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April 04, 2017  

Class-B Offices in Times Square Up for Grabs

A liquidating REIT is preparing to market the 749,000-square-foot office building at 1440 Broadway in Manhattan’s Times Square.

The 25-story property, which is 83% occupied, could attract bids in the vicinity of $580 million, or $775/sf. The property will likely be pitched as a value-added play.

The owner, New York REIT, announced last August that it planned to liquidate its holdings. The marketing campaign for 1440 Broadway is expected to start around midyear, handled by Eastdil Secured.

The Class-B building, at the northeast corner of West 40th Street, is roughly 83% occupied. But the Ford Foundation is expected to vacate its 105,000 sf when its lease expires in September 2019. That creates the potential for the occupancy rate to fall to about 70%.

Other large tenants include Empire Residential Realty, Kaplan Test Prep, Macy’s and Mizuho, according to CoStar. There is also retail space at the base of the property, with tenants that include CVS (21,500 sf), FedEx, Subway and Western Union. Overall, investment-grade tenants account for some 40% of the rental income, according to the REIT.

The building was constructed in 1928. New York REIT bought it for $530 million, or $701/sf, in 2013 from a partnership between Rockpoint Group of Boston and Monday Properties of New York.

New York REIT was launched in 2010 as American Realty Capital New York Recovery REIT. It was one of more than a dozen nontraded REITs operated by Nicholas Schorsch under the American Realty Capital banner. Schorsch resigned from the boards of the REITs in 2014 after a scandal involving accounting irregularities at American Realty Capital Properties. The same year, American Realty Capital New York Recovery REIT changed its name to New York REIT and listed its shares on the New York Stock Exchange. Schorsch was replaced as chief executive by real estate veteran Michael Happel.

Last year, New York REIT agreed to a merger with JBG Cos., of Chevy Chase, Md., that would have valued the combined company at $8.4 billion. But opposition from shareholders, including Winthrop Realty’s Michael Ashner and New York developer Steve Witkoff, scuttled the deal. JBG later agreed to be acquired and spun off by Vornado Realty of New York.

New York REIT then adopted the liquidation plan and changed its external manager from an Apollo Global affiliate to Ashner’s Winthrop REIT Advisors. In conjunction with that change, which took effect last month, former Vornado executive vice president Wendy Silverstein replaced Happel as chief executive.

As previously reported, New York REIT is shopping its 48.9% interest in One Worldwide Plaza, a 2.1 million-square-foot office tower in Midtown Manhattan. Eastdil also has that listing. The REIT’s other Manhattan holdings include the 317,000-sf office building at 333 West 34th Street and the 215,000-sf property at 245-249 West 17th Street.