Sunday Summary: John Santora Has His WeWork Cut Out For Him

Like a lot of Americans (heck, like a lot of people the world over), Commercial Observer’s editorial staff retains our longstanding fascination with WeWork (WE).

Love them or hate them, the company was a force in global real estate, gobbling up space, bewitching investors, creating something akin to a cult of personality. Then it spiraled out of control and declared bankruptcy.

Just last week the fallout of its excesses continued when (with suitable dramatic flourish) their coworking archrival, Industrious, took over WeWork’s former 240,000-square-foot headquarters at Kato International’s Tower 49.

That being said, we also saw something hopeful for the coworking behemoth.

The firm officially exited the bankruptcy process in May and on Tuesday named a new CEO, John Santora, to take the reins.

“I firmly believe that flexible work is no longer just an option, but rather a strategic imperative for companies wanting to maximize the efficiency of their real estate footprint, as well as their dynamic workforce,” Santora said in a statement. “While there is much work to do, with these supportive, structural trends and a restructured organization in place, I could not be more confident in our future and I am energized and excited by the challenge that lies ahead.”

Santora is a familiar (and, if we may add, comforting) choice to readers of CO. He spent decades at or near the helm of one of the most important brokerages in the world, Cushman & Wakefield (CWK), serving at various points as tri-state president and global chief operating officer.

It’s a tough role, but we’re confident he’s going to roll up his sleeves and get to WeWork.

Joint ventures

After a neither-coming-nor-going announcement from the Fed this week on interest rates (the long and short of it: Don’t expect more than one rate cut before the end of the year) those who were feeling tense shouldn’t expect to get any relief in the form of “herbal remedies” — if you know what we mean.

Pot, we’re talking about pot.

The unlicensed cannabis shops that proliferated all over New York City after marijuana was legalized in 2021 have been caught in a swift crackdown.

And this might be worse for retail landlords than many currently appreciate.

“When cannabis was legalized, there was a tremendous void in the retail landscape following the onset of COVID-19,” Adam Lindenbaum, an attorney at Rosenberg & Estis, told CO. “A lot of our clients were eager to rent up their vacant space, eager to receive these very fair, or sometimes over-market offers, with the understanding that things wouldn’t be done completely above board.”

The rush to get in was, as Meridian’s James Famularo put it, a little like the frozen yogurt craze of the 1990s and early 2000s.

The fact that these illicit cannabis stores are closing at a rapid clip means that there will likely be a new block of inventory coming available, and the prices that landlords were seeing under their not-exactly-street-legal-and-therefore-willing-to-pay-through-the-nose tenants will be nearly impossible to achieve again in the short term.

Big leases

Well, it’s not final yet, but a monster expansion is in the works at Rudin’s 345 Park Avenue.

Specifically, Blackstone (BX) is in negotiations to expand its footprint at the building to a whopping 1.06 million square feet, which would mean tacking on an additional 340,000 square feet.

Mic drop.

Beyond that jaw-dropping, albeit tentative, bit of news there were some extremely solid leases to report: Ziff Davis took 23,000 square feet at 360 Park Avenue South; Allied Irish Bank took 11,000 square feet at 825 Third Avenue; Skanska USA took a 20,000-square-foot lease at 21-01 51st Avenue in Long Island City; and (perhaps our favorite, if we’re allowed to play favorites) it looks like after a smash success in opening their second branch in Manhattan, the Queens favorite, Utopia Bagels, signed a lease for a third location in Long Island City!

But after eating all those bagels, any sensible person will want to work out. That’s why Barry’s Bootcamp signed a 5,000-square-foot lease at 510 Driggs Avenue in Williamsburg.

Sorry, we had fitness on the brain this week…

Is it us, or have climbing gyms suddenly taken over every empty space with high ceilings in this city?

Well, maybe not that much, but “There’s been a huge growth since 2019,” said Julian Acevedo, who co-founded GP81, a climbing gym. “There’s been a bubble growing.” 

GP81 opened a space in Bushwick last month that will now have to compete with MetroRock Bushwick a couple of blocks away; and then there’s The Bouldering Project in Gowanus (also opened this year), and Vital Climbing Gym is opening its fourth outpost at Essex Crossing later this year. All in all, there are a dozen such sites.

Big shifts

We saw some interesting people moves last week. (Beyond John Santora, that is.)

After 19 years at Meridian Capital Group, Judah Hammer decamped for CBRE.

Plus, Silverstein Capital Partners named Shawn Katz as its new president. (Where its previous president, Michael May, is going is still unknown.)

Finally, we learned about a merger (the ultimate “people move”) in the works between the Los Angeles-based Ares Management and GLP Capital Partners, which (if successful) would be one of the largest mergers of asset managers in a very long time.

Big Florida

There were interesting sales and financings in South Florida last week.

Tishman Speyer did a deal in the Sunshine State with the $100.2 million purchase of the 35-acre Rock Lake Business Center in Pompano Beach from IDI Logistics.

The Related Group scored a whopping $400 million loan from Madison Realty Capital for a luxury condominium project on posh Fisher Island.

And, not to be outdone, PMG set a record by securing a $668 million loan from Bank OZK and Related Fund Management to construct its 100-story Waldorf Astoria Hotel & Residences Miami.

Call your father!

If you’re looking for a gift for the dad who has everything, we got one that he probably doesn’t have:

A space flight! (It’ll cost $450,000, but hey.)

However, we’re going to wager that the price of space tourism goes down at some point in the future given the investments currently being made in the space industry — and its attendant real estate.

“The space industry is in high growth mode,” said Tom Taylor of JLL. “The strategy for a lot of these companies around how they’re going to grow and compete is their real estate strategy. It’s almost foundational.”

Indeed, space startups raised $12.5 billion last year, and in the next decade it’s expected the industry will be worth some $1 trillion. That means lots of real estate.

Happy Father’s Day!