Bank failures create another blow, more grim news for New York’s already-reeling office landlords

BY AARON ELSTEIN

The failure of two major banks is yet another blow for the city’s office landlords.

Signature Bank is the secondlargest tenant for the owner of the Empire State Building, while a division of Silicon Valley Bank added more space only two years ago in a Midtown tower owned by Paramount Group. The struggling First Republic Bank is a big tenant at Hudson Yards.

The fates of banks and commercial landlords are deeply entwined. Not only do banks rent lots of space, but commercial property tends to office space. make up a large portion of their loan books.

The timing is unfortunate for landlords already coping with the loss of tenants from other sectors and the persistence of remote work.

“There is no market for office buildings except for the 1 Vanderbilts of the world,” Piper Sandler analyst Alexander Goldfarb said, referring to the new Midtown tower developed by SL Green Realty.

Not only do the recent, stunning failures eliminate two tenants from the rolls, but other banks, venture capital firms and other institutions are expected to take steps to lower costs, which would mean employing fewer people and renting less

As it happens, SL Green may be the most exposed to the bank fallout. Financial institutions of all kinds account for 43% of tenants, Goldfarb said, although SVB wasn’t one. The tech sector, which has struggled for a year, represents 15% of SL Green’s tenants. The landlord’s stock price has dropped by 18% since SVB failed on the morning of March 10. Vornado Realty Trust, Empire State Realty Trust and Paramount Group have also fallen.

SL Green shares are their lowest since 2009 and Vornado’s, since 1996.

Big leases

Analyst Steve Sakwa of Evercore ISI said Signature Bank rented

308,000 square feet at 1333 Broadway and 1400 Broadway at a cost of $18 million in annual rent. If none of the space is used by whichever institution buys Signature’s remains, the gross market value of Empire State Realty’s properties could fall by $265 million, he said.

Paramount Group is also exposed. In 2021 SVB signed a lease for an investment banking division, Leerink, to occupy 139,000 square feet at the landlord’s 1301 Sixth Ave. property. If Leerink isn’t bought by another bank in the near term, Sakwa estimated, Paramount’s rev- enue would fall by $10 million. First Republic Bank occupies a third of 410 Tenth Ave., a 630,000-square-foot building in Hudson Yards, according to Trepp. ■ C. J. Hughes contributed to this article.

Zohran Mamdani

New York state Assembly

INTERVIEW BY CAROLINE SPIVACK

Queens Assembly member Zohran Mamdani has big ideas for the Metropolitan Transportation Authority. In a recently proposed package of eight bills, known as “Fix the MTA,” Mamdani and his progressive colleagues seek to go far beyond stabilizing the agency’s finances by funding dramatic service improvements, including six-minute subway service and free bus fares. Seven bills would enact policy change, while an expansive spending bill calls on the state to pump about $3.3 billion per year, over four years, into the agency. And components of the legislative package are gaining traction. Both the Assembly and the state Senate called for a fare freeze and included a pilot for free bus service in their one-house budgets released Tuesday in response to Gov. Kathy Hochul’s February budget proposal. The progress is encouraging to Mamdani, who says it is absolutely possible to create a transit system that New Yorkers deserve by rethinking how the state taxes the rich.

For you, why focus on building a better MTA?

The MTA, for many New Yorkers, is the way that they most frequently interact with government. It is how people get to work, how they see friends, how they go to worship. And I think it’s critical for us to have New Yorkers expect more from their government. If we want to create that, it’s necessary to begin at the most frequent point of interaction. I’d argue the MTA is one point.

Your proposed spending bill tackles a lot. Can you break it down for us?

I’d synthesize it into four major planks. The first plank is to resolve the MTA’s operating budget deficit. The second plank is to freeze fares at $2.75. The third plank is to fund frequency, so six-minute headways for trains and a 20% increase in bus service. And a fourth

POLITICS

Dossier

WHO IS HE Assembly member, 36th district, which includes Astoria and Ditmars-Steinway

AGE 31

BORN Kampala, Uganda

GREW UP Kampala, Cape Town and Morningside Heights

RESIDES Astoria

EDUCATION Bachelor’s in Africana studies, Bowdoin College plank is to make buses free over the next four years. What is at the heart of this fight is making it clear to New Yorkers that the MTA that we deserve is truly possible. The only thing that is stopping us is political will. If we want to have more frequent service, we can create that by funding it.

FAVORITE STATION Mamdani enjoys commuting through Herald Square, solely, he says, because of a permanent interactive installation that allows straphangers to play notes akin to a xylophone with other passengers while waiting to catch a train.

SUBWAY SETTING Before his political career, Mamdani rapped under the name Mr. Cardamon. He shot part of the music video for “Nani” on the Astoria Boulevard subway platform, where he later canvassed during his run for his Assembly seat.

THE SPOT If he had to recommend one eatery in his district, Mamdani suggests Egyptian seafood restaurant Abuqir on Steinway Street. Customize how your seafood is prepared and don’t skip the baba ganoush or eggplant to start, he advises. The bread is also “some of the best I’ve had in my life,” said Mamdani. It all adds up to “a quintessential Astoria experience,” he said.

Some would say making buses free is coun terintuitive given the MTA’s finances. Free buses make buses faster, safer and universally accessible. In terms of faster, we’ve seen when this was implemented on three lines in Boston that the dwell times of those lines decreased by 23%. In terms of safer, we’ve seen that when this was implemented in Kansas City that 80% of bus riders felt safer, and bus incidents went down 39%. And in terms of universally accessible, buses are the only method of public transit that our disabled neighbors can use at any juncture—trains are simply not that way because of the lack of elevator access. And to make it truly accessible, if we took away fares, it would provide relief to the most working class of New Yorkers; the average bus rider makes about $30,000 a year. If fully implemented, the most expansive cost would be $778 million per year. That is about 4% of the state budget.

So where would all that money come from?

The entirety of the spending bill costs about 1.5% of our state budget. Last year it was $222 billion; this year the governor has proposed a $227 billion budget. The money that we are calling for is but crumbs compared to the amount we could raise by taxing the wealthiest New Yorkers. The corporate tax right now in New York is 7.25%. New Jersey has an 11.5% rate. What I, and many other legislators, are proposing is that we raise our corporate tax on companies making more than$2.5 million a year in profit. And we spend the money raised on critical public goods like, but not limited to, the MTA.

How would this account for raids on the MTA’s budget that we’ve seen in Albany, in which funds committed to the agency are used for other purposes?

One critical piece of legislation in this package is a bill to remit the internet sales tax. This is a source of funding for the MTA right now, but it is not fully safeguarded from the possibility of executive raids. We have seen previous governors take money out of the MTA, for example, to shore up the finances of upstate ski resorts. A key thing is not simply to increase the amount of funding the MTA receives; it’s also safeguarding what they already receive. ■