Sunday Summary: Holiday Cheer

It’s the day before Christmas. We hope all your shopping is done and presents are wrapped and under the tree. All that’s left is spending time with friends and family (potentially indulging [yourself in a feast of seven fishes](, depending on how much Italian is in you) and forgetting about work for a few days. Before you do, let’s look at some last-minute holiday cheer that commercial real estate got this year. We all know financings have been harder to come by recently, which is why it’s always joyous to see a massive deal close. New York City got one last week when [Aby Rosen’s RFR Holding secured a $1.1 billion refinancing]( for its Seagram Building at 375 Park Avenue. The deal was a bit in the making as RFR reportedly started looking in February to refinance its $1 billion mortgage on the property. RFR missed the May maturation date for that loan and, after getting an extension, finally secured the fresh debt from JVP Management before year’s end. While that was something to be cheerful about, we can’t ignore the leasing presents we got. The week before Christmas saw not one but two deals that cracked the city’s top 10 biggest leases of the year. First up, law firm [Paul, Weiss, Rifkind, Wharton & Garrison took 765,000 square feet]( at Fisher Brothers’ 1345 Avenue of the Americas. The deal was New York City’s — and the country’s — [largest office lease of 2023](. And it appears to be an expansion too, as Paul Weiss will relocate from its current 550,000-square-foot offices at 1285 Avenue of the Americas. It wasn’t just Paul Weiss giving the leasing market some Christmas cheer. [MetLife extended its 400,000 square feet]( in its namesake MetLife Building, keeping the insurance giant in the 200 Park Avenue tower until 2038. That deal is the sixth largest office lease in the city this year. Christmas salesIn arguably one of the greatest Christmas songs, Ray Davies sang, [“Father Christmas, give us some money.”]( And there were plenty of cash gifts going around last week. Prada did some holiday shopping of its own. The Italian luxury fashion house [agreed to drop $425 million to buy the building]( that has housed its New York City flagship store since 1997. It’s unclear when the purchase of 724 Fifth Avenue from Jeff Sutton’s Wharton Properties will be finalized, but if it closes before the ball drops in Times Square it would crack [the top 10 investment sales of 2023 in the city](. It wasn’t just Prada dropping some cash. Zara’s billionaire founder [Amancio Ortega paid $113 million]( for a cold-storage facility in Miami; Slate Property Group and RiseBoro Community Partnership acquired the shuttered JFK Hilton Hotel in Queens for [$64 million to turn it into supportive housing](; and TPG Angelo Gordon [picked up a 46-acre plot of land]( in the Inland Empire for $34.3 million. And, in a tale sure to warm some hearts, [Srinivas Chavali bought Dulles Town Center, the largest mall]( in Virginia’s Loudoun County, for $46 million. Chavali had attended the mall’s grand opening in 1999, soon after emigrating from India, and said that event helped inspire him to get into the real estate business. “I never could have dreamed of owning Dulles Town Center and I never could have imagined over my life that I would own a 1.2 million-square-foot mall and very few people know my name,” Chavali told Commercial Observer. There was also plenty of money being lent before Christmas. Lauderdale Beach Association [locked down $185 million to refinance]( its beachfront hotel in Fort Lauderdale, Fla.; Madison Realty Capital originated a [$177.5 million refinancing for a multifamily asset]( in Boston; Triangle Equities secured a [$50 million first-lien mortgage]( for its industrial development in Queens; [Sumaida + Khurana and Bizzi + Bilgili landed $47.25 million]( in construction financing for their Miami Beach office development; and Alto Real Estate Funds [finalized a $46.6 million loan]( for its six-property industrial portfolio spread across the country. Last, [Santander Bank was awarded a minority stake]( in the remaining balance of Signature Bank’s rent-regulated loan portfolio. Santander bid $1.1 billion for a 20 percent interest in the roughly $9 billion in loans. Bah humbug!Sorry to be a Grinch and ruin the holiday good times, but there was some bad news we had to report last week. Most notably, a new paper from the National Bureau of Economic Research found that 14 percent of the $2.7 trillion commercial real estate loan market [currently have outstanding balances higher than property values]( and are at risk of immediate default. That includes 44 percent of office loans. The paper calculated that a 10 percent default rate on all CRE loans could trigger up to $80 billion in bank losses, which could lead to dozens of bank failures. And it’s clear that some owners are already feeling the pain. Savanna [handed the keys to its 12-story Harlem office building]( back to its lender to avoid foreclosure. [Signa Holding put its 50 percent stake]( in the Chrysler Building up for sale as the bankrupt Austrian company tries to wind down its vast commercial enterprise. The impact on the office market has been driving down valuations all across the country, especially in California’s Orange County. Several properties have sold at a loss in the area recently, including 3 Hutton Centre Drive, which [Tireco bought for $28.9 million](, a drop from the $50.5 million that Harbert Corporation and Cypress Office Properties paid in 2016. Some landlords have been able to avoid the worst, with Monday Properties [recapitalizing the debt on the Nestlé USA headquarters building in Arlington, Va.](, thus averting a foreclosure that was set for last week. All I want for Christmas is a new contractSome 20,000 commercial building workers in New York City could take to the streets and strike if landlords don’t cede ground before their labor contract expires on Dec. 31. The [32BJ Services Employees International Union voted to walk off the job]( if negotiations with the Realty Advisory Board (RAB) don’t lead to a new contract before the end of the year. Both sides have budged little in the monthslong negotiations. RAB has argued the sluggish office market is more than enough to justify cost-cutting measures like workers contributing toward the cost of health insurance premiums, fewer paid sick and vacation days, cuts to overtime and lower wages for new hires. The union, on the other hand, balked at those proposals and said that members' status as essential workers during the pandemic is one of many reasons to not give up its hard-won labor protections. We won’t leave you on a dour note before Christmas. SL Green Realty surely has to be feeling the holiday cheer as several of its [Times Square neighbors announced support for its plan]( to put a casino in the neighborhood. Jamestown, Levin Management, Rosemark Management, Soho Properties, Moinian Group, Wharton Properties, RFR Holding, Ian Schrager Company and Stillman Development have all joined a coalition pushing the state to award SL Green, Caesars Entertainment and Jay-Z’s Roc Nation a casino license for Times Square. Happy holidays! 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