Marty Burger thought the Garment District would be a good setting for his second act.
Burger, once the CEO of megadeveloper Silverstein Properties, partnered with former Town Residential honcho Andrew Heiberger to acquire a 12-story building, next to an Irish pub and a few doors down from a parking garage.
The developers figured they’d turn the unloved office structure at 29 West 35th Street into a 107-unit apartment complex equipped with a rooftop movie screen for tenants.
Before the duo could create their urban oasis blocks from Penn Station, the city’s Midtown South rezoning, transforming 42 blocks in central Manhattan into 10,000 units of housing, needed to pass.
“We put the property under contract and made the bet [the rezoning] was going to go through,” Burger said.
The City Council passed the change last August, and the building sale closed in October. Its units accounted for 1 percent of the neighborhood’s housing goal.
“It actually went through quicker than we thought,” Burger added.
Brokers and developers turned their eyes to the area. Could Herald Square become the next Dimes Square? Would New York’s media elite come up with a nickname for young women of the Garment District?
“We get a call every day from people who say ‘I saw 29 West 35th Street. We’ve got a project at X [West] 36th Street and 34th Street and 37th Street,’” Burger said. “I don’t know if people just woke up, but the Midtown South [rezoning] seems to have spurred a lot of activity.”
Broker buzz and good vibes, however, have not translated into sales. So far, the pile of plans for ground-up construction or tear downs is slim. But it could grow: Inquiries and talks with landlords of aging office buildings are increasing, sources said.
Nine months after passage, developers scouting in the area say the rezoning does not solve the industry’s underlying math problem because of construction costs and tight margins. Multifamily projects with more than 100 units of multifamily spur higher wage requirements under 485x, a state tax program developers lean on for tax incentives. Those cut into profit margins. So does waiting for longtime existing tenants to move out.
“The sea change that the rezoning of Midtown South should be bringing about in terms of new developments is hampered by the prevailing wage requirement of 485x,” said Michael Cohen of Williams Equities, which owns office buildings in Midtown South.
If 485x is a minus in the developer’s math equation, a tax break for office to residential conversions, known as 467m, is a plus. Possibly enough of a plus to get more development going.
“You wouldn’t be able to build this without 467m,” Burger said of his project. “The numbers just wouldn’t work.”
Time warp
Midtown South spans over 42 blocks. At its heart is the Garment District. The neighborhood, between Fifth Avenue and Ninth Avenue, from West 34th to 42nd Streets, consists of buildings designed for the city’s apparel-manufacturing businesses a century ago.
In 1987, the city further limited options. In an attempt to mitigate the industry’s decline and jobs leaving the city, it passed an ordinance requiring owners to preserve space for garment manufacturers.
But zoning couldn’t defeat the forces of globalization, and fashion and manufacturing jobs continued to leave the city and the U.S. In 2018, Mayor Bill De Blasio lifted some restrictions but failed to remove the housing ban. At last, in 2024, Mayor Eric Adams’ City of Yes legislation cleared the way for new, denser housing with one key change: Floor-area ratios increased from 12 to up to 18. Less than a year later, the Midtown South rezoning passed the City Council unanimously, though with last-minute carveouts preventing residential use on certain blocks.
“It just touches so many neighborhoods.”
The geography is advantageous: east of Herald Square, west of Murray Hill, north of NoMad, south of Bryant Park and close to Hudson Yards. “What’s great about where we are is it just touches so many neighborhoods,” Burger said.
But the political slow-walking had a hangover. The Garment District’s office buildings are dated, with some hanging on by a thread in terms of maintenance or financials. Yet some tenants prefer their dilapidated buildings with asking rents of $60.49 per square foot, according to Colliers, half what they’d pay in a trophy office in Hudson Yards.
At Burger and Heiberger’s conversion, the office tenants had already vacated, except for a restaurant lease, which expired earlier this year.
“A lot of these other buildings have existing tenants,” said Burger. “They have to get rid of and deal with. So it’s not as immediate a plan.”
Sale bin
The building at 29 West 35th Street fell into distress during the pandemic. Barry Sternlicht’s Starwood Property Trust launched a foreclosure auction in early 2022, alleging the owner defaulted on its $41 million loan. Starwood acquired the property in a $23 million credit bid after no bidders showed up at a foreclosure.
Starwood, through a special servicer, struck a deal with Heiberger and Burger for the property. Finding debt financing was easy. The equity was a challenge, however, because of Zohran Mamdani’s victory in the Democratic primary, Burger said.
“A lot of institutional investors red-lined New York to figure out what was going to happen with the election,” said Burger.
But the building had attractive features for a conversion. There was no need to wait until tenants’ leases expired and conversion could start as soon as the rezoning passed. David Levinson of L&L and Terracotta Management joined as equity partners and the sale closed in October 2025 for $25 million, or $294 per square foot. Of the 107 units, 27 will be designated as affordable with rents at about $1,700 per month.
The 467m tax break allows Heiberger and Burger to avoid paying property taxes for up to three years, while the project is under construction, which has been crucial. After that, the break gives owners a 90 percent exemption for 30 years if a quarter of the units are affordable. If Heiberger and Burger owned the building the rest of their lives, they would only owe about a 10th of the property taxes of comparable residential buildings in the city. In addition to tax breaks, Burger’s other advantage is the speed in which conversions can be completed. Burger expects his building to be open by next June.
“The whole project, we should be in for under $1,000 a foot when we’re done, maybe even less,” said Burger. “Our basis is going to be great, and our timing is going to be so much quicker than if we had to build ground up.”
Dawn of residential
Burger’s conversion could be the first domino.
Howard Rabner of Ariel Property Advisors is listing a small office structure just behind it, at 34 West 36th Street. The building is only six stories and 11,000 square feet. But he’s getting inquiries from buyers eyeing conversions.
“These building owners say, ‘You know what, I’m not going to get top dollar in the rent, but there could be an opportunity to go residential and take advantage of everything else around me, and especially that block,’” Rabner said.
He has seen 10 trades in Midtown South in the past year and thinks the pace could pick up.
Rabner draws parallels to the Midtown East rezoning in 2017, which incentivized developers to build new modern office towers, especially in terms of timeline. JP Morgan’s colossal headquarters tower at 270 Park Avenue was the first and largest office built under the rezoning. The tower was finished eight years after the rezoning passed.
The rezoning “was seen as long term because you had long leases and you have owners that know they can’t do anything in the short term,” Rabner said. “But 10 to 15 years down the road, you can start seeing it happen.”
In Midtown South, at least two developers have already pitched ground-up residential developments. Notably, Jack Yadidi filed plans with the city in March for a 32-story tower at 30 West 37th Street, demolishing an existing two-story structure.
So far, few have benefited more from the Midtown South rezoning than Richard Coles’ Vanbarton Group. The developer owns a coveted site in NoMad at 3 West 29th Street. It abuts Marble Collegiate Church, led for decades by Dr. Norman Vincent Peale, best known for his book, “The Power of Powerful Thinking,” and celebrity attendance. (President Trump married his first wife, Ivana, at Marble Collegiate.)
Before the rezoning, an office development seemed likely. HFZ Capital had once planned to build a 34-story office tower before losing the property to foreclosure in 2021.
“You go back and you Google that site, you’ll see it was going to be an office then life science then it was going to be a hotel,” Coles said during The Real Deal’s Salon Series in January. “Meanwhile, during this whole journey, we were thinking, ‘God, if it could only be residential.’”