In a significant move for the New York real estate scene, New York University (NYU) has struck a deal with Vornado Realty Trust for all 1.1 million square feet of office space at 770 Broadway. The agreement not only encompasses a sprawling amount of space but also a staggering time frame; NYU is set to occupy the building for at least 70 years starting this January. In an earnings call noted by
Crain’s New York
, Vornado’s CEO Steven Roth expressed delight in expanding their partnership with NYU, although specifics on the rent paid were not disclosed.
According to John Beckman, a senior vice president at NYU, 770 Broadway is “critical to fulfilling NYU’s bold aspirations in science and tech.” Having confirmed the transaction with
Crain’s New York
, the school has agreed to a significant prepaid portion of the rent, enabling Vornado to settle its $700 million loan on the property. While the rent rate remains under wraps, Vornado’s past earnings filings hint that former tenants Meta Platforms and Yahoo shelled out an average of $113 per square foot last year.
A silver lining amid occupancy challenges, this development promises a boon for Vornado’s portfolio. Prior to the lease, Vornado reported a declining occupancy rate, falling to 86.7% in the last quarter from 89.9% the same time last year. The NYU master lease is projected to bolster the occupancy rate to a healthy 90%. Furthermore, Vornado’s funds from operations dipped to 50 cents a share, compared to 62 cents in the previous year, as reported by
Crain’s New York
.
Earlier in August, a “handshake” agreement was reached for a long-term masterlease of the property, following Meta’s reduction of its leased area. Roth talked up the transaction during the company’s second-quarter earnings call, optimistically cited by
The Real Deal
. Despite not disclosing the identity of the “user” at the time, the deal with NYU now confirms the tenant’s identity. Vornado has also executed a separate deal with Uniqlo, selling part of its interest at 666 Fifth Avenue for $350 million, with closure expected in 2025.
“Leasing volume was solid,” stated JPMorgan analyst Anthony Paolone, contrasting with Piper Sandler analyst Alexander Goldfarb who considered it “light” compared to previous quarters. Despite this, the NYU deal signifies a resurgence of interest in Class A office space, echoed by Roth who emphasized the company’s continued “rigorous” cash management and the strategy to uphold shareholder payouts annually, according to
Crain’s New York
.
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