Donald Trump is looking to raise a lot of money fast and is turning to one of his favorite cash sources: real estate.
The new president has made saving money a tenet of his administration. With the help of Elon Musk and the newly-crafted DOGE, the White House has slashed federal spending — though the jury’s out whether the government has significantly trimmed any fat — and unveiled initiatives to bring in more revenue and create a new sovereign wealth fund.
In February, employees at the General Services Administration were given executive orders to sell more than 500 federal buildings, according to Wired. The goal is to reduce the size of “the owned real estate footprint by 50 percent and the number of buildings by 70 percent. Reductions will be focused on the non-core general office space of the portfolio which can be replaced as needed in the private leased market,” according to a document viewed by Wired.
For New York City, it means a bunch of large, old buildings could soon hit the market.
But does anyone want to buy these spaces?
The Real Deal turned to those who would know — and would likely be asked to sell the spaces if they were to be put up for sale — to get their thoughts on New York’s federal buildings. We asked five brokers to take a look at the state’s government-owned properties and step into the role of marketer. While not all of these buildings are owned by the GSA, we looked at all federal properties to provide a thorough look at the federal portfolio.
Some of the spaces may be a hard sell, especially old courthouses that would require a major lift to make usable for other purposes — fetching as little as $300 per square foot. Others could be on the more premium side, given their historical value and the likelihood of them being eligible for City of Yes.
1 Bowling Green
1 Bowling Green, also known as the Alexander Hamilton U.S. Custom House, was built in 1907 and is about 320,000 square feet. The seven-story Beaux Arts building designed by Cass Gilbert could bring in a premium price from a user looking for an architectural gem. The Department of Finance values it at $57,213,000.
“I think it would probably be the best user-building opportunity in New York City,” said BKREA’s Bob Knakal. “The architecture is phenomenal, and the presence for a user would be incredible.”
Knakal said users pay a premium for building over what an investor pays, which has averaged about 16 percent since 1984. But on the high end, that premium can surpass 200 percent.
“This building would be at the top of that premium range. I could see this building selling for well in excess of $1,000 per square foot, or about $378 million, even though it would likely need a complete gut renovation.”
Knakal added that his estimate doesn’t even take into consideration the “massive amounts” of air rights that landmarked buildings have and that can be moved more easily under City of Yes.
Still, since it’s owned by U.S. Customs and Border Protection and not the GSA, it may not be up for sale just yet.
201 Varick Street
The 12-story 201 Varick Street could be another winner — and stands to bring different types of possible tenants. The 930,000-square-foot property, built in 1929, is the highest-valued building of the lot, with the Department of Finance assessing its worth at $122,191,650.
Marcus & Millichap’s John Horowitz said the first thing he would do is scope out the art deco building’s column layout and window locations to see if it works as a residential conversion, assuming the building was delivered vacant.
“A building like this in this location, given the need for additional housing in New York City, that’s certainly the highest and best use for this building today,” Horowitz said. “If I were brokering this building, the first thing I would do is I would be walking the building, speaking to architects and figuring out the zoning.”
If a conversion isn’t viable, Horowitz said he would work with the owner to divide the space and find the right tenant. Office tenants are starting to flock to the once-quiet Hudson Square neighborhood, thanks to the opening of Google’s New York headquarters at St. John’s Terminal and Disney’s relocation there.
“I think you’d try to get a little more interest from the creative type of tenant instead of the corporate tenant,” Horowitz said. “The tech companies that would be interested in a building like this, a lot of them are now requiring their employees to come back five days a week, so you’re definitely starting to see the office market improve, especially in this type of location.”
290 Broadway
290 Broadway, also known as the Foley Square Federal Building, could also be an attractive property. The 34-story building, which opened in 1994 and the Department of Finance values at $95,266,350, has a few things going for it: it’s multi-use, and it’s in an upscale neighborhood.
If James Nelson of Avison Young were marketing it, he would have high hopes. The building runs an entire city block and encompasses one million square feet, of which 769,000 square feet are currently rentable. “It has zoning for both commercial and residential and would likely be considered for conversion under the City of Yes initiative,” he told The Real Deal.
And then, of course, there’s the location. “Its prime Tribeca location would also bode well for condos.”
Kenneth Salzman of Lee & Associates was similarly intrigued. “I suspect that the building has security ‘enhancements’ that may be attractive to private sector businesses (or that keeps the agencies located in the building ‘sticky’ because it will be difficult to find those features in other non-government owned properties),” he said. “If the GSA is able to deliver vacant possession, it may be possible to convert the building (or the upper portion of the building) for residential use.”
The one issue may be its young age, at least compared to the other GSA-owned properties.
“Notwithstanding, the building was constructed after 1991 and is therefore not considered ‘outdated’ or warranting repurposing (from the City’s perspective). As such, it may not qualify for the City’s 467-m tax incentive program, which has accelerated office to residential conversions as part of the City of Yes for Housing Opportunity plan,” Salzman said. “On the positive side: agencies that ‘downsize’ out of the building may still require a presence in lower Manhattan, potentially lowering the overall availability rate.”
203-209 Centre Street
The Howard Street Garage is another building that could be a good contender for City of Yes.
Built in 1933, the property is small, with only 65,000 square feet, of which only about 2,400 square feet are rentable. But it could be updated more easily than other federal behemoths. And its Department of Finance value is only $7,346,250.
Avison Young’s Nelson described it as “a unique conversion opportunity property because under City of Yes, it could be redeveloped up to more than 150,000 building square feet.”
That could mean more housing. “If security weren’t an issue, residential could be built on top and a garage returned to the government,” Nelson said.
Analyzing the space more, Nelson got even more excited about the prospect of it hitting the market. “If the federal government is in need of brokerage assistance for U.S. assets, I’m happy to oblige.”
500 Pearl Street
500 Pearl Street may be an edge case, and brokers are divided.
The 27-story Daniel Patrick Moynihan United States Courthouse was built in 1994 and offers 684,000 currently rentable square feet. But, according to Avison Young’s Nelson, it “is not what you’d expect as a typical government building with its granite and marble façade. It too has residential zoning, so could likely see a conversion here as well to rental and condos.”
But Lee & Associates’ Salzman doesn’t think that’s likely to happen. “My sense is that the Federal Government may be looking to monetize the assets through sale-leaseback transactions, where a private owner agrees to purchase the properties with long-term leases for the government agencies in place,” he said.
To transform the building into something else would prove difficult, in his estimation. “If the Government is planning to relocate the courts to a new location, I strongly suspect that it will be prohibitively expensive and difficult to convert the property to alternative uses without impacting the landmark status,” Salzman said. “I suspect that if the courts vacate the building, they will still require a presence in lower Manhattan, potentially reducing the overall availability rate in the submarket.”
26 Federal Plaza
At 26 Federal Plaza, the country’s tallest federal office building, Lee & Associates’ Salzman said its size and the existing tenants would make a residential conversion difficult. Built in 1977, the 41-story building offers nearly 2.3 million rentable square feet; the Department of Finance values it at $94,308,750.
“The agencies that are there, to the extent that they are going to downsize, they still exist,” Salzman said. “So the potential to be taken offline and converted to residential would be difficult to do, but not impossible.”
The building’s age is also a disadvantage, whether the 48-year-old building is going to be converted or used as an office.
“To reposition that as an office building, you’re going to have to put in a tremendous amount of capital, which would reflect a large discount in any potential sale price,” Salzman said, although that discount could be offset by a sale-leaseback where the GSA guarantees a private owner a long-term lease.
“The conditions matter,” Salzman said. “The discount could be offset If the building is being sold where there’s a significant portion of the building that is going to be leased back by the government, whereas a speculative office building is not particularly exciting.”
40 Centre Street
Other buildings may not be as desirable.
40 Centre Street was built in 1936 and offers 541,000 rentable square feet with a building area of 635,000 square feet. The 37-story courthouse consists of a six-story base and a 31-story office tower, which the Department of Finance assesses to be worth $55,582,200. While an architectural gem, it wouldn’t be as attractive to potential buyers or tenants.
In fact, David Schechtman from Meridian Investment Sales said 40 Centre Street would most likely be sold to investors who would do a sale-leaseback with the government because “large tenants are few and far between down here.”
Due to the limited tenant demand, he added, the properties would likely trade at a large discount to the market — “$300 per square foot at best.”
799 United Nations Plaza
Another wildcard is 799 United Nations Plaza, the government’s newest building. Built in 2010, the 26-story property is 325,000 square feet, of which 127,000 is currently rentable. The Department of Finance assesses its value at $62,816,850.
It’s a pretty bleak building. It has six floors of windowless rooms at its base for security reasons; in 2002, the New York Times described the design as “essentially a high-rise bomb shelter.”
That could be a hard sell for some. As Marcus & Millichap’s Horowitz said, those floors could be used for “anything you can fashion that doesn’t require human beings spending significant amounts of time there.” That could be a data center or for storage.
Similarly, he pointed out that it’s not the most well-placed location. It’s practically in the East River, so far from transit, which could dissuade some potential tenants.
Avison Young’s Nelson sees some upside, however. “It’s currently 325,000 square feet of office space and has residential zoning as well,” he said. “Given its proximity to the UN, its highest and best use would likely be offices for another foreign government if the U.S. opted to put this strategic location on the market.”
1 Saint Andrews Plaza
Built in 1975, the Silvio J Mollo Federal Building, an 11-story property, currently houses the U.S. Attorney’s office and has 134,000 rentable square feet. The Department of Finance assesses its current value at $11,369,700.
Marcus & Millichap’s Horowitz thinks it would likely sell for cheaper given its landmark status — especially if it isn’t sold fully leased. “If I’m a buyer, I would offer less because I know it’s going to take longer to make changes,” he said.
Horowitz added that zoning will play a major role in its marketability. If successfully rezoned, it could be sold as a residential conversion. If not, it would have to stay commercial.
And a business may not be interested, given the location. It’s downtown among the courthouses, which involves onerous security protocol. “If I’m a private business, there’s really no reason to be there,” said Horowitz.
There are some good things about the building, however. “It’s not aesthetically pleasing, but it does have a great view of City Hall,” said Avison Young’s Nelson. “The property is currently overbuilt, so its highest and best use would likely remain office. Avison Young has tracked that 25% of office sales post-pandemic have sold to end users, so this could be a likely candidate.”
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