Legal Fallout Hits Key Figures in NYC Real Estate
The week’s biggest headline involves a formal criminal investigation into New York Attorney General Letitia James. The FBI and U.S. Attorney's Office in Albany are scrutinizing her personal real estate and mortgage transactions. Allegations include misrepresenting residency, mislabeling relationships on legal documents, and falsifying information to secure better mortgage terms for properties in Brooklyn and Virginia.
James has dismissed the accusations as “baseless” and politically motivated, calling the investigation a “revenge tour.” Her attorney tied the probe to former President Trump, whose businesses James previously investigated, resulting in a $360 million penalty earlier this year. That ruling is currently under appeal. The criminal referral came from Federal Housing Finance Agency director Bill Pulte, who suggested that if proven, the allegations could lead to charges such as wire fraud or bank fraud.
Meanwhile, former developer Josh Schuster, once a rising star in New York real estate, was arrested in Florida and charged with wire and securities fraud. The SEC has also filed a civil suit against Schuster and his company, Silverback Development, alleging they misused millions raised for a Gramercy Park condo project. A forensic audit reportedly found $2 million unaccounted for. The SEC is seeking penalties, disgorgement of funds, and a ban on future securities sales.
Capital Pressure and Strategic Defaults
In the Meatpacking District, Delshah Capital has filed Chapter 11 bankruptcy petitions for two retail properties: 58-60 Ninth Avenue and 69 Gansevoort Street. The properties, valued at $30 million, carry $28.6 million in liabilities. The filings appear to be part of a structured agreement with the lender, following a pre-foreclosure suit that was dropped last month. Retail tenants like Free People and J.Crew have vacated, and rising interest rates have made refinancing unfeasible.
In Midtown, the anticipated sale of 590 Madison Avenue, a 41-story office tower, could be structured as an installment sale. The property, owned by the State Teachers Retirement System of Ohio, has an asking price of $1.1 billion. Bidders reportedly include RXR and Tishman Speyer, with some requesting deferred payment structures to manage the high price tag. Market volatility and tighter lending conditions have made securing large, upfront financing challenging.
Elsewhere, Safehold and Melohn Capital secured $167 million in refinancing for the ground lease at 32 Old Slip in Lower Manhattan. The financing was provided by Goldman Sachs, Barclays, and Morgan Stanley. In Flushing, Lions Group replaced a $15 million loan with a $61 million construction facility from iCross Capital for a 14-story office building at 37-16 Union Street. The deal reflects continued confidence in Flushing’s development potential.
Leases Expand Across Office and Industrial Markets
In leasing news, fintech company Chime has signed an 84,000-square-foot lease at 122 Fifth Avenue in the Flatiron District. The building, which recently underwent a $100 million redevelopment, also houses tenants like Microsoft and Reformation. Chime will relocate from 101 Greenwich Street. Asking rents in Midtown South averaged $83.81 per square foot in Q1 2025.
Further uptown, PNC Bank has signed a 15-year lease for 83,000 square feet at 437 Madison Avenue. This move represents both an expansion and a relocation from its current office at 340 Madison Avenue. The new lease spans three floors and underscores the strength of Manhattan’s Class A office market.
On the industrial side, Bain Capital and Oliver Street Capital have acquired 11 Class B warehouses in Northern New Jersey for $208 million. The portfolio, totaling 784,000 square feet, is 88% leased and aligns with Bain’s strategy of focusing on smaller, high-demand facilities.
Policy Shifts and Development Momentum
Optimism is growing among developers despite economic challenges. Jonathan Landau described this as a “great time to build,” citing strong housing demand and robust condo sales. MaryAnne Gilmartin praised Mayor Eric Adams’ City of Yes rezoning plan, which aims to add 80,000 housing units over 15 years. Although the final version supports fewer units than initially proposed, Gilmartin called it a significant step forward.
Developers are also leveraging tax incentives like the 485x and 467m abatements to fund affordable and mixed-use projects. Nathan Berman of Metro Loft Developers noted that these programs, combined with rezoning efforts, have made office-to-residential conversions more viable. His company is leading one of the largest conversion projects in the U.S., transforming the Pfizer Building.