Sunday Summary: Still Trying to Figure Out the Politics of It

It’s been more than a week, but much of the commercial real estate industry is still in a daze over Zohran Mamdani’s victory in New York’s Democratic mayoral primary, which was made official on July 1.

What does Mamdani mean for the business?

Select figures like Dan Loeb, the CEO of hedge fund Third Point, have gone straight to panic, tweeting, “It’s officially hot commie summer.”

Others have threatened to pack up their businesses, like Red Apple CEO John Catsimatidis, who likened Mamdani to Fidel Castro in AMNY.

And some are still trying to get behind incumbent Eric Adams — at least, that seems to be what Joe Sitt was advocating on Bloomberg.

However, the truth is that, as the Democratic nominee, Mamdani is the odds-on favorite to be the next resident of Gracie Mansion, and this means facing policy proposals, legislation and advocacy that CRE was not prepared for.

“The city continues to have real, important challenges — affordability, mental health, public safety, dealing with the Trump administration — and now is not the time to give up on the best city in the world,” advised lobbyist Suri Kasirer.

While the industry is smarting under proposals like rent freezes, some of Mamdani’s ideas — such as 200,000 units of permanent affordable housing — are probably something that the broader real estate community can get behind.

Last month in a New York Times interview, Mamdani even praised — albeit modestly — the role of private development in the housing market.

But, thankfully (for them), owners in the industry caught a break policy-wise: Less than a week after the initial primary tally, the Rent Guidelines Board voted 5-4 to raise rents 3 percent on rent-stabilized apartments for one-year leases and 4.5 percent for two-year leases.

Just note: It might have to last landlords a while.

Speaking of politics…

Donald Trump’s big, beautiful tax bill passed the House and Senate last week — like it or not.

There are a lot of things in the legislation to make the public nervous, from massive new additions to the federal budget deficit, to millions of Americans probably thrown off Medicaid.

But … what does it mean for real estate?

One good thing for real estate would be permanently restoring a full 100 percent bonus depreciation on assets placed in service after Jan. 19, 2025.

The policy, which Trump included in his first big tax bill in 2017, was intended to be phased out and set to fully expire in 2027. “Having it permanent is a huge, huge win for commercial real estate,” Glen Kunofsky of Surmont told Commercial Observer.

Also, on CRE’s wish list, was an extension of the federal Opportunity Zone incentives program, designed to encourage development in economically distressed areas. The other parts of the bill, however, are still very much a question mark. (Even Republicans seem unsure about the political wisdom of passing said bill, which forced J.D. Vance to break a tie in the Senate. In The Atlantic, Jonathan Chait likened the hesitancy to the petty hoods on The Sopranos who, before ripping off a mafia poker game, spur themselves on saying, “Let’s do it before the crank wears off.”)

The leases go marching on

There were a number of big leases last week, but the one that most caught our attention was an expansion from one of the city’s biggest white-shoe law firms, Paul, Weiss, Rifkind, Wharton & Garrison.

Not that the lease itself — a healthy 84,672 square feet at the Fisher Brothers’s 1345 Avenue of the Americas —  is the biggest one of the week, but it brings the law firm’s footprint to a seriously big number: 849,672 square feet.

That was not the only big one, either. Investment management company Invesco renewed over 200,000 square feet at Brookfield Properties’ 225 Liberty Street. (Just a block or so away, Brookfield signed another lease — Warby Parker had eyes on 1,700 square feet at 250 Vesey Street.)

Also, Pinterest took 83,000 square feet at SL Green Realty’s 11 Madison Avenue.

All this seems in keeping with a recent Colliers report which said that Manhattan just wrapped the strongest six months of office demand in more than a decade, despite a slight dip in the second quarter. Given the 11.4 million square feet notched in the first quarter, that wasn’t unexpected.

“Was [the dip] a major surprise? No,” said Franklin Wallach, executive managing director of research and business development for Colliers. “Because it was such a number to beat from Q1. So that was a very tall order to repeat.”

Indeed, 9.23 million square feet of office activity last quarter was still 28 percent above the five-year quarterly average!

Florida sales, New Jersey financings, hirings

A trio of heavyweights — Related Group, BH Group and Dezer Development — shelled out a massive $131 million to buy out the Miami Beach Club condo with redevelopment plans in mind. (Hey, that’s only a quick 15-minute or so drive to Bal Harbor Shops, where Stephen Starr is planning his next venture at the old Aba space.)

Relatedly, Related purchased a 1.6-acre parcel in Dadeland, Fla., from Harry Macklowe for $20 million with plans to build a multifamily project — unfortunately for Macklowe, that was about 37 percent less than he paid for the property three years ago.

Also in Florida wheelings and dealings, Terra and the Frisbie Group have partnered to buy the 47-acre Palm Beach Kennel Club in West Palm Beach for $21 million with plans for a mixed-use development.

Up north, Kushner Companies scored a $515 million loan from Blackstone for The Journal, their two-tower luxe development in Jersey City. (Disclosure: Kushner’s president, Nicole Kushner Meyer, is married to Observer Media owner Joseph Meyer.)

Oh, and we heard that Sherry Wang is leaving her perch at Goldman Sachs for the Vistria Group, where she was named a partner.

The last of the long weekend

Maybe you should enjoy this day off reading a spy novel. Or a detective story.

Or you could read about the FBI’s real estate pursuits which (spoiler alert) is ending with them relocating to the Ronald Reagan Building complex at 1300 Pennsylvania Avenue NW after years of false leads at tracking down a new home.

Weirdly enough, the CIA also struck a clandestine deal with The Peterson Companies for the 434,000-square-foot Dulles Discovery 2 in Northern Virginia for $246.4 million, according to public records. (We guess they couldn’t be too clandestine.)

See you next week!