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The glass is half full — less, actually — at 345 Seventh Avenue, a century-old office building near Penn Station, and three smaller buildings that sold last month: Long-term tenants occupy just 43 percent of their combined 212,000 rentable square feet.
Blame a flight to quality in the office market. More than 93 percent of leases in the four-building portfolio will expire in 2026 even after 345 Seventh Avenue got a $3.6 million renovation in 2016.
Empire Capital Holdings bought the properties with Igal Namdar of Namdar Realty Group for $107 million, real estate records show. The seller was Clemons Management.
Financing included $78 million in mortgage loan proceeds and $7 million in mezzanine debt, according to DBRS Morningstar, which rated the property as average prior to the sale of a $621 million CMBS loan securitized partly by the mortgage.
Documents associated with the securitization provide an inside look at the property’s finances.
Total leased space, including tenants who aren’t paying rent and those on month-to-month leases, at 345, 341 and 343 Seventh Avenue, as well as 167 West 29th Street, brings the occupancy rate of all four buildings as of Aug. 21 to 59 percent.
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Tenants include D’Agostino, a real estate law firm; HVAC maker Mitsubishi; fur tailor Fox Unlimited; Chinagraph, the television movie marketer that has promoted Daniel Craig’s James Bond films; and on the ground floor, Apple Bank and a Five Guys restaurant.
During the pandemic, D’Agostino gave up its full-floor lease on the 24th floor, which now sits empty as the firm does business on the entire floor below, according to Morningstar DBRS. The building’s owners will have to front most of the $12.7 million required to stabilize the property, according to Morningstar.
Demand has finally exceeded supply in Manhattan’s office market: Third-quarter leasing volume jumped 59 percent from the prior three months, according to Colliers International. It was the first quarter in two years that tenants leased more space than what became vacant, adding 870,000 square feet to Manhattan’s tally of leased space.