Gregory Kraut

Where are you seeing the greatest returns? 

The spread between a distressed Class B/C basis and a boutique Class A rent. 

Trophy space at $300-plus a square foot with 2 to 3 percent vacancy is priced for perfection — there’s no return left there. The return is buying well-located, architecturally significant buildings at 40 to 60 cents on the 2019 dollar, and repositioning them into the flight-to-quality bid. Manhattan availability is 12.5 percent, the lowest since 2020, and we’re on pace for the best leasing year since 2000. Tenants are paying up for quality — that’s where the arbitrage is. 

How would you describe KPG Funds’ investment strategy, and how has it changed?

Since 2014, the strategy hasn’t changed: Buy aging, architecturally significant Class B and C buildings and convert them into boutique Class A that feels more like a hotel than an office. What’s changed is the hunting ground and the underwriting. We’re increasingly buying from distress — lender sales, foreclosures — instead of just tired landlords, and with the 30-Year at 7.33 percent, you’re underwriting to in-place cash flow, not cap-rate compression.

The fund was built for exactly this window.

Where is Manhattan office demand the weakest?

The Financial District, by the numbers — 21.8 percent availability, the highest in Manhattan and double pre-COVID. 

But that’s also where the cure is fastest: The weakest buildings are being converted to residential and leaving the market permanently — 5 million square feet came offline in 2025 alone — so the remaining stock tightens every quarter. Downtown is already rebounding on a roughly $24-a-foot discount to Midtown. Weakest today, but I wouldn’t confuse that with weakest tomorrow.

Who are the types of tenants craving architecturally significant offices over steel and glass?

Look at what’s actually full: 401 Manhattan buildings are 100 percent leased, and the median one was built in 1931, and renovated around 2011. 

Prewar bones with modern systems are beating 1980s glass boxes. The tenants paying for it are the ones using office as a weapon: AI firms, which account for over 60 percent of tech leasing in Midtown South, creative and media companies, boutique finance and law firms. They don’t want to be one more tenant in a commodity tower; they want an address with an identity that helps them recruit. Steel and glass competes on price. Character competes on desire — and desire wins the talent war.

How’s New York City’s real estate market treating you? 

Very well, because the market finally came to us. Flight to quality is our entire business model — we’ve been doing these conversions since 2018, and now tenants pay $100-plus a foot for exactly that product while commodity space begs. 

Leasing is on pace for its best year since 2000. The headwinds are real — 7 percent-plus interest rates, a refinancing wall, 12 percent CMBS office delinquency — but we bought right, and, in this market, the well-capitalized buyer with the right product is king.

Lightning Round:

Your AI platform of choice? Muse.

Who would play you in a movie? Tom Cruise.

One prompt you’d never give AI. Anything illegal.

Jalen Brunson or Aaron Judge? Definitely Jalen Brunson.

“Oppenheimer” or “Odyssey”? “Odyssey.”

Tom Holland, Andrew Garfield or Tobey Maguire? None.

Have you ever eaten pizza with a knife and fork? Of course.

The most money you’ve ever spent on a hamburger? $1 million.

Bank or non-bank? Non-bank.

Last book you read? Don’t Believe Everything You Think by Joseph Nguyen.

Borrowing costs — up or down in 2027? Way up!

What was your nickname when you grew up/started out? Krauty.

How long do we have before AI kills us all? Fake news.

Where’s your secret escape compound? (Think Peter Thiel’s New Zealand Plan B.) My house in Connecticut.