Dive Brief:

• KPG Funds closed a $50 million construction loan deal to renovate a 70,000- square-foot office building in Manhattan’s SoHo neighborhood, according to a press release.
• The building’s renovations include upgraded internet, security and building management systems, new HVAC installations, elevators and a dedicated entrance on Crosby Street.
• The developer says the three-year loan will be used to rebrand the property as a boutique luxury office building, as New York City continues to look for ways to revamp and modernize existing office space. 

Dive Insight:

KPG expects the project to debut in early 2024, with renovations coming in at a time when occupiers are looking for better buildings, amenities and systems that can draw employees back to the office. 

The Crosby will include three floors of luxury office space totaling 34,229 square feet, in addition to 18,000 square feet of retail areas on the building’s ground and second level.

The development group says that dual access to Crosby Street and Broadway will provide the office with additional access to retail and dining spaces in SoHo. It says the location is less than a quarter mile from local and express subway lines, which is expected to attract potential occupants. CBRE’s recent Spring Occupier Sentiment report echoed this belief, finding that markets near public transportation, are walkable or have high-end experiential retail outperform other commercial spaces.

“Bespoke office is on fire and we can’t build fast enough to accommodate the demand for our Signature KPG office product,” KPG co-founder and CEO Greg Kraut told New York Yimby. “The demand for office space post-COVID is being redefined in 2023 by landlords who provide an ultra high-end experience for their tenants in highly desirable locations.”

The renovation loan includes financing from Sabal Investment Holdings, GDS Brightstar and the lending arm of GDSNY. KPG says Newmark brokered the loan transaction, and will oversee leasing of the building’s office space. RIPCO Real Estate is expected to operate leasing for the building’s retail portions. 

Despite fluctuating vacancy rates in New York City since the pandemic, KPG has continued to invest in space renovations to boost occupancy rates. Last year, the developer, which buys architecturally significant Class B and C buildings and turns them into Class A boutique offices, cited an occupancy rate of 85% across its buildings, compared to a city occupancy rate of 42.5% at the time