By: Hadassa Kalatizadeh

Cornell University’s medical school is moving out of lab space on the Upper East Side, leased by the landlord formerly named New York City REIT.

As reported by Crain’s NY, the 30,000 square foot of space may not seem like much, but it’s yet another blow to the landlord.

The vacating space at 400 E. 67th St., at which Weill Cornell Medicine’s lease expires next month, was disclosed in a report on Friday by bond-rater KBRA. The University had rented space in the first two floors of the condominium tower, but is moving out with the expiring lease. Sarah Smith, executive director of public relations, said Weill Cornell is “considering consolidating some of our locations into other currently leased or owned building space to maximize these other properties by the end of the year.”

The building, known as the Laurel, is a 31-story condo. The commercial space is owned by NYC REIT, a firm which changed its name last year to American Strategic Investment Co, highlighting its adding other businesses to its portfolio besides for NY real estate.

At the end of April, American Strategic announced that it is putting three Manhattan properties on the auction block: The 165,000square foot office building at 9 Times Square, which is 30 percent vacant; the office building at 123 William St. in the Financial District; and the 11-story condo building at 196 Orchard St. “These strategic dispositions are in furtherance of the company’s previously announced repositioning of the company’s investment portfolio and expanded business plan to invest in assets beyond Manhattan real estate,” said the REIT, which trades under the “NYC” stock ticker on the New York Stock Exchange.

Per Crain’s, a decade ago, American Strategic had started amassing Manhattan office and residential space, when interest rates were super low and when optimism was high regarding NYC real estate. Their portfolio grew to span roughly 1.2 million square feet in Manhattan buildings. Most of the acquired office buildings, however, are Class B and have struggled to retain tenants since 2020, when the pandemic hit, which left commercial real estate ailing.

In 2014, American Strategic had purchased the Laurel’s commercial space, and a parking garage in the Upper West Side condominium complex formerly known as Trump Place, for $85 million, which came to about $707 per square foot. KBRA’s new estimate for the property values it at a combined $323 per square foot, and the bond-rating firm lowered its outlook for the properties’ $50 million mortgage to “underperform.” In its report Friday, KBRA noted Cornell’s upcoming exit from the fully occupied building and the overall difficulty faced by commercial space in today’s market.

On an earnings call Friday, American Strategic Investment CEO Michael Anderson said he has had “some unsolicited interest in recent months on 9 Times Square and think that there will be similar interest at 123 William.” He also noted that the company is seeing “some increased leasing interest” at 1140 Sixth, the 250,000 square-foot building which the company acquired in 2016. That building is newer and centrally located at West 44th Street, but it is still struggling with 23 percent vacancy. As to the future, “I would say that the focus is probably outside of New York,” the CEO said.