPND

Cerberus supplied a $47 million bridge loan to Namdar in 2022 for the lease-up of the 166-unit 28 Cottage development.

Officials at Hudson Bay Capital Management and Namdar Group did not return requests for comment. —Andrew Coen

MIAMI MOOLAH

38 West Eleventh Residences.

Edgemere Commons A2 in Far Rockaway Queens

Homestead Place in Jersey City.

Chart Finance

CMBS Distress Rate Dips for Second Straight Month

By Mike Haas

At CRED iQ, we’re committed to delivering timely, data-driven insights into the commercial real estate market. Our latest analysis reveals a notable shift showing that the overall distress rate across commercial mortgage-backed securities (CMBS) has dropped for the second consecutive month, declining by 20 basis points (bps) to 10.6 percent.

This encouraging trend is accompanied by modest improvements in our core distress metrics, signaling potential stabilization in certain segments of the market. However, a closer look at property types reveals a tale of divergence — particularly between retail and hotel — offering critical takeaways for investors and stakeholders.

Our research team tracks two key indicators of distress: delinquency rates and special servicing rates. In our latest report, the delinquency rate edged down from 8 percent in March to 7.9 percent, while the special servicing rate saw a more significant 40-bp reduction, landing at 9.7 percent.

A year ago, these figures stood at 5.4 percent and 7.4 percent, respectively, underscoring how much the CRE landscape has evolved. These month-overmonth improvements suggest that, while challenges persist, the market may be finding its footing in select areas.

Among property types, the office and multifamily segments remain the most distressed, though both posted relatively flat results. Office continues to lead the pack at 19.2 percent (down 10 bps from March), while multifamily eased slightly to 12.9 percent (also down 10 bps). These incremental declines hint at resilience, but the broader distress levels in these sectors still warrant close attention.

The real story this month lies in the contrasting fortunes of retail and hotel. Retail, which had been neck and neck with the hotel sector in March, delivered a standout performance — its distress rate plummeted 210 bps to 8.6 percent. This marks the fifth consecutive month of improvement for the sector and the largest drop in that streak. Factors such as adaptive reuse, strong consumer spending and successful lease negotiations may be driving this positive momentum, a trend we’ll continue to monitor.

Meanwhile, the hotel segment moved in the opposite direction, with its distress rate climbing 130 bps to 11.5 percent. This uptick brings hotel closer to overtaking multifamily as the second-most distressed property type. Rising operational costs, shifting travel patterns and maturing loans could be contributing to this increase, making hotels a focal point for our next analysis.

Industrial and self-storage, as expected, remain bright spots. Industrial held steady at an impressively low 0.5 percent distress rate, while self-storage shaved 20 bps to 1.8 percent. These segments continue to demonstrate stability amid broader market fluctuations.

Payment status: a mixed picture

Digging deeper into payment statuses across approximately $55.6 billion in CMBS loans, we found:

• $10.3 billion (18.5 percent) are current.

• $14 billion (25.2 percent) are delinquent (including those within grace periods).

• $31.3 billion (56.2 percent) have passed their maturity date, with 20 percent performing and 36.3 percent nonperforming.

These figures are largely unchanged from March, suggesting a steady, if uneven, state of payment performance across the portfolio.

Our methodology

CRED iQ’s distress rate is a comprehensive measure that combines delinquency (30-plus days past due) and special servicing activity, encompassing both performing and nonperforming loans that fail to pay off at maturity. Our analysis focuses on CMBS properties securitized in conduits and single-borrower large loan structures, while we track Freddie Mac, Fannie Mae, Ginnie Mae and CRE CLO metrics separately for a holistic view of the market.

Mike Haas is the founder and CEO of CRED iQ.

CREDIQ

COLUMNS

THINK GLOBAL, ACT LOCAL

Foreign Investors Bet Big on New York City’s Multifamily Market

After a quiet few years, foreign capital is officially back in New York City’s multifamily market — and this time, it is coming in excited.

We have been tracking the uptick closely, and, over the last few months, we have closed multiple deals with international buyers and are actively seeing more trades happening with foreign capital. It’s no longer a trickle — it’s a surge. From Japan to Argentina to France to Israel, foreign buyers are back, and they are betting big on NYC multifamily.

But here is the kicker: They’re not just buying in Manhattan anymore.

We recently closed on 182 Eagle Street and 352 Monroe Street, new-construction multifamily buildings in the heart of Bed-Stuy, Brooklyn. The buyer? A Taiwan-based investment group. That is a rare move as, historically, foreign capital in NYC has been laser-focused on prime Manhattan or maybe a few spots in Downtown Brooklyn and along the Williamsburg waterfront. This deal signals something much bigger: NYC multifamily remains a global magnet — even outside of Manhattan, especially as pricing in Manhattan starts to firm up — and foreign

CONCRETE THOUGHTS

OK,

groups are willing to explore the outer boroughs for value and yield. This is a major trend shift, and it’s happening right now.

Over the last 30 days alone, we signed two separate deals with two foreign groups — one from Taiwan and the other from Israel. Both are aggressively pursuing well- located, newer, free-market multifamily product. These types of buyers are often purchasing without any financing, and they are closing fast.

Take our recent deal at 322 East 93rd Street on the Upper East Side. We had multiple bids, and the two top offers came from foreign investors. The building ended up going to a Japanese group that offered strong all-cash terms, no financing, and closed in just eight days from contract signing — a record for a multifamily deal in NYC this year. This level of execution shows just how hungry and committed these groups are.

So, what’s bringing foreign capital off the sidelines?

First, it is the strength of the rental market. While rents in most major U.S. cities have been sliding for nearly a year due to oversupply, New York continues to defy the trend. Rents here are climbing — and

fast. Both Manhattan and Brooklyn just hit all-time highs, and projections point to another 5 to 7 percent increase heading into this summer’s leasing season. That kind of rental momentum is a major confidence booster for long-term investors looking for steady, growing income.

Second, interest rates have begun to slide. With the Fed signaling a shift in tone and bond markets responding, foreign buyers — especially those deploying equity or relying on low-leverage strategies — are moving quickly to capitalize on the current moment. Just six months ago, core, turnkey buildings in Manhattan were trading at cap rates north of 6 percent. Today, those same buildings are getting multiple bids, and we are seeing cap rates already compressing into the mid-5 percent range. The window for high-yield product in prime locations is beginning to close.

Lastly, multifamily is now the safe play. Let us call it like it is: Office and retail assets are still under pressure globally. That displaced capital must land somewhere, and multifamily, especially in a resilient city like New York, has become the new “trophy asset” for foreign capital. With a deep tenant base, long-term appreciation potential and relative stability — particularly for free-market product

— NYC multifamily stands out as a smart, secure investment choice.

This influx of foreign capital is reshaping the market in real time. Sellers with quality product — especially free-market or mixeduse multifamily buildings — are starting to see more offers, better terms and shorter timelines to close. And other buyers are starting to feel the squeeze. Domestic buyers — especially those relying on financing — are now competing for deals directly against foreign groups with low cost of capital. If you are a local syndicator or operator, you’ll need to sharpen your pencils, rethink your underwriting, and get creative on terms to compete in this environment. Because, make no mistake, these foreign buyers are not slowing down.

If you’re a multifamily owner in NYC, this moment shouldn’t be overlooked. We’re in a rare window where foreign demand is strong, cap rates are still attractive, and pricing is starting to firm up. Once rates drop further — and they will — we expect competition to spike and pricing to climb, especially for core turnkey assets in prime neighborhoods.

Lev Mavashev is founder and principal of Alpha Realty, a New York brokerage focusing on multifamily.

I’ll Tell You How to Fix New York City’s Housing Crisis …

My inbox was flooded late last month in response to my column slamming the 485x tax abatement program in New York The main response centered around: Well, if not 485x, then what? I’ll get to that in a bit.

On a national level, housing prices are too high because the long period of low interest rates has put many homeowners in the position of being chained to their house by a 3 percent mortgage. This inertia within the housing market is constraining supply. That’s why when a new house comes on the market, an immediate bidding war occurs and costs escalate. Simple economics: Lower supply (because folks are not moving) leads to higher prices. I suggest the federal government mandate that mortgages are a personal asset that you can take with you to your next home. The caveat would have to be some type of test to make sure the loan to value was appropriate. Provided this test, who would complain? The banks, that’s who. Simple solution: Pay the bank a 1 percent fee plus administrative costs when a mortgage is transferred. The misallocation of the housing stock caused by this inertia would go away, freeing up supply and exerting significant downward pressure on housing costs.

Now, locally. In New York City, we desperately need housing at all levels of the socioeconomic spectrum. My firm, BKREA,

sells a ton of land in the city, and we are constantly speaking to developers of affordable housing who would love to build buildings with 100 percent of the apartments being affordable. They make offers, but the offers are woefully low and the seller does not transact with them. Why?

“Because the line at the Department of Housing Preservation and Development (HPD) to get financing is four to five years long. I have to build in the carry of the land in my underwriting so I can only offer X dollars.” — That’s the response most of the time.

So here’s an idea: The federal government should give New York $20 billion for the creation of affordable housing (to be doled out to the private sector by HPD so real builders can build this stuff) in exchange for the state relaxing our rent regulations so the private sector actually wants to invest in the housing stock again.

Communist policymakers would hate this, but look at the hypocrisy of their positions. They all say they want New York to be affordable for everyone, but most of the legislation that is passed has the opposite effect. The unfortunate truth is that policymakers care more about getting re-elected than they

care about the well-being of their constituents. Clearly, this is not the way it should be. The reason that housing is such a pivotal issue is the impact housing has on the mental health of people. It is much more difficult for people who are homeless or constantly threatened with eviction to make wise choices. Choices about family, including choices about children and what’s best for them, often hang in a delicate balance with the stress that financial uncertainty and instability can cause. Here are some steps to create more supply:

Bring back the old 421a tax abatement. Land values would go up. When land values go up, sellers sell. When sellers sell, buildings get built. And the labor unions will love the tens of thousands of jobs that will be created. What’s the point of having a potential job under 485x at $72.45 per hour that no one gets?

Reinstate the Major Capital Improvement and Individual Apartment Improvement programs the way they were. Tens of thousands of shuttered vacant apartments would be under gut renovation within two weeks. How much sheetrock

would be sold? How many sinks, toilets, bathtubs, stoves and refrigerators would be sold? How many jobs would be created? How much more tax revenue would the city collect? A total no-brainer.

Bring back vacancy decontrol. This doesn’t negatively impact anyone. When tenants leave previously regulated apartments, those units are not getting rented at low rents to other tenants. Instead, they are nailed shut. Who does that help?

Means test all rent-regulated tenants. I really don’t believe property owners want to kick grandma out of her apartment and onto the street. If people need the subsidies that rent regulation provides, have them prove it. Why? Two reasons: Because it’s fair, and because if a tenant was certified by the state as qualifying for rent-regulated housing, the “harassment” of tenants that the advocates fear would all but disappear.

Supply and more availability of housing solve all of our housing problems. Time for our policymakers to think more about their constituents than themselves.

Robert Knakal is founder, chairman and CEO of BK Real Estate Advisors.

Lev Mavashev.

Robert Knakal.

You’ll Wanna See This

CBRE’s master dealmaker Mary Ann Tighe breaks down the trends driving New York’s office market now and in the future

By Amanda Schiavo | Photography by Evelyn Freja

ary Ann Tighe started 2025 the same way she closed 2024: busy.

It’s a common state for the veteran commercial real estate executive who has for 23 years been CEO of brokerage giant CBRE’s New York tri-state operations.

Where to start? Tighe (pronounced “Tie”) helped represent auction house Christie’s in its 400,000-square-foot renewal for 25 years at Rockefeller Center in August. Speaking of auction houses, Tighe also repped Sotheby’s in its $100 million purchase of the historic Breuer Building at 945 Madison Avenue, a deal that closed in November.

There were numerous other deals since midyear 2024. These included helping represent owner Tishman Speyer on a 35-year, 150,000-square-foot lease for a charter high school at Brooklyn’s 422 Fulton Street, and repping the ownership of 295 Fifth Avenue in its 43,000-square-foot lease with credit data firm Octus. Tighe, too, led the tenant-side negotiations for law firm Orrick Herrington & Sutcliffe in its 144,312-square-foot, 15-year renewal at 51 West 52nd Street.

Tighe, who jumped into the commercial real estate industry from the realm of art, has been part of some of the most significant projects in New York City over the last 30 years, including the revitalization of Times Square and the redevelopment of Lower Manhattan after 9/11.

She connected with Commercial Observer to discuss her career, the evolution of Lower Manhattan in particular, the rebuilding of the World Trade Center and her experience as a highly successful woman in commercial real estate.

This conversation has been edited for length and clarity.

Commercial Observer: How did you get your start in real estate?

Mary Ann Tighe: I did not intend to become a real estate broker or a real estate anything. I intended to be an art historian. I had the good fortune in the latter half of my 20s to get a job working in the Carter-Mondale White House. And that job led to my becoming, at age 29, the chief operating officer of the National Endowment for the Arts. I did that job for four years, and one of the issues doing that job is that I had to agree I would not work for any entity that received government funding for three years after I left the endowment. Every arts organization in the United States received government money, and so I knew I had to change careers.

In 1981, I was hired by ABC and I started a cable channel that was originally called Arts and Entertainment — today it is called A&E. One day I am in Venice for A&E buying Italian public television station RAI Television and I end up meeting

a retired commercial real estate broker, Joe Bernstein. We ended up sharing a ride to the airport, and at the end of the ride I noticed the driver was bilking him on the exchange. I said, “No, no, no,” and I took the money and gave it back to my very nice co-passenger, and he said to me, “You’d be great in my old business.”

And so for the nine hours on the flight going home, Joe tells me the story of his career in commercial real estate as a broker. We get home, he introduces me to several people, and I get hired by the Edward S. Gordon Company. I rise to the level of vice chairman at the Edward S. Gordon Company over the next 15 years.

ESG was acquired by a company called Insignia. I was vice chairman of that company, and I had decided that my career peaked. So I cold called the CEO of CBRE, asked him if he had any interest in me. He hired me as CEO of the New York tri-state in 2002, and in 2003 we acquired my old company, Insignia ESG. I put the two of them together, and we have been the dominant commercial real estate firm since then.

What makes you passionate about commercial real estate?

New York. I grew up in the South Bronx, but the city as a whole, particularly Manhattan, embodied my big ambitions. I had this romantic attachment to the city, and it wasn’t even so much about real estate initially — it was about the city’s ability to fuel ambition. I lived in Washington, D.C., for a number of years, and I think that one of the things that being in the White House in my 20s and then also being COO of a federal agency did for me was it got me to think on a very big scale very young. I didn’t want to come back to just have a corporate job. I wanted to do big things, and you can do big things in New York real estate.

I’ve fulfilled my romantic intentions. I get to look at The New York Times Building and think “I did that.” I get to look at the World Trade Center, and feel like I am a part of that.

What has the experience with the World Trade Center been like for you?

Everyone experienced Sept. 11 differently. The apartment I was living in at the time, I actually could see the Trade Center towers, so when the first plane hit I was home. I remember the shock of it.

Later that day, around 5:30 p.m. I was on the Upper East Side and I ran into [World Trade Center leaseholder] Larry Silverstein. I went up to him on the street, I didn’t know him all that well, and I wanted to offer my condolences, but all I could do was cry. He just put his arms around me and said,

“Sweetheart, we’re going to rebuild.”

Years later, I am the head of the CBRE team as the leasing agent for Larry at the World Trade Center. I was able ultimately to bring Conde Nast, whom I represented, as the anchor deal for tower one. I actually brought the first lease that was done at the new Trade Center in tower seven, the New York Academy of Sciences. And I also brought in [media company] GroupM, which anchored tower three.

My belief in the Trade Center from the get-go was deep. It was the most difficult work of my career at that point. You can’t discuss the Trade Center without discussing Larry Silverstein. None of this would have been possible without him. He was unshakable. He was committed in every conceivable way you could be committed.

What challenges did you face with leasing at the Trade Center?

The first 10 years, it was so bad. I think of the weekly meetings we had that were like seances, because we had kind of nothing to talk about. Nobody would come and nobody believed it was coming back. And at one point I said to Larry, “I don’t know how we’re going to do this.” He said, “I know this psychiatrist at NYU. You should go ask him to give you his thoughts about why no one will come back to the Trade Center site.” So I did.

The psychiatrist said people fear the unknown. And, at the time, many people wouldn’t go back downtown, they wouldn’t visit downtown while the Trade Center site was still Ground Zero. He said, “You need to do things that will make people comfortable with the site.” So I got to work with Larry’s head of communications to come up with a series of events, fashion shows, art exhibits — all manner of things that would actually cause people to come down.

Still, when I would talk to my fellow brokers and ask them to just have their people come take a look, the vast majority told me no. I had one of my own colleagues tell me it would be 10 years before he would set foot on the site.

Today, we don’t have those problems anymore. The funny thing about success is it begets success. I’m so proud of how happy the tenants are in the Trade Center and how much growth there has been. We have one company at the Trade Center that we’ve moved three times. They keep growing and exercising their expansion options. Companies are all recognizing that their people like working there. I mean, it’s pretty dreamy.

Aside from the Trade Center, what makes the downtown area a desirable real estate market?

Downtown is one of the great value plays of New York City. People are very neighborhood-specific, so, if you haven’t been there, your vision of it is outdated. Downtown is New York City’s 15-minute city. It is the place where you can walk to wherever you need. Work, live, play — it’s there. The restaurant choices, the shopping choices, the apartment choices and the work environment choices are really rich.

It’s also an area that is taking old office stock and converting it into residential buildings at a rate that is faster than anywhere else. And what I can tell you from my Trade Center experience is many of the tens of thousands of people who work in the Trade Center walk to work.

I always say there are three things that make you rich in New York, and the first thing is if you can walk to work, because it simplifies life. The second is if you have a silent bedroom, and the third is if you actually have spare space. I think that over the next five to 10 years, you will no longer need to sell downtown to anybody.

In a December 2024 podcast from CBRE you described the next 10 years of the Manhattan office market being transformational. Can you give us an idea of what we might see?

New York City has the world’s oldest office stock, with the average age of a Manhattan office building over 80 years. However, what we have learned in the post-COVID era is that to attract and retain top talent and to entice them into the office, we need light-filled, sustainable, amenitized office design that can only be achieved in either new construction or extensive renovation of an older building.

And we’ve learned that companies are willing to pay higher rents for these better-quality properties. Along with the mismatch between tenant demand and office inventory, our city also suffers from a chronic shortage of housing — another essential for remaining competitive with other global business centers.

In recognition of these dynamics, our public officials have begun addressing the limitations in our zoning code and building regulations, long-standing constraints that have stymied efforts to refresh New York’s urban environment. Consequently, we are in the process of seeing radical transformation of our business districts whether it is new office stock in Manhattan’s Midtown East, City of Yes rezoning, renovation of commodity products or residential conversions.

On the podcast you also said the market will need new office space like oxygen. What’s driving that need? Is it the push for return to office?

Manhattan is the largest office market in the world. So, when a cycle is turning, it’s like watching an aircraft carrier turn around — the moves are big but slow. You can see it coming from a long way away. The average office building built on a site that is fully entitled takes five years from excavation to temporary certificate of occupancy.

If we look at construction currently underway, we can see that only 3.5 million square feet of new office stock will be delivered between now and 2030. That’s less than 1 percent added to our 425 million-square-foot inventory. Of that 3.5 million, 2 million is committed, leaving 1.5 million available for lease between now and 2030.

Since in a typical year Manhattan leasing activity is in the 20 to 30 million square feet range, the next five years will see a significant undersupply of new product. This is ironic since the return-to-work push is accelerating, and it is precisely the new and improved properties that companies are seeking. In addition, two of the business sectors that dominate New York City — financial services and legal — are in growth and consolidation mode, resulting in a growing demand for big blocks of space.

Then, too, we are seeing new types of tech companies laying claim to a Manhattan presence, most notably the AI firms that incubate on the West Coast but seek proximity to their

THE SIT-DOWN

customer base by creating outposts in our city.

So the combination of a challenging construction ecosystem — few available sites, constrained construction conditions, intense regulation and zoning, accelerating costs and stubbornly high interest rates — and demand from industry growth and diversification mean that for our city to flourish we need to build and to renovate. This construction is the oxygen that keeps the heart of our city pumping.

You also talked about TikTok not wanting to move into 4 Times Square until the name of the building was changed because four is the “death number” in much of Chinese culture. TikTok is obviously a huge tenant, but is this a sign that tenants have the power at the moment?

Is this a landlord’s market or a tenant’s market? In truth, there is no universal answer to this question. Where power resides in New York real estate is dependent on the submarket, the building age and quality, the financial strength of the property’s ownership, and the tenant’s balance sheet, to name just a few of the factors that impact a negotiation.

For example, if a large tenant is looking for a block of space on Park Avenue right now, the power rests with the landlord. If that same tenant was willing to move downtown to a nonrenovated building, the tenant will dominate the negotiation.   With a market of Manhattan’s size it’s always dangerous to generalize.

Earlier, you mentioned that the World Trade Center was a challenging part of your career. What other challenges have you faced, particularly as a woman in CRE?

I had a very lucky break in that my mentor when I started in the business was a woman named Carol Nelson. So, had I not had Carol, I think it would have been really a bumpy ride.

I came from the government and the media industry, and in government I had never felt the sexist vibe. I’m sure it was there, but back in the day people were careful not to do things that were politically disruptive. Clearly, that’s not the case today, but it used to be the case. The first time I watched the real estate brokerage boys club in action, I was kind of shocked by how little filter they had on what they said out loud — again, this is the 1980s.

But I had things working to my benefit. One was I was in my late 30s by then, and I had testified before Congress. I had met the president of the United States. I worked in the office of the vice president. It was very hard to intimidate me. For me, it was more like, “What’s wrong with these people?” versus, “Oh my God, I feel fragile.” I didn’t.

But then the second thing was the woman who I was working for initially, she had really experienced the slings

and arrows of being a woman, a very successful woman, in our industry. I watched her, I would say, clear the path for me. And, because of Carol, I didn’t get the full impact. By the time I was on my own by the late `90s, when Carol was retiring, I was so well established professionally that nobody was going to do anything untoward, and nobody was going to use their power to diminish my power.

In that regard, there is a group of women I have been mentoring for the last 17 or 18 years. We started with maybe a dozen and it’s grown to a group of 20 today, and I do believe that having the support of other women in the industry helps you see through any noise.

What is your perspective on the situation for women in CRE today?

It is definitely a more friendly environment for women today than it was 30 years ago. It’s definitely better, but not perfect. The trade of information in a world where someone’s your buddy is a very different trade than if it’s just a formal exchange. So one would think that in the world of social media, in the world of the internet, all things are known. But, in fact, the scale of our New York market is so vast, and the ability to know something when it hasn’t happened yet or it’s on the cusp of happening, or what the details of the trade were as a result, is powerful.

You need to have a network of trust out there, and, until there are enough women in that network, there won’t be anything that is actual gender equality. But we’re certainly on the path to that.

I might add, I take pride in this. I think New York City is well ahead of any major market in the United States that I know of in terms of integrating women at every level of the business.

Do you have any concerns that things might go backward, considering the attack on DEI that’s happening right now?

Here is a question: How did DEI impact the real estate industry? The way that I experienced that impact was watching people have the conscious thought that every team they create should have a mix of gender. Certainly within my own firm, I would tell you that that thought was there.

I also think it impacted us when we were assembling for a particular assignment — an outside team that had to incorporate into the larger effort. We went further afield, not the usual suspects only, but, again, trying to build a more diverse body. And I think we made progress. I’d like to think that that’s now in our head permanently. Let’s put it this way: I know it is at CBRE. I mean, what do we teach ourselves? We taught ourselves this works. I feel confident at my own firm that we don’t need a mandate from the government to do what actually creates a more successful working environment.

Do you have a proudest moment in your career?

I think my proudest moment will be when we finish the Trade Center. I’m not there yet.

What do you feel you still need to accomplish in your career?

The beauty of being a real estate broker is that you get to live other companies’ lives for limited periods of time. You get to step into the life of The New York Times, you get to step into the life of Christie’s or Sotheby’s. You get to actually understand their business and, for a period, become part of their business environment, and that is so much fun. I think of it in some ways like what an actor or actress must feel when they get to play a part.

New York is so fortunate in that we don’t have a single dominant business. New York has a lot of different types of businesses — for profit, not for profit, etc. So I get to work on St Patrick’s Cathedral and PJT Investment Bank. These are different organizations, and that’s the nature of the city, and as long as the industry accepts me I’ll keep at it.

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The age-old challenge of filling construction jobs just got a nasty curveball

By Amanda Schiavo

eportations and inflation are worsening a labor shortage that was already running rampant through the construction industry, hindering projects and adding to an already significant affordable housing crisis across the country.

A 2024 workforce study found that 92 percent of construction firms with open positions for salaried workers had trouble filling those jobs, according to trade group the Associated General Contractors of America and technology firm Arcoro, a jump from the 85 percent recorded in a 2023 survey. Additionally, this year the industry will need to add 454,000 new workers on top of its typical hiring if construction demands are to be met, according to the Associated Builders and Contractors labor union.

“The single biggest problem” in the construction industry is the lack of skilled workers, said Gregory Kraut, co-founder and CEO of owner KPG Funds. It is an issue that has been plaguing the construction industry for decades, and has only been exacerbated by recent trends, which show few signs of abating.

“I’ve been in this role for 21 years, and this was a problem 21 years ago,” said Tom Hardiman, executive director of the Modular Building Institute. “Prior to being at MBI, I worked for a chapter of the Associated Builders and Contractors, and that was always one of their top issues: We can’t find enough workers.”

Among the catalysts that have enhanced this problem are the rise in deportations of undocumented immigrants, an important source of labor for the construction industry. Also, historically high inflation over the past three years — particularly in 2022, when inflation rates spiked to levels not seen since the early 1980s — have driven up costs across every facet of the construction process, resulting in the delay or even the total abandonment of some projects.

Immigrant labor makes up approximately 25 percent of the construction industry workforce, according to Rice University’s Baker Institute for Public Policy. About half of the immigrant population within the construction workforce is undocumented, according to data from the Urban Institute

“One thing that over the last 10 years that actually kept the construction workforce afloat was the increased migration that we had into the U.S.,” Kraut said. “In one day we had about 20 percent of our workforce disappear because of Trump’s immigration stance. There’s a whole underbelly of construction that relies on those people.”

During Donald Trump’s first term he signed an executive order that re-established the Secure Communities enforcement program, a strict immigration crackdown from the George W. Bush and Barack Obama administrations that was phased out in 2014. One study suggests that that one move led to significant reductions in the construction workforce and a slowdown in residential construction.

Between the executive order from his first term and Trump’s current anti-immigration push — average daily illegal crossings along the southern border have fallen to levels not seen since the 1960s — there is real concern that the housing crisis will only worsen due to the dearth of labor.

“Immigration policies have certainly impacted the workforce,” said

Hit the Light on the Way Out

Nonprofits occupy more than 10% of New York City’s commercial space. What happens if federal cuts drive a lot of them out of business?

By Larry Getlen

he federal government’s determination to cancel contracts and slash funding wherever possible is likely to have a devastating effect on nonprofit organizations in New York.

Exact figures are difficult to calculate due to how much is changing in such a short time. But prominent examples are easy to find in just the two months since the so-called Department of Government Efficiency began a severe cutting spree.

New York State recently lost over $400 million in federal funding from the U.S. Department of Health and Human Services that was designated for various health agencies and programs.

New York City lost $80 million that the Federal Emergency Management Agency took back. And The Guardian recently reported that Farm School NYC, which trains New York City residents in urban agriculture and depended on the U.S. Department of Agriculture for a significant portion of its funding, had a $300,000 grant terminated, killing numerous programs.

With losses on this level across the nonprofit ecosystem, it’s virtually impossible to imagine that commercial real estate won’t be affected in the form of lost tenants, as some nonprofits simply won’t be able to continue, all or in part, without crucial federal funding.

“Federal funding cuts to nonprofits could disrupt parts of the city’s commercial market,” James Whelan, president of the Real Estate Board of New York, an industry lobby, said in a statement provided to Commercial Observer. “We have seen steady leasing activity from this sector through the post- pandemic recovery, and it would be unfortunate if that upward trajectory was interrupted.”

Jeffrey Gural, chairman of GFP Real Estate, provides numerous nonprofits with below-marketrate rent in some of his buildings. Gural is already seeing the effect of the federal government’s cuts firsthand.

“We had one tenant that went out of business that occupied 12,000 square feet and had a contract with the federal government to do research on pandemics,” said Gural. “When I leased the space to them, I figured they would be a growth tenant because I thought people would prefer not to go through another pandemic. We signed a 10-year lease to build the space and paid the broker, and they only lasted two years.”

The tenant went out of business after the federal government canceled vital contracts, and the tenant handed the keys on its space back to Gural.

With so many funding cuts hitting organizations so quickly, many nonprofits are still scrambling to figure out how and if they can survive, and what changes need to be made if they do.

But early indications have shown that, over time, experiences like Gural’s have the potential to become far more common, dealing New York office owners another blow. And that blow is being felt just as much of the sector seemed to be turning things around from the dark days of the pandemic and the widespread embrace of work from home.

The consequences could be stark. According to figures provided by Cushman & Wakefield, there are approximately 27,000 nonprofit organizations in the New York City metropolitan area, and one

in eight jobs in the city are in the nonprofit sector. Exact figures have been hard to come by, but Cushman estimates that roughly 11 to 13 percent of commercial space in New York City is occupied by nonprofit organizations.

Carri Lyon, a real estate attorney, executive managing director at Cushman & Wakefield and co-chair of the company’s national not-for-profit practice group, notes that a landlord allowing a struggling nonprofit to simply walk away from a lease is not the norm, no matter how much funding it loses.

“You can’t just toss the keys back and walk off unless you want to end up in court. That’s something that’s been a big source of confusion,” said Lyon. “This came up a lot during COVID where tenants thought, ‘I’m not going into the office, so here are my keys.’ You’ve got a binding lease. They’ll come after you if you have money left, and they can tell, because your tax returns as a nonprofit are public.”

Lyon advises nonprofits she works with that, in the event of funding cuts, they should have an honest talk with their landlord about their situation.

“If they’re having trouble, they should talk to the landlord or have us go with them,” said Lyon. “During COVID, landlords got really good at, ‘Let me see your books. Show me how you’re hurting and what you’re doing about it.’ ”

Lyon said that while landlords are not obligated to help the nonprofit even then, signs of genuine hardship and well-thought-out efforts to deal with them head-on increase the likelihood that the landlord might give the organization a break.

“Landlords aren’t obligated to do anything,” said Lyon. “But some will give a rent break and tack it on to the end of the term. And others will say, ‘I’m sorry, but it looks to me like you’ve got plenty of money, and we’re all taking a hit.’ The worst thing a nonprofit can do is to just walk off and say, ‘Let my lawyer deal with this.’ ”

That said, while the situation for nonprofits seems to range from concerning to fatal, not all have been similarly affected … yet.

“One of our clients provides support services for migrant youth, including housing, and none of those contracts have been terminated,” said Stephen Powers, co-founder of Open Impact Real Estate, a commercial real estate services company that specializes in mission-driven organizations. “And they’ve actually extended some of those contracts because they’re not ready to recast them.”

Powers also noted that the funding sources for many of these types of organizations provide hope that some organizations will be just minimally affected.

“Most New York City nonprofits are being funded from a combination of city and state sources, and then some federal, but the majority is state and city,” said Powers. “I’d say over 90 percent of funding is coming from those state and city sources.”

But, according to Gural, even a heavy reliance on state and city funding might not be the safe haven it sounds like for nonprofits.

“There’s a ripple effect,” said Gural. “The first thing I ask when I call a big nonprofit is, ‘Do you get any federal money?’ And I pray that they’re going to say no. And a lot of them don’t get any federal money. But, if they’re getting state and

city money, and then the state and the city have their funding cut, then they will have to cut their budgets.

“So we’re in a period right now where no one knows what to expect. People who have federal contracts are the first group to tell me they’re in trouble, but it’s possible that the next group will be those who rely on state and city money, who may find out that the state and the city are cutting back because they’re getting less money from the federal government.”

Gural also notes that nonprofits with New York City office space are likely to work out of Class B and other commodity buildings, which have not enjoyed the return to high demand that Class A buildings have in the flight to quality of the past few years.

“Most nonprofits are in B buildings because it looks bad if I’m a potential donor to a nonprofit and I go to meet them in their office, and it’s a building on Park Avenue or in Hudson Yards,” said Gural.

So if the time comes when funding cuts lead to a nonprofit exodus of sorts, commodity buildings will, in an eerie reminder of pandemic times, bear the brunt, leaving them once again with an overstock of empty office space.

That said, with so many cuts happening so quickly, we are still in the beginning stages of seeing how this all plays out — for nonprofits and for the office sector alike.

Demonstrating that not all nonprofits see their future as having been compromised, Open Impact’s Powers mentions an educational organization he works with that has been planning to purchase a 40,000-square-foot building.

“Their board doubled down,” Powers said. “They said, ‘This is a very long-term plan, and these short-term changes are not going to have an impact on our long-term plans.’ ”

But, overall, the forecast for nonprofits seems potentially bleak in the months and years to come, as many have already experienced cuts, and others wait to see if and when the hammer will drop.

“There are a lot of nonprofits that are on hold right now,” said Gural. “Anyone who is thinking of getting a job in the nonprofit world is in trouble. I’ve talked to some of the hospitals and colleges, and no one is hiring. Everybody’s on pause and waiting to see what happens, because nobody knows what the real bottom line is going to be.”

‘The first thing I ask when I call a big nonprofit is, “Do you get any federal money?” And I pray that they’re going to say no.’

‘They call it the golden age of private credit for a reason.’

“It’s competition but it’s also collaborating,” said David Bouton, co-head of U.S. commercial mortgage- backed securities (CMBS) at Citigroup. “We jointly do deals with clients who are private credit, we source loans and provide back leverage, and, in certain ways, it’s actually provided a very good partnership.”

Last year, Bouton and Joseph Dyckman, the other head of U.S. CMBS at Citigroup, extended $4 billion of warehouse line repurchase agreements to nonbank lenders, bringing the bank’s total commitment in that space to $13 billion.

“I think our clients view it as another way to partner with Citi, and we view it as a way to expand the origination platform,” said Dyckman, who added he’s not too worried about the exponential growth of shadow banking. “Everyone makes a big deal about private credit markets, but private credit can’t withstand the volume we’ll see in the next several years, so there’s still a tremendous opportunity for bank balance sheet lending to continue.”

Scott Rechler, chairman of RXR, has been able to view the emergence of private credit through the lens of being both a borrower and a private lender, as his firm launched a $1 billion CRE credit strategy in 2023. Rechler argued that banks like to be lenders to nonbanks due to the favorable credit treatment and the better collateral, as well as the fact that whole loans provided to the funds are often broken up to disentangle risk — which is also easier for borrowers to live with.

“What we’re finding, we’re seeing, is an interesting simpatico, where everyone is finding their home and it works for all pieces,” said Rechler. “And, so, that is a good development that will create somewhat more permanent capital for the borrower and re-equitize the CRE space.”

Humble origins

Unlike its more famous (and maligned) cousin private equity, which emerged out of the go-go 1980s and was immortalized by movies like Wall Street and books like Barbarians at the Gate, the industry of private credit has its origins in the lending apocalypse that followed the Global Financial Crisis of 2007-2009.

“After the GFC, the Dodd-Frank [financial oversight legislation] went into effect and regulatory oversight pushed business to the shadow banking market. That’s how debt funds got started,” explained James Millon, president of U.S. debt and structured finance at CBRE.

In the post-GFC banking landscape, onerous regulations made it more challenging and expensive for traditional lenders to play a role in financing real estate and corporate debt. And, while the federal Troubled Asset Relief Program (TARP) and the Term Asset Backed Securities Loan Facility (TALF) were designed to open up liquidity within the asset-backed securitization space, the programs also created an incentive for private debt funds, nonbank lenders and mortgage REITs to open their doors to originate loans and borrow against them at cheap rates.

Both Millon and Rechler independently likened the capital markets’ innovation in this period to what occurred when private firms established the modern commercial mortgage-backed securities market in the early 1990s to replace the failed savings and loan industry that began a painful, multiyear collapse in 1987.

“After the savings and loan crisis, the nonbank lender that evolved was the CMBS market, which didn’t exist before that,” explained Rechler. “After the GFC, the regulatory environment made it much more challenging and expensive for traditional lenders to play a role, which led

to nonbank lenders.”

At first blush, the nonbank lending industry was relatively small. In 2009, it was only $250 billion, while total private credit assets under management didn’t even reach $1 trillion until 2020, according to data from the Wall Street Journal

“Before it was formalized, and had the glow of being called private credit, the private lending world was hard money lending, it was sharp elbowed and could be called predatory,” said Weissman.

But it did fill a void.

Michael Gigliotti, senior managing director at JLL Capital Markets, explained that GE Real Estate and Mesa West Capital were among the first that saw the gap in the marketplace of CRE bridge loans that banks were either avoiding due to nonrecourse risk or the dangerous leverage requirements, which flew in the face of new DoddFrank mandates. Moreover, investment dollars into various CRE asset classes only grew once the S&P 500 added real estate in 2016 as one of 11 sectors in its Global Industry Classification Standard, pushing real estate finance well beyond the traditional bounds of public REIT stock purchases.

“People really gravitated toward [private credit] because it solved issues, and then there wasn’t enough of it, so more people took advantage of it,” said Gigliotti. “Also there was the ability to earn equity-like returns in the credit space because of leverage you could put on their credit.”

There were sector specific loans, too, that required the touch of private credit. S3 Capital’s Robert Schwartz, who co-founded his firm in 2013, said that by the mid-2010s regional banks were completely inactive lenders in the sub$20 million space for construction loans. That allowed his firm to grow quickly by filling that void, mainly in New York City, and eventually nationally.

Today S3 Capital has originated $6.3 billion in multifamily bridge and construction loans.

“The need for that capital was huge, and the regional banks were ignoring it. There was no real institutional presence in that market back then for those lenders,” said Schwartz.

But the Dodd-Frank rules, while well intentioned to rein in the excesses of the commercial and investment banks that nearly blew up the global financial system, also had an unintended side effect. After 2008, the government no longer wanted to see banks use the deposits of Joe Six-Pack or Molly Main Street to finance CRE investment sales, construction projects, lease-ups or repostings. Instead, they wanted that financing to come from institutional investors that could bear the brunt of any losses (and certainly the headlines).

“The regulation is well intended but it’s not executed well,” said Weissman. “As it’s become harder to get loans from banks, it’s opened up the desire and demand for alternative financing, and that’s what’s accelerated that business.”

Clients for you. Clients for me?

For both banks and nonbank lenders alike, the crux of their business model is to secure clients — either depositors or long-term investors, sometimes direct referrals, often repeat borrowers — that allow them to make loans on lucrative assets.

Now that a second player has entered the credit space, however, banks are feeling the heat as there’s only a limited number of clients to service and only so much debt

needed at once.

“The thought process that your local banker is your tried and true, to be trusted for all your banking needs, mortgages, lines of credit, has been turned on its head with the prevalence of private credit,” said real estate finance attorney Christine O’Connell, a partner at King & Spalding. “Back in 2008 to 2010, when banks pulled back and private credit came in, it was seen as dangerous for borrowers. But, as these players have grown in the space, it’s almost become the banks that used to be there.”

Those who have succeeded in the alternative lending space believe they can offer their borrowers services that banks either can’t do or won’t do, particularly speed of execution and the ability to take over stalled projects and foreclosures due to their vertically integrated structure.

Marcello Cricco-Lizza, principal of global commercial real estate at Balbec Capital, an alternative investment manager with $23 billion in assets, argued that large bank loans often take months to close, due to regulatory constraints, while bank appraisals can take two to three weeks as nervous boards review the details.

“There’s a whole slew of borrowers for whom bank financing just doesn’t make sense. There’s not enough proceeds, and they can’t go high enough in leverage,” he said. “Whereas, we can add higher leverage on our loans and have the sophistication to take over those properties and work them out that banks don’t have.”

Aside from the ability to offer higher loan-to-value ratios, there’s a certain personal touch that many private credit asset managers tend to advertise as well.

Warren de Haan, CEO and managing partner of Acore Capital, a CRE investment firm with $19 billion in AUM, noted that his company currently has 80 borrowers with whom they’ve made at least three deals, and that “there’s not much reason for them to go elsewhere,” due to the familiarity between both parties.

“Today, when you have a difficult macro environment with higher interest rates, there’s more of a hands-on asset management function that’s required for borrowers to feel they’ve had a great experience,” he said. “Everything we do feeds the funnel of production, so our goal is to give our clients a white-glove experience.”

Investors have taken notice of the more borrowerfriendly landscape. The proportion of bank lending compared to all corporate borrowing dropped from 44 percent in 2020 to 35 percent in 2023, according to the Federal Reserve Bank of St. Louis.

In an increasingly situational and deal-specific marketplace, where borrowers choose their lenders based on deal theme and expertise, banks have responded by highlighting their resumés and relationships, to say nothing of their global, multinational outreach.

“Banks are leaning in on strong relationships that they have to keep their clients, but I don’t think they’re expanding into too many new relationships,” said David Perlman, managing director at Thorofare Capital, a vertically integrated commercial real estate debt manager. “If you have a good relationship, you’ll get a good bank quote, but it’s very competitive.”

Perlman added that the largest commercial banks have the luxury of holding a global viewpoint toward their clients’ business needs. This allows them to be more flexible on deal structures, like waving upfront fees and yield maintenance, due to the global revenue their deposits eventually accrue.

Attorney Scott Levine, a partner at King & Spalding, told

CO that relationships “are a huge reason” why his CRE clients go to certain banks for financing, mainly due to debt funds’ pesky habit of selling off pieces of their loan for back leverage (often to another bank).

“Borrowers feel the debt funds are more likely to sell than the banks, particularly when things go south, and that’s when they get concerned,” he said. “The banks might be selling pieces of loans, but they’re generally sticking around in the deal — and, for borrowers, they know who is on the phone when they call.”

But the outlook is not entirely sunny for U.S. commercial banking. Most banks’ legacy portfolios have issues, whether from 30-year mortgages written at low interest rates, or 10-year office loans now completely underwater. Plus, almost every bank is feeling the heat from nervous depositors, who are tempted by Treasurys, money market accounts, mutual funds and, yes, debt funds.

Moreover, the uncertainty of Basel III — an international framework on bank capital requirements and liquidity and leverage regulations — has also depressed the sector’s standing among borrowers, as banks have been more cautious about extending CRE loans amid the Basel fog, which requires higher capital requirements to compensate for the increased risk.

So, ironically, banks have responded to the competition from private credit by becoming the private credit industry’s lender of choice, and changing the nature of commercial real estate finance in the process.

Risk vs. reward

As Stuart Boesky explains it, the banks just got tired of carrying all the risk in big CRE projects.

The industry veteran and CEO of Pembroke Capital told CO that the nation’s largest banks actively decided that it would be most cost effective for the active fund managers to take some of their “smaller” clients away from them. In return, the banks would help these entities by originating large loans at advance rates that reduced risk and allowed themselves to remain participants in the CRE market, albeit with a smaller staff and less

overhead. The debt funds, in turn, generated new business and created clients for life.

“Until very recently, I think the banks were happy to let the funds do their business,” said Boesky. “I don’t think that business was profitable to banks due to cost of capital and regulatory requirements and so they were very willing to lend to those big funds.”

Through warehouse-type facilities and repos — which include note-on-note finances, joint venture uni-trench loans and single- asset repos — the banks have been able to originate safer CRE loans that receive better capital treatment and that place balance sheet risk in the hands of safer sponsors.

“Their desire to finance us is top of their list,” said de Haan. “It’s a partnership between alternative lenders and the banks that results in more liquidity available at an attractive cost for the CRE industry, and that’s a positive long-term trend.”

Balbec Capital’s Cricco-Lizza has called this universe of lender financing “the most competitive sector today within all of CRE,” and said that the competitive nature among debt funds for bank loan business has pushed out many regional banks that otherwise would be making bridge and construction loans.

“Everyone wants to be in it,” he said. “Because the people providing lender financing don’t take a loss, if you do the work properly, but it’s a low-risk business where you can still earn some spread, and a lot of bigger banks in direct CRE lending have done pretty poorly.”

Citigroup’s Dyckman said lender financings allowed his commercial bank to originate certain types of loans they normally wouldn’t consider because they have a professional banking partner with them to carry most of the risk.

“Now we can do deals with size,” said Dyckman. “It’s been a tremendous sort of growth for us over the last 12 months.”

But, like anything in the nebulous waters of high finance, enormous risks balance out the enormous rewards.

Boesky argued that in many respects the evolution of debt funds is a good thing, as banks in the post-GFC years offered historically low LTV levels on CRE loans that would’ve depressed the product across all sectors had debt funds not come into existence. But he cautioned that private credit might be growing too large, too quickly.

“As they raise more and more money, they get more competitive, which means they have to price their loan products at points that don’t adequately compensate them for the associated risk,” he said. “And sometimes things like that end badly.”

Rechler — who is both a borrower of, and lender in, private credit — admitted that there is a lack of transparency on the capital that has created some risk in this new system.

“When banks do it, the regulators know exactly what’s out there, they know what banks are lending and how much to each sector, but that’s not really transparent on these funds,” he said.

Casual observers should recognize that if a black swan event occurs, commercial banks’ exposure is limited because they are lending at a senior position to the funds. They’ll be more protected than the actual investors into private credit, who would take the first losses.

“If there’s margin calls, or a COVID-style event, all of sudden the leverage providers to private credit will call in their loans, and a lot of lenders don’t have that margin call type of facility,” said Weissman. “It’s not that there’s no risk. There’s a transfer of risk and repricing of risk that’s happening here.”

Others in the space are bullish no matter what the market brings. Zegen conceded that while there’s room for multiple players, the investor base of private credit is shifting away from institutions to now encompass wealth managers, IRA accounts and individual retail investors

“They’re funding the next age of private credit, and more and more it’s taking the place of banks,” said Zegen. “We’re in the early innings of it.”

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Nuveen Green Capital co-founders

Alexandra Cooley (left) and Jessica Bailey keep growing the C-PACE lending space despite macroeconomic storms

By Andrew Coen | Photograph by Axel Dupeux

‘I wouldn’t say this program is perfect — I wouldn’t say any program across the country is perfect — but it’s good, and it’s getting better.’

visual in the Darien, Conn., headquarters of Nuveen Green Capital (NGC) provides a daily reminder of how far the company and the Commercial Property Assessed Clean Energy (C-PACE) lending sector it specializes in has grown over the past decade as the industry nears the $10 billion threshold.

NGC, which was co-founded by Jessica Bailey and Alexandra “Ali” Cooley in 2015 as Greenworks Lending, still has a page from one of its early pitch books showing a U.S. map with Connecticut, Ohio and California colored green, indicating the only three states at the time with C-PACE programs. Their firm, which was acquired by Chicago-based asset manager Nuveen in 2021, closed the commercial real estate industry’s first rated C-PACE securitization in 2017, and has paved the way for the sector to expand into 40 states.

Last year, in fact, NGC accounted for nearly half of the C-PACE market share nationally with more than $1.2 billion of volume.

“When we both look back at that, we think of who took that bet with us and said you can turn those three states into a national industry and soon — we hope — an international industry,” said Bailey, who previously worked with Cooley at the Connecticut Green Bank prior to forming NGC. “It really was that public-private partnership that helped us expand into 40 states across the U.S. and really has set the table for the impact and the scale that we’ve seen in the industry.”

Bailey and Cooley first teamed at the Connecticut Green Bank in 2012 when they were building a C-PACE program, aimed at delivering private capital to commercial property owners in the Constitution State looking to decarbonize their buildings. The duo quickly realized this strategy could be taken to a national level given the void in the middle CRE market for landlords in need of capital for energy enhancements to reduce operating expenses.

C-PACE financing, which typically has fixed-rate, 30-year loan periods funded by a special tax assessment on the property tax bill, has expanded well beyond its initial vision of facilitating building renovations or new construction projects. Now it’s playing a far bigger role in the capital stack. When interest rates began to rapidly rise in 2022, more CRE borrowers sought C-PACE as a credit enhancement in existing debt deals for recapitalizations and refinancing past debt.

“Having had the opportunity to work with Jessica and Ali at the Connecticut Green Bank, where they played integral roles in designing, implementing, and launching the nation’s first successful C-PACE program, I have been truly inspired by their shared journey as they continue to make a significant impact on the commercial real estate and C-PACE industries,” said Bryan Garcia, president and CEO of the Connecticut Green Bank. “Through their ongoing efforts, Ali and Jessica have consistently demonstrated the many benefits of C-PACE, and their well-deserved success serves as a testament to their dedication and hard work.”

The expansion of C-PACE got a big boost in late 2024 when New York City expanded the number of projects eligible for this type of financing mechanism to include gut rehabilitations in addition to renovations. Bailey and Cooley advocated hard for New York City’s C-PACE expansion by working closely with the New York State Research and Development Authority and with City Hall to create new guidelines. It was part of their long run of educational outreach on behalf of the industry dating back to working with the Connecticut Green Bank.

“Rather than going into the public sector and saying ‘This is how you need to do this so private capital can do what they do,’ we really approach them as partners and we ask them what their needs are,” Bailey said. “We worked over the course of two to three years to figure out how to revise the structure of the program in New York City to make it more amenable to building owners wanting to use C-PACE financing. And I wouldn’t say this program is perfect — I wouldn’t say any program across the country is perfect — but it’s good, and it’s getting better.”

During the initial more limited rollout of New York City’s C-PACE program, NGC closed the second deal ever in the Big Apple with a $28 million loan to fund the retrofit of parent company TIAA/Nuveen’s building at 730 Third Avenue in September 2021. It marked New York City’s last C-PACE transaction prior to a prolonged pause in the program caused by administrative delays. The pause found Cooley and Bailey working behind the scenes to greenlight larger-scale C-PACE deals for the most populous U.S. city.

Cooley said New York City is now poised for a big flow of C-PACE originations with a number of conversion projects taking flight as some office owners look to switch their buildings to residential use. She also noted that C-PACE can be a tool for New York City CRE borrowers with large capital stacks in need of gap financing or developers seeking cost savings as they confront higher construction costs from tariffs enacted by President Donald Trump.

Also, even as the Trump administration takes aim at environmental, social and corporate governance (ESG) principles, the NGC co-founders expect C-PACE to remain on an upward trajectory. That’s due to the increased versatility since those early days at Greenworks, when Bailey and Cooper were helping building owners with weather-resiliency projects and the fact that C-PACE policies are administered by individual states rather than the federal government.

“Certainly there is not as much demand for clean energy improvements or sustainable redesign of commercial real estate,” Bailey said, “but that’s only a piece of what C-PACE has been about all these years. Where we have found traction is when building owners are trying to make a smart financial decision to position their building for success. We think both from a market demand perspective and politically we’re pretty well insulated from anything that’s happening in D.C., which feels pretty good.”

NGC closed its largest deal to date last fall with a $220 million, 30-year C-PACE loan to finance the recapitalization of San Francisco developer Jay Paul Company’s new 19-story office building at 200 Park Avenue in Downtown San Jose. The transaction came on the heels of a $190 million C-PACE loan NGC originated in August 2024 for JC Hospitality to refinance past debt on its Virgin Hotels Las Vegas property.

The clean energy lending arm of Nuveen positioned itself for further growth last October by partnering with Canadian global investment group CDPQ to launch a $600 million CRE lending program. It combined long-term C-PACE financing with senior bridge and construction loans.

Sandeep Srinath, managing director of the asset securitization group at ING Americas, which provides financing for C-PACE lenders, credits Bailey and Cooley for advancing the industry over the past decade. ING partnered with NGC on the company’s first C-PACE deal in 2017 and has been active in the space since.

“Since then, it’s remarkable to see not only the growth but also how the C-PACE approach has revolutionized

commercial real estate,” Srinath said. “A lot of credit goes to Nuveen Green Capital for helping pioneer the C-PACE space, and they remain a leader that continues to push boundaries and innovate.”

The growth in deal count has fueled growth in-house. After beginning with Bailey and Cooley as the only two on staff, NGC has increased to around 100 employees in its Darien and Manhattan offices, with women comprising much of the firm. Both Cooley and Bailey take pride in running a women-led CRE finance firm in a male-dominated industry after encountering some initial bumps along the road with some sexist comments from investors — including questions about whether they’d use the money to decorate their offices.

“It would have been a lot harder had we not had each other,” Cooley said. “For the most part it didn’t come up, but there were a couple instances where it definitely did, and the fact that we could look at each other and be like, ‘That was weird, and that is not normal,’ and then move on, I think that really helped having a partner who was going through the same thing.”

The paths for both Bailey and Cooley into CRE alternative lending were, appropriately enough, of the non-traditional variety.

Bailey, a Chicago native, came from a policy background after studying political science at the University of Notre Dame and earning a master’s in international relations at Yale.

Cooley, who grew up in Westport, Conn., initially did consulting work in the oil and gas space after graduating from the University of Pennsylvania in 2008 at a time when ethanol was driving energy policies in Washington. The experience proved to be a “light bulb” moment for Cooley to chart a future focused on alternative energy lending, and eventually created a path to join forces with Bailey at Connecticut Green Bank. “I realized that you can have a smart policy that drives the private sector into creating the change that you want to see,” Cooley said. “That realization drove me to go to business school, and I ended up with the nontraditional path out of business school going into the public sector. But what the Green Bank was starting to do was so interesting to me because it was really setting the table for private capital to come in.”

Closing in excess of $1 billion in originations in a year while also advocating for the C-PACE industry nationwide brings very little free time for the NGC co-founders.

Bailey, who is also busy raising four kids, enjoys heading to the mountains when she can for skiing and hiking. Cooley is especially preoccupied these days after giving birth to identical twin girls last July. She also just completed a renovation of her apartment, developing a passion for interior design from the project.

Looking ahead to 2025 and beyond, NGC sees plenty of green shoots for C-PACE with its recent expansion in New York City, New Jersey, Georgia and Hawaii along with an enhanced program in Florida. Only a few states remain without any movement in C-PACE-enabled legislation. That makes for a far more complete map from Bailey and Cooley’s early days forming an alternative lender that has helped pioneer an industry.

“In terms of de novo states where we don’t have any policy, there’s fewer and fewer, not that we’re not trying for them all,” Bailey said. “But, for the most part, the map has moved from those three green states to really a pretty green map.”

YUNUS

GLENN SILVA

JIMMY