A Garment District apparel company has zigged where others have zagged.
As buyers and sellers of commercial real estate take a breather, Studio Nazar, which specializes in midmarket women’s clothing, has snapped up the 7-story office building at 124 W. 36th St. as an investment property. It’s a bet that interest rates will soon come down and office rents will rise, to revitalizing effect.
“I believe the market will come back at some point,” Joseph Nazar, the company’s founder, told Crain’s. “At least that’s my hope.”
Nazar added that the midblock site, near Seventh Avenue, will become the new location of Studio Nazar’s offices, which are currently at nearby 499 Seventh. But Nazar added that his 30-year-old company will not undertake any manufacturing at the 28,000-square-foot building and will likely lease out empty floors to different kinds of tenants.
No. 124 is more than 30% vacant, according to CoStar, while rents in the building average $28 per square foot a year. The deal went into contract Jan. 10 and closed May 3. Bank of America provided $5 million in acquisition financing, according to the city register.
The seller of the 1922 structure, which also contains retail space, was Dosol Corp., a real estate entity based on West 37th Street. Alan Mandelbaum, who signed the deed on Dosol’s behalf, could not be reached for comment.
Fashion companies have shown an interest in sewing up deals in the past few months. Prada spent a whopping $822 million at the end of 2023 on a pair of Fifth Avenue buildings in the Plaza District, at Nos. 720 and 724, before tacking on a third commercial space on West 56th Street in April for $13 million.
And a few weeks later, Gucci parent Kering plunked down $963 million for 715-717 Fifth Ave., a property right across the street with multiple levels of retail space.
The moves were seen as an attempt to lock in real estate costs at a time of unpredictability and fluctuation, though the companies were reportedly hunting around for years.
Studio Nazar’s acquisition is hardly in the same ballpark. But it’s not the first Garment District clothing company to avail itself of depressed values in its neighborhood.
In March Walter & Samuels unloaded 225 W. 39th St., a similarly aged midblock property and one stung by the departure of coworking provider WeWork, for about $22 million to executives at IHL Group, a manufacturer of casual clothing for TJ Maxx and other stores.
Older office buildings lacking amenities and located in untrendy neighborhoods, a description that could apply to much of the Garment District, have been particularly vulnerable in the current office-market slump. Their small-scale tenants are often deciding not to renew their leases at the Class B and Class C buildings because many of their employees now regularly work from home, brokers and landlords say.
But Mayor Eric Adams has proposed rezoning the Garment District and other Manhattan enclaves to create as much as 4,000 units of housing, a change that could boost sagging property values. No. 124 sits in an area the mayor has pledged to rezone.
Leases
Construction firm opening project office at Industry City
Address: Industry City Building 2, Brooklyn
Landlord: Jamestown, Belvedere Capital and Angelo Gordon & Co.
Tenant: Skanska USA
Lease size: 15,300 square feet
Asset type: Office
Brokers: Jeff Fein and Matt Stewart represented the landlord in-house.
Communications firm takes space in Flatiron District
Address: 49 W. 23rd St., Manhattan
Landlord: 23 R.P. Associates
Tenant: Drury Design
Lease size: 5,594 square feet
Asking rent: Approx. $53 per square foot
Brokers: Kaufman Organization's Mark Furst and Catherline Vilar represented the tenant. Adams & Co.'s Jeff Buslik, Alan Bonett and Brad Cohn represented the landlord.
Blockchain firm inks NoHo lease
Address: 740 Broadway, Manhattan
Landlord: Lafayette-Astor Associates
Tenant: Skip Protocol
Lease size: 3,886 square feet
Lease length: 3.5 years
Asset type: Office
Brokers: Lee & Associates' Dennis Someck, Justin Myers, and Rachel Kirkham represented the tenant. Newmark's Robert Silver, Anthony Sciacca, and Brittany Silver represented the landlord, along with GFP Real Estate's Neith Stone.
Financings
Flushing condo development lands construction loan
Address: 138-28 Northern Blvd., Queens
Owner: Linzhong Zhuo
Lender: S3 Capital
Loan amount: $64 million
Asset type: Mixed-use condos
Industrial parcel redevelopment in Long Island City gets financing
Address: 45-40 Vernon Blvd, Queens
Owner: ZD Jasper Realty
Lender: Elite United
Loan amount: $25 million
Asset type: Mixed-use
Read more about the deal here.
The city will soon demolish and rebuild The Battery promenade five feet higher to help protect Lower Manhattan from powerful storm surge and rising sea level.
Mayor Eric Adams announced Monday the start of construction on the city’s $200-million Battery Coastal Resilience project. The city-funded effort will make parts of the wharf and park — a major draw for tourists — off-limits until 2026. But once complete the city says the project will shield some 300,000 workers, 100,000 residents and 12,000 businesses from flood waters.
“This is the single largest urban climate adaptation project in the nation, and it will lay groundwork to protect our city's future,” Adams said during a news conference at The Battery.
The Battery Coastal Resilience project is one of a string of waterfront initiatives that together are known as the Lower Manhattan Coastal Resiliency Project, which began with the Bloomberg administration. Adams described Monday’s groundbreaking as part of “the relay to hand off the baton to make sure that we protect our waterfront and our infrastructure.”
The city’s Economic Development Corp., in partnership with the parks department, will implement the project in two phases to reduce the impact on park access.
During the initial phase of construction, crews will raze and reconstruct the western portion of the promenade by 2025. The second phase of work will rebuild the eastern half of the esplanade, with work expected to be complete in 2026. Ferry operations to the Statue of Liberty will be unaffected, said city officials.
The city says it's currently mobilizing marine construction equipment, including cranes, tug boats and excavation machinery mounted on barges, to tear down the promenade stretching from the East Coast Memorial to Pier A.
Immediately to the north of the project, state-run Battery Park City is in the midst of its own more than mile long effort to reimagine the western waterfront with fixed and deployable flood barriers. On the opposite side of The Battery planning is underway for yet another city-led coastal project, known as the Financial District and Seaport Climate Resilience Master Plan. North of that project additional protections are in the works along Manhattan’s eastern flank.
“All of it forms a comprehensive multi-billion dollar effort that's already taken us 12 years; it's got several more years to go,” said Rohit Aggarwala, the city’s chief climate officer and the commissioner of the Department of Environmental Protection. “The good news is that within a couple of years we are going to start seeing the first of these projects complete.”
New York developers have long insisted that an affordable housing tax break replacing 421-a is a vital part of the push to build more homes in the city. But their response to the replacement in this year's state budget, 485-x, has been muted at best.
And now, one prominent developer is saying the higher wage and stricter affordability requirements in the program have effectively killed a huge project the company had planned for Williamsburg.
"It's not feasible right now," Two Trees Managing Director David Lombino said of River Ring, the sprawling, mixed-use development the firm intended to build on the neighborhood's waterfront. "It was a popular project, but we were reliant on a tax-incentive program, and the new program is more expensive than the old program."
River Ring would have featured more than 1,000 residential units, 25% of which would have been affordable for families earning between 40% and 130% of the area median income, or about $56,000 to $182,000 for a family of three. Amenities were to include a $150 million waterfront park and a YMCA.
But allowing units to be designated as affordable for families earning as much as 130% of the area median income was one of the biggest complaints about 421-a, and under 485-x, the highest level allowed is 100%, or about $140,000 for a family of three. Construction wages must be higher as well, starting at $72.45 an hour for buildings in parts of Manhattan, Queens and Brooklyn, including where Two Trees was planning to build River Ring. That area is known as "Zone A."
Now is a tough environment for real estate in general thanks to factors such as high interest rates and development costs, which Lombino acknowledged. But he stressed that 485-x does nothing to mitigate these issues.
"Nothing in 485-x acknowledges the interest rate environment," he said. "In fact, it makes it more expensive to build than the old program."
Representatives for Gov. Kathy Hochul's office did not respond to a request for comment by press time. In her remarks on April 15 announcing the budget deal, she said 485-x "will jumpstart housing production for the city while creating permanently affordable units, all the while ensuring that good wages will be there for our hardworking men and women who build them."
The New York Post first reported news of the decision from Two Trees. The firm is run by the Walentas family and famous for spearheading the transformation of Dumbo.
Lombino declined to specify what else Two Trees could build at the River Ring site but said the company would not leave it undeveloped indefinitely. The company is also still moving forward on its comparably ambitious mixed-use Domino project in the neighborhood, which still qualifies for 421-a under the program's deadline extension to 2031 that was also included in the state budget.
He expects other developers to make similar decisions going forward.
"Over the next couple years, there will be a lot of construction [being finished] under the old 421-a program with the completion deadline extension," he said. "You'll see few if any people starting projects under 485-x in Zone A."
Passing any replacement for 421-a has proved difficult. It expired in mid-2022, and there was virtually no momentum in the state Legislature behind developing a new program that year or in 2023, with many critics essentially saying good riddance to what they saw as a giveaway to large developers that produced little truly affordable housing.
Lombino says there had been a chance to pass a more effective program this year given the major change in attitude many New Yorkers have had around housing.
"There's an increasing understanding that housing supply needs to increase dramatically," he said. "You have people from all sides of the spectrum saying we need more housing, even council members you wouldn't necessarily suspect given their politics."
And he pushed back on the notion that Two Trees was bluffing, stressing that the firm needs to have an expectation that its real estate projects will make financial sense before moving forward on them.
"The return on investment needs to be higher than what you can get in a high yield savings account or with a certificate of deposit from your local bank. Otherwise people are going to deploy their capital in different ways," he said. "It's not a charity."