New-York News

Cornell to exit UES space in fresh blow to struggling REIT

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Cornell University’s medical school is moving out of 30,000 square feet of lab space on the Upper East Side, the latest piece of grim news for the landlord formerly called New York City REIT that is distancing itself from its troubled portfolio.

The move-out, effective when Weill Cornell Medicine’s lease at 400 E. 67th St. expires next month, was disclosed Friday in a report by bond-rater KBRA. The university rented space in the first two floors of the Laurel, a 31-story condominium tower developed in 2007 and owned by NYC REIT, a firm that last year changed its name to American Strategic Investment Co. to underscore its effort to own things besides New York real estate.

On April 30, American Strategic said it put three Manhattan properties on the auction block: The office buildings 9 Times Square and 123 William St., plus the condo 196 Orchard St. The 165,000 square-foot Times Square building is 30% vacant.

“These strategic dispositions are in furtherance of the company’s previously announced repositioning of the company’s investment portfolio and expanded business plan to invest in assets beyond Manhattan real estate,” said the REIT, which trades under the “NYC” stock ticker on the New York Stock Exchange.

American Strategic amassed a portfolio of 1.2 million square feet of Manhattan office and residential space starting a decade ago, when interest rates were ultra-low and optimism about New York City real estate was ultra-high. Most of the acquired office buildings are Class B and have struggled to retain tenants since 2020.

In 2014 the firm bought the Laurel’s commercial space, plus a parking garage in the Upper West Side condominium complex formerly known as Trump Place, for $85 million, or $707 per square foot. KBRA estimated the properties are worth a combined $323 per square foot now and lowered its outlook for the properties’ $50 million mortgage to “underperform,” citing the looming Cornell exit from a fully occupied building and generally unfavorable conditions for office. Sarah Smith, executive director of public relations, said Weill Cornell is “considering consolidating some of our locations into other currently leased or owned building space to maximize these other properties by the end of the year.”

A few months after the Laurel deal, American Strategic Investment bought 9 Times Square. A building acquired in 2016, the 250,000 square-foot 1140 Sixth Ave., is newer and attractively located at West 44th Street but 23% empty. Last month lenders extended the maturity of 9 Times Square’s $49.5 million mortgage to October to give ASI time to sell the building.

ASI shares trade at just 9% of book value, according to Yahoo Finance, a figure suggesting investors have all but given up on management extracting value from its portfolio.

On an earnings call Friday, CEO Michael Anderson said he has had “some unsolicited interest in recent months on 9 Times Square and think that there will be similar interest at 123 William.” He added the firm is seeing “some increased leasing interest” at 1140 Sixth.  

As to the future, “I would say that the focus is probably outside of New York.”

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Aaron Elstein , 2024-05-13 19:22:07

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