Cushman & Wakefield’s Adam Spies, Doug Harmon, Josh King and Adam Doneger were engaged by WMC to market the sale, with LaSalle eventually acquiring its partner’s interest in the property. 

The 74,112-square-foot building was developed as a joint venture between WMC and LaSalle in 2018, with WMC taking the role of operating partner and developer with a less than 50 percent interest in the project. LaSalle engaged in the venture through its U.S. core open-end real estate fund, LaSalle Property Fund (LPF). 

In May 2018, the JV secured $35 million in construction financing from CIT Group for the property. 

The building was constructed on a 99-year ground lease, with the land owned by Redemptorist Fathers of New York church. 

In 2019, Memorial Sloan Kettering Cancer Center inked a 30-year lease at the property for 75,000 square feet, taking the entire six-story building. 

In good company, the asset is located a few blocks away from several Memorial Sloan Kettering outposts as well as the New York-Presbyterian/Weill Cornell Medical Center. It also neighbors Weill Cornell’s medical diagnostics imaging center.

In an announcement at the time of the property’s development, Richard Reese, a managing director of acquisitions at LaSalle, said: “This property fits well with LaSalle’s strategic focus on medical office acquisitions, offering long-term stability in a thriving location. The Upper East Side of Manhattan is a densely populated area with a robust pool of demand drivers. In addition, the medical facilities in the area are also able to boost demand well beyond the immediate neighborhood, creating the need for additional supply.”

Officials at WMC couldn’t be reached for comment. A LaSalle spokesperson and C&W officials declined to comment.

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.

To wit, this week the Fed announced a 75 basis point increase in benchmark interest rates. (It’s the third hike since June and the fifth since the beginning of the year.)

“Borrowing essentially has become two times as expensive since the beginning of the year,” Lisa Knee, partner at EisnerAmper, told CO.

And these borrowing costs have been doing predictable damage to the single-family market, according to a report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, which found that permits to build single-family homes were up only 3.5 percent in August. In comparison, the number of permits for multifamily dwellings increased 28 percent.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” National Association of Home Builders Chairman Jerry Konter said. (The NAHB had its own dire report earlier in the week.) “In another indicator of a weakening market, 24 percent of builders reported reducing home prices, up from 19 percent last month.”

But this is kind of what the Fed is shooting for.

“Housing prices were going up at an unsustainably fast level,” Fed Chair Jerome Powell said when announcing the rate hike. “For the longer term what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace, and people can afford houses again. We probably in the housing market have to go through a correction to get back to that place.”

But, pain of dealing with a correction aside, there are reasons to be optimistic about the long-term future.

One indicator is in the land market. In Manhattan, it had been going crazy over the summer. While price per square foot is not what it was at the top of the market (circa 2015 and 2016) dollar volume for land sales are on pace to be 103 percent of what they were last year, according to JLL’s Robert Knakal.

“The activity has been precipitated by the consensus that inflation and higher rates are a shorter-term dynamic, and three to four years from today, when what is being purchased for construction will be coming online, broader economic indicators will be back to relatively normal levels,” Knakal wrote in his CO column.

In Related news…

You know what region needs more housing? Southern California. And do you know who’s been answering this call without any misgivings or second thoughts? Related Companies.

The mega-developer just announced plans to turn the 41-acre Metro Town Square in Santa Ana, Calif., into 4,000 units of housing that they’re planning on calling Related Bristol.

California was bursting with plans last week; the New York-based East End Capital filed plans for a project with 10 new soundstages, three flex spaces, offices, a four-level garage and more in Glendale.

The Sullivan family (best known for the Toyota of Hollywood dealership) proposed a major redevelopment of 6000 Hollywood Boulevard that would include a new 35-story multifamily tower, a six-story office building and multiple low-rise residential townhomes for a total of 350 units.

And a retail center in Lancaster (more than 60 miles from Downtown L.A.) also changed hands last week. Merlone Geier Partners traded the 35-acre, 715,000-square-foot Valley Central mall to Bridge33 Capital for $45.3 million.

Speaking of retail

Along with Valley Central there was interesting mall activity this week. A joint venture between The Meridian Group and Martin-Diamond Properties acquired five J.C. Penney stores in Virginia, Maryland and Delaware comprising some 900,000 square feet for $53 million.

Investindustrial, a private equity firm, put down $200 million for a majority stake in Italian food hall chain Eataly, with plans to open new flagship Eatalys around the world.

And there were interesting retail leases as well.

The indoor golf company Five Iron Golf scored a 30,000-square-foot, 15-year lease at H.J. Kalikow & Company’s 101 Park Avenue. (It’s the golf company’s sixth location in New York.)

Grimoire Group signed a 10-year lease for a 6,721-square-foot Asian fusion restaurant at 31 Penn Plaza.

A few blocks west we learned that Wild Ink is out and sushi bar BondST is in at Hudson Yards. (It’s BondST’s second location.)

And (maybe it’s not retail but it’s certainly retail adjacent) e-commerce marketing firm Yotpo subleased 30,688 square feet from Flatiron Health at One SoHo Square, aka 233 Spring Street.

Not everybody had a great week

In case you didn’t hear, ex-President Trump has legal problems. In addition to the unfavorable ruling he got from the court-appointed special master on the top-secret documents he was hoarding at Mar-a-Lago, the former president’s real estate business was hit hard by New York Attorney General Letitia James.

In a 214-page civil suit, Trump, his organization and three of his children were accused of fraudulently manipulating property valuations for tax and loan purposes. The suit is asking the Trump Organization to repay $250 million and would bar Trump, Eric Trump, Donald Trump Jr. and Ivanka Trump from making commercial real estate acquisitions in New York for five years, and from serving on the boards of any New York firms.

Of course, Trump wasn’t the only one to have a bad week.

The remaining $126.8 million balance of Citigroup’s commercial mortgage-backed securities loan to Cohen Brothers Realty for its Midtown skyscraper at 750 Lexington Avenue — aka International Plaza — has been put into special servicing.

And Tishman Speyer is swatting away a lawsuit, launched by the watchdog group Housing Rights Initiative and a current tenant at Jackson Park in Long Island City, claiming Tishman Speyer skirted the rent stabilization laws. (The tenant in question claims that their rent went up 58 percent from 2021 to 2022.)

We’ll always have Florida

Florida had a pretty good week, real estate-wise.

Related Companies — again with Related Companies?! — is proposing a 25-story, 456,000-square-foot office building in Downtown Miami that they’re calling 515 Fern, a block from the Brightline train station and featuring some 15,000 square feet for retail.

They’re not the only big New York-based real estate company to broaden their South Florida plans. Jim Zboril, previously of Tavistock Development Company, was tapped last week to be CEO of the West Palm Beach-located L&L Development Group with plans to expand the firm’s presence across the Sun Belt.

Heck, the Magic City is even doing flex office leases. Quest Workspaces just grabbed more than 26,000 square feet at CP Group’s One Biscayne Tower.

And now for some quiet Sunday reading

Another developer who has seen his future in multifamily has been William Macklowe (better known as Billy).

Macklowe is in the midst of developing one of the most exciting (and excoriated) Park Slope projects in years at 120 Fifth Avenue. Macklowe sat with CO to discuss Brooklyn, multifamily and the future of the five-day workweek.

To those who observe, have a sweet new year.

Cushman & Wakefield arranged the transaction with a team led by Gideon Gil and Lauren Kaufman. 

“The market continues to reward the highest quality projects and sponsors,” Gil said in a statement. “The ability to construct a sizable and highly amenitized mixed-use project in a prime Park Slope location is very rare, and we look forward to the successful completion of this trophy asset.”

Macklowe and Senlac Ridge plan two mixed-use buildings featuring 180 residential units, of which 25 percent will be designated as affordable. The project will also have 67,000 square feet of retail space, a parking garage and a fitness center. German retailer Lidl Supermarket and CVS Pharmacy recently signed long-term leases.

Officials at Sumitomo Mitsui Trust Bank and Senlac Ridge did not immediately return requests for comment. Macklowe declined to comment. 

Andrew Coen can be reached at acoen@commercialobserver.com.

An ad about a cancer survivor who had achieved her dream of having children after receiving the best, most convenient care at a particular outpatient cancer treatment facility at first struck a chord, but by the fifth or sixth iteration, it admittedly grew tiresome, and I retired that particular station altogether. 

“I hear advertisements on radio and TV for every city hospital,” said one leading commercial real estate executive who focuses on the health care industry. “Hospitals never before used social media, television, radio and newspapers anywhere near the extent that they do now.” 

The increased prevalence of such ads is no coincidence, as hospitals and other health care groups compete for market share, medical professionals and patients. All the while, health care provider costs are increasing, as the Feds grapple with skyrocketing health care costs and, due to the Affordable Care Act, have substantially decreased Medicaid and Medicare reimbursements to hospitals.

As a result, hospitals are pushing to become more specialized and efficient, which is evident as new, and often state-of-the-art, ambulatory care and outpatient clinics spring up across New York City. The private practice all but disappears as individual doctors bogged down by new paperwork join group practices. And hospital groups scramble for the millions of people now required to be insured under the ACA. 

The city is now home to one of the largest not-for-profit health systems in the country, most recently exemplified by the Mount Sinai and Continuum merger, which will combine Mount Sinai’s academic specializations with Continuum’s community hospitals. Such mergers will expand the capabilities and specializations necessary to survive in an increasingly competitive market. 

“It’s the tip of the iceberg,” said Michael Berne, who as managing director heads Lee & Associates’ senior housing arm. “I think we are going to see more and more mergers and consolidations, and it wouldn’t surprise me if hospitals on Long Island and northern New Jersey start to merge with those in Manhattan.”  

In addition, the number of seniors older than 65 is expected to at least double over the next two decades, as developers once far removed from the health care sector consider the value in this growing segment of the population, which will turn a billion-dollar industry into a trillion-dollar one.

“Owners of real estate in every major city in the country that historically have only been in the industrial and commercial retail areas are seriously considering senior housing and ambulatory, medical and surgery centers,” said Mr. Berne, who in the last nine months was approached by four major national players looking to move into the space.

With Medicare and Medicaid constrained, efficiency is necessary. Though mergers will become more commonplace, ambulatory and outpatient centers will give hospital groups the “economies of scope” that a merger completed simply to increase scale will not achieve, said Cushman & Wakefield Executive Managing Director Scott Mason, who leads that firm’s health care group.  

Mount Sinai Hospital this month inked a 14,500-square-foot deal to open a dialysis center in East Harlem on the fourth floor of 520 East 117th Street at East River Plaza, a result of medical procedures once conducted on hospital beds now being considered walk-in procedures. 

Segmented, dark office buildings are a thing of the past as patients demand faster service and more inviting spaces and as what Mr. Mason calls a “retail mindset” overtakes the industry. For example, CVS Caremark, a leader in the walk-in clinic retail space, is one of the fastest-growing components in health care right now, he said. 

“If I need a flu shot, would I rather go through the trouble to get an appointment that’s three weeks away or do it when I’m picking up my gumdrops?” he said. “It’s a no-brainer.”   

Across the city, major hospital groups over the course of the last year and a half have launched initiatives that will increase specialization and scale in one form or another. Memorial Sloan-Kettering, Mount Sinai, Montefiore Hospital and Inventa Health are among the dozens of hospitals and medical companies with new initiatives in the pipeline. William Macklowe is one developer keen to the new developments as he transforms 156 William Street into a medical facility. 

New York-Presbyterian Hospital is expanding and taking over New York Downtown Hospital at 1283 York Avenue, where it is building a new ambulatory care center; Memorial Sloan Kettering Cancer Center and the City University of New York are constructing two new state-of-the-art science and medical facilities on the Upper East Side, including an up to 750,000-square-foot cancer care facility and a more than 336,000-square-foot science and health professions building; and Montefiore Medical Center and Simone Development are creating a new 280,000-square-foot building at Hutchinson Metro Center. 

“You have to do things differently in New York City, because you simply don’t have big areas of undeveloped space,” said Jeffrey Cooper, the Savills U.S. chairman and executive managing director, who spearheaded that firm’s real estate practice.  

Leasing space in office buildings for specialized treatment centers becomes a go-to option when there is a lack of space, and that part of the equation is picking up as well. 

“While a lot of these hospitals find a need to locate near patients and are spreading away from campuses into the outer boroughs or Manhattan, others are leasing space in office buildings near existing campuses,” Mr. Cooper said. 

Last month, Memorial Sloan Kettering Cancer Center signed a seven-year, 54,200-square-foot sublease at 485 Lexington Avenue. Also, Mount Sinai Brooklyn Heights Medical Group recently upped its footprint at 1 Pierrepont Plaza in Downtown Brooklyn to 75,060 square feet. Lenox Hill Hospital/North Shore-Long Island Jewish Health System signed a 15-year renewal for 70,434 square feet at 110 East 59th Street. And Greater New York Hospital Association, a New York-based health care trade association, signed a long-term lease expansion at the BMW Building for more than 108,000 square feet.   

As the one-stop-shop mentality permeates the industry, giving rise to new high-tech facilities, mergers, recruitment of doctors with a range of expertise and small, outpatient clinics, patients requiring overnight stays can expect conditions to become more accommodating, Mr. Cooper said.

“There are too many hospitals in the city, and as a result many have empty beds,” he said, noting that two-bed rooms are becoming single-bed rooms, creating a more private, comfortable experience.    

The health care industry occupies a rapidly evolving and complicated terrain. Newcomers looking to enter the space should proceed with caution. There will be winners and losers, with the most prominent example of the latter perhaps being the 161-year-old St. Vincent’s Hospital, which announced its closure in Greenwich Village in 2010 and made way for a controversial luxury condo conversion. Hospitals in the boroughs are still struggling to stay afloat, and Long Island College Hospital in Brooklyn is just one on the verge of well-publicized and fraught collapse. And smaller hospitals will find it difficult to survive.

But large hospitals will struggle too as health care costs become unsustainable and higher-end hospitals offering the most expensive services become especially vulnerable. The competitive edge they seek with an array of new offerings is perhaps a saving grace, and though it may cloud an already complicated industry as the changes pan out, in the end, the experts believe the consumer will be better for it. 

“It’s going to create a vastly improved experience for most people,” Mr. Mason said. 

“We’re really excited to be involved with such a noteworthy project and borrower,” Matt Petrula, a senior group manager at M&T who worked on the deal, told CO. “This is actually our first development opportunity together, but we have worked with them in the past.”

Demolition on the existing four-story structure is expected to commence within a week, and the project is slated for completion in early to mid-2018.

William Macklowe’s namesake company acquired the site for an aggregate price of $22.5 million through two transactions: a $13.5 million purchase of the leasehold in 2012, and a $9 million purchase of the garage’s leased space in 2014, Vincent Carrrega, a principal of Avison Young’s capital markets group, confirmed. Mr. Carrega worked on the sale.

The transaction initially allowed Mr. Macklowe, the son of developer Harry Macklowe, to own the property until 2084, according to previous reports. However, he recently negotiated to acquire the fee interest on the land, according to a person familiar with the matter.

William Macklowe Company is teaming up with Grove International Partners and Goldman Sachs on the condo development. Once the tower is completed, the residential units will feature up to 12-foot high ceilings, and have views of Union Square and Washington Square Park.

The property will also contain ground-floor retail along University Place and house a 24-hour doorman on site. The sales office for the project will open in early 2016.

Annabelle Selldorf of Selldorf Architects is the project’s design architect, and SLCE Architects is the architect of record. Ms. Selldorf’s firm has done projects internationally.

A representative for William Macklowe Company declined to comment.

For some commercial tenants and residents of Lower Manhattan simple things like picking up groceries after work or getting a key made is a nightmare. For others, it’s a minor annoyance. Still others say it isn’t a problem at all.

They might all be right. The truth is, while services and amenities are less plentiful than they are on, say, the Upper West Side, they are in greater abundance than ever before. And they will only improve.

The gap Downtown, said Matthew Messinger, the chief executive officer and president at Trinity Place Holdings, is the “entire kids category…everything from clothes to activities” as well as grocery stores and spas.

Trinity Place Holdings is developing 77 Greenwich Street, an 85-unit residential condominium with 7,000 square feet for retail and a 476-seat elementary school.

The building will try to meet some of its residents’ needs with a self-service dog wash as well as a residents-only dog run. As a result of press around the dog amenities in the building, Trinity Place Holdings has been approached by prospective tenants in the pet industry to nab the building’s retail space.

While some resources are harder to find Downtown, the area south of Chambers Street and east of Broadway is home to eight hardware stores and locksmiths, according to the Alliance for Downtown New York. There are 20 dry cleaners, eight supermarkets, eight tailors and seven greenmarkets.

“Those services are in the neighborhood,” said Lee Block, an executive vice president at Winick Realty Group. “There might not be as many options as there are in other parts of town, [but] I think more are coming as the office workers migrate Downtown and more of the buildings are converted, and we get more residential units online. There are more restaurants looking at space. Other restaurants have announced they are moving Downtown and are under construction.” 

At 160 Water Street, Mr. Block and colleague Darrell Rubens are marketing 25,000 square feet for Vanbarton Group, and they are targeting supermarkets. He said there has been interest from a number of groups.

“I think that plays to the fact that there aren’t as many tenants serving the market for the residents in the neighborhood,” Mr. Block said.

Whole Foods Market is not going to be one of the markets looking at the space, but as has been reported, the grocery chain is negotiating a lease at William Macklowe’s 1 Wall Street.

At 180 Water Street, Mr. Block is marketing 10,000 square feet for Vanbarton Group at grade. Much of the interest has come from “food and other needs, like gyms [and] other services that cater to residential and office tenants.”

Michael Goldban, the senior vice president of retail leasing at Brookfield Property Partners, said that the company’s Brookfield Place on Vesey Street offers a lot of options for residents and office workers.

“The local community is an important stakeholder to us,” Mr. Goldban said. “We have Parm, which is accessible food. Hudson Eats is really for everybody. Even Le District, which is higher end, has lots of different options, takeout stuff and you can buy foods. It’s really kind of a grocery marketplace. Those were all deliberately done.”

There is a Drybar blowout salon inside Brookfield Place as well as a children’s clothing and baby gear store, Babesta, a Rite Aid drugstore and an Equinox. And the public spaces are used for dancing, movie nights and children’s sing-alongs on the weekends.

And for what’s missing on a given block, residents and office workers don’t have to go hunting high and low for it, said Ric Clark, the senior managing partner and chairman of Brookfield Property Partners and a Tribeca resident.

“You don’t have to walk that far to find this stuff. I mean Tribeca is a five-minute walk,” Mr. Clark said. “I think every day there’s another great restaurant or another great retail or amenity outlet that’s opening up. Lower Manhattan is phenomenal. Personally I consider south of Canal one big community…I probably go to 14th Street and not much beyond that.”

Some retail and office tenants are targeting Lower Manhattan.

For example, California-based 18|8 men’s salon will be opening imminently at 20 Pine Street, according to Mr. Block, who represented the tenant in the deal.

“They will cater to the commercial and residential tenants in the neighborhood,” he said. “We focused on the Financial District because the population down here is a 24/7 neighborhood.”

Of course, convenience is one of the reasons why a lot of companies want office space in the area.

Nonprofits, for instance, have gone Downtown en masse because of the good supply of Class B buildings in Lower Manhattan like on Broad Street and Maiden Lane, the varying sizes of floor plates and the ease with which employees can commute via New Jersey Transit or Metro-North Railroad, said broker Suzanne Sunshine of S. Sunshine & Associates who specializes in nonprofits. She represented Planned Parenthood last year in its move from Midtown to 123 William Street in the Financial District.

“It the most competitive market offering the most amenities at that price, especially with accessibility by both employees and the stakeholders,” Ms. Sunshine said. “Basically there is no longer a reason for them not to come to Lower Manhattan as long as they can afford pricing in the $40-a-foot range.”

She noted that the food options have improved, and in fact, the area has become a destination.

But, there still aren’t enough supermarkets around.

As a result, drug stores are doing double duty as supermarkets.

“You have lots of markets that sort of serve the supermarket function that have sprouted up at different locations,” said Jessica Lappin, the president of the Alliance for Downtown New York. “Duane Reade at 40 Wall Street functions as a little bit of a supermarket.”

Michael Cohen, the president of New York tri-state region for Colliers International, highlighted that Duane Reade as a serious amenity for the area. As for why, Mr. Cohen said, “Take a trip there and you’ll see the answer.”

Indeed, this Duane Reade hawks items like sushi and has a splashy cosmetics counter that wouldn’t look out of place in Macy’s as well as a hair salon.

Ms. Lappin acknowledged that while there are places to dine in the evenings and on the weekends like Rosa Mexicano, The Malt House Financial District and Dorlan’s Tavern & Oyster Bar, “traditionally this is still a lunch market.”

Ms. Lappin said tenants aren’t complaining about a gap in services other than about a lack of retail on Water Street. She said she is working with the City Planning Commission for a zoning amendment that would allow “arcades to be filled in to create new street-level retail.” City Planning has a hearing on March 30 on the text change, which would bring mom-and-pop-type stores to arcades like the ones found at 77 Water Street and 180 Water Street.

One retail broker who only spoke on the condition of anonymity is uncertain there is enough demand for Manhattan to have three malls Downtown: Brookfield Place, Westfield World Trade Center and The Shops at Hudson Yards.

“I don’t believe people who live Downtown are going to use the retail at the Trade Center,” the broker said. “The people Downtown use Brookfield Place a little bit if they live right there, maybe for the food. Trade Center retail [when it opens later this year] is going to be tourists. I don’t think New Yorkers are going to shop there. Everybody will go once and look at it.”

He doesn’t have confidence that there is enough night business Downtown.

“I wouldn’t put a client down there that needs nighttime business,” the broker said.

John Brod, a partner at ABS Partners Real Estate, said whatever is missing is irrelevant because everything is at our fingertips.

“I think it has everything except grocery stores other than a Whole Foods on Greenwich [Street],” said Mr. Brod. “But the population, which is increasingly younger rather than older, is so [comfortable with the] Internet there’s less of a need for the traditional grocery store found in other residential markets.”

With additional reporting provided by Terence Cullen.

The New York-Presbyterian Hospital-affiliated school has leased 29,000 square feet of part of the building’s 11th and 12th floors, since November 2013, according to CoStar Group. The existing lease—which would have ended last month—was extended so it would terminate the same time as the new lease. All told, the medical center now has more than 80,000 square feet within the 250,000-square-foot building.

William Macklowe Company and LaSalle Investment Management acquired the building for $62.5 million in 2013 from Capstone Equities, according to CoStar. The developers committed to repurposing the building from an office structure into New York City’s first medical office building in Downtown Manhattan, as Commercial Observer reported in 2014. At the time, William Macklowe, the founder and chief executive officer of William Macklowe Company, likened finding medical practitioners for the property to “tenanting a mall.”

Current tenants include Pace University Counseling Center, an organization that assists the university’s students and faculty, and Riverside Research, a nonprofit dedicated to scientific research.

“We knew that our strategy to target healthcare tenants was the correct prescription,” Macklowe said in prepared remarks at the time.

John Cefaly, Michael Burgio and David Berke of Cushman & Wakefield represented the tenant while Paul Wexler and Josef Yadgarov of Wexler Healthcare Properties, part of The Corcoran Group, represented the building’s ownership. Cefaly, Burgio and Berke did not return a request for comment via a spokesman while Wexler and Yadgarov did not respond by the time of publication.

In March 2014, Wexler said that there was a growing trend among healthcare providers to “consolidate specialities into one location to make it one-stop shopping.” He spoke about an increase of such synergistic opportunities among medical practitioners. Two years later Weill Cornell’s expansion seems to be proving his point.

The New York Post first reported news of the deal.

The Port Authority would pay just under $8.3 million over the term, the documents indicate. That comes out to about $65 per square foot. The agreement also allows the agency to extend for an additional five years, during which time the Port Authority would pay another $3.5 million in total rent. The landlord has also agreed to give three months of free rent.

The lease at 233 Park Avenue South is set to expire on Oct. 31, according to the Port Authority agenda, but the landlord agreed to a five-month extension. The Port Authority will move into its new offices in the Financial District in April 2017.

Departing 233 Park Avenue South is part of a broader push to relocate the Port Authority’s offices, which were split up following 9/11—when a number of the agency’s employees died in its offices at the original 1 World Trade Center. The Port Authority signed a deal at 225 Park Avenue South along with the neighboring 233 Park Avenue South. Employees at those two buildings began relocating to Silverstein Properties’ 4 World Trade Center in 2014, the agenda notes.

Offices for its construction divisions set up shop at 115 Broadway after the attacks and subsequent rebuilding. Commissioners voted last month to move the departments to 80 Pine Street between Water and Pearl Streets, reducing its space as the World Trade Center is nearly complete.

The Port Authority chose to sign at 156 William Street rather than 4 WTC because it was redeveloped for medical uses in 2014, and was “uniquely suited” to house its medical services office, according to the agenda. Landlord William Macklowe told Commercial Observer in March 2014 that the 24,000-square-foot floors could be cut up for two to three healthcare-related users. Other medical tenants include Weill Cornell Medical College, which in July signed a 55,000-square-foot lease for several floors of the 250,000-square-foot building, as CO reported at the time.

A spokesman for Macklowe declined to comment. It was not immediately clear if brokers are involved in the Port Authority transaction.

His deal was far from straightforward. Macklowe nabbed the lot between Baltic and Douglass streets after Avery Hall faced significant backlash from Park Slopers upset with its plan to tear down the 30,000-square-foot Key Foods grocery store and replace it with a mixed-use apartment complex. He decided to honor Avery Hall’s special agreement with local civic organizations, with Macklowe and his co-developer Senlac Ridge Partners agreeing to provide 45 units of affordable housing at the 180-unit project, which recently nabbed discount grocer Lidl to replace Key Foods at the site.

Macklowe is optimistic about the development’s ability to woo Park Slope residents and the broader Brooklyn market. Brooklyn saw office leasing increase nearly 30 percent in the second quarter of 2022 compared to the previous quarter, retail asking rents rise in 10 of the borough’s 17 key shopping corridors early this year, and rents in its most affordable enclaves skyrocket in June (in good news for developers but less so for residents). 

While not everything is hunky-dory — there’s still that pesky recession on everyone’s minds and a host of companies cutting office space in New York — Macklowe sees Brooklyn as New York City’s future.

This interview has been edited for length and clarity.

Commercial Observer: Why Brooklyn?

William Macklowe: Brooklyn is an extremely dynamic and exciting borough and market, even its own country, though people will judge you about calling it that. We have tried to invest in Brooklyn through a period of years and have tried to find the right site that fits our criteria. This one [120 Fifth Avenue] happened to do it. If Brooklyn were on its own, it would probably be the fourth-largest metropolitan area in the country. And we’ve seen the evolution of Brooklyn as a market that people want to live in as an economic choice, to today, where it’s really a lifestyle choice. 

The market performed fabulously before the pandemic, through the pandemic, and even more so now. When I and my development partner, David Welsh with Senlac Ridge Partners, came together to buy this piece of dirt as partners, we realized that Park Slope is and has always been one of the best neighborhoods in Brooklyn, and this really is an A-plus-plus site in an A-plus-plus market. So we’re very excited to be building in such a dynamic environment.

Speaking of that site, both Lidl and CVS signed on as tenants. Are there any other deals in the works for the remaining space, and how is that project going?

They are both terrific tenants, they’ll be very good co-tenants, and I think they’ll give a lot back to the community. We’ve had a fair degree of retail interest ranging the gamut from three strong well-known brands to neighborhood-type tenancies. 

And I think the commitment by both Lidl and CVS this early in our development process will only yield better results and has already started to catalyze further interest from a whole host of quality tenants. We are looking for tenants that complement each other, that work with the building, that work with the community and that work with those who will be living above them.

How did you see the Brooklyn market doing more broadly than your own investments?

Rentals are at all-time highs, absorption continues to run apace, you’ve seen an expansion of geographic borders with Brooklyn going further south and further east, and it’s really remarkable and exciting to see. We’re very happy to be building into that, and we think that stability of the Brooklyn market as we’ve seen, especially through the pandemic, will continue because it has established Brooklyn really as its own identity and its own character.

It’s young, it’s vibrant, it’s dynamic. There’s terrific streetscapes, fabulous restaurants, open spaces, parks, and, as development came into Brooklyn over the last 10 years or so, the buildings are highly amenitized. They are places that people want to be after work — or hopefully not working from home — but when they come home from offices. It’s an extension of the 24/7 fabric that animates the streetscape and makes a very fun place.

What do you think is in store for New York City’s office market? Is this the end of the office as we know it?

It’s a very challenging question because there’s been a lot of smarter people than me that have talked about it, but I think it would be a shame to see the end of the office. What we need to do is take a step back and realize that COVID didn’t necessarily create the flexible work schedule or ultimate work from home — it accelerated to a conclusion around that construct. 

I do think that the five-day workweek is gone. And the younger generation of workers that populate the offices want some flexibility. But, by the same token, as we’ve seen through decades and generations, great ideas, great successes, great innovations and great advancements have come from collaboration, teamwork and being together. It’s very difficult to replicate those successes and those advancements forward sitting at home and speaking through a screen. 

I think there is going to be an inflection point where people will realize that, and I think people also want a certain degree of social interaction during the day as well. If you consider the fact that New York is running at historic occupancy levels — restaurants are full, bars are full, people are availing themselves of all the cultural things that New York has to offer — they’re just not going to offices. But they still want to be in New York. At some point it goes from bending to breaking, and people will go back to work. I think you’re starting to see a heavy push to be back in the office, especially in the financial sector, because that’s where you get progress and advancement, by being together and collaborating. 

So we’ll get there and I think office buildings will respond to these challenges. There’ll be changes in the way space is utilized. There’ll be changes in the way office buildings are amenitized. That will slowly but surely bring people back to work.

Did you decide to pivot away from office to residential?

I didn’t really pivot away from office. I’m not a fund, my business runs out of our own capital, so we have the ability to work opportunistically and move in any direction that we see fit. We love office. We love New York office and we believe in New York office. We were doing a lot of value-add office redevelopment and we were fortunate to sell a bunch of buildings prior to the pandemic, and not because we knew — it was just dumb luck on the timing. 

There was so much capital chasing value-add office, it created a massive compression on deals. We just felt that the risk profile was getting a little too tight for us, so we switched and we did a decent amount of medical office development, which was very successful for us. We still continue to try and further our investment endeavors in that arena. 

And we love residential. I’m known more for office, but I’ve been involved in the development of multiple apartment buildings in New York over the years, and the ability to build a rental, which is one of the greatest real estate assets in the New York real estate market, is just a fabulous opportunity, so we jumped at it. We built a condominium down at 21 East 12th Street. So we do it all. 

We are watching the office market right now, we are an active participant in investment sales, and we are ready to take on office risk at the right moment. But we are believers in New York and believers in New York office.

You mentioned medical office, and you recently sold your interest in the Upper East Side medical building at 323 East 61st Street to LaSalle Investment Management. What was behind that decision?

It was an appropriate time to harvest. We buy and hold, we buy and sell, we buy and recapitalize, we build and sell, we build and hold — it’s just what feels right at the time.

Are you concerned at all about the current interest rate environment or other larger economic trends?

I think we’re pretty well-hedged on our project with respect to our financing, but I definitely think it’s having an impact in the market on many levels.

What office properties would you consider a good opportunity for investment?

New-ish or new enough. The availability to effectively repurpose the office building to meet the demands of today’s tenancy or potential tenancies and transit-oriented properties.

Are there any new markets you’re looking at investing in or any other commercial property types?

I think right now we’re staying close to home. We’re not chasing cap rate compression outside of New York. We’re looking to see what happens here. There should be some very nice opportunities over the next 12, 24 and 36 months.

You’ve had a tumultuous relationship with your father. Have you repaired that relationship or spoken to him recently?

I think there’s been enough written about that. Next question, please.

Is there anything else you want to add?

We are a New York firm. We believe in New York and we’re very excited to be getting into the ground at the end of this year.

Celia Young can be reached at cyoung@commercialobserver.com.