The Real Deal New York

Happel would “fully support” NY REIT sale

Eastdil exploring market for NYC-focused office REIT

November 05, 2015 03:20PM
By Rey Mashayekhi

1440 Broadway NYC

1440 Broadway in Midtown (inset: Michael Happel)

New York REIT president and CEO Michael Happel said he would “fully support” an entity-level sale of the New York City-focused real estate investment trust should such a deal come to pass.

In addition to reshuffling its board of directors, New York REIT tapped Eastdil Secured last month to advise on “potential strategic transactions” in wake of mounting shareholder criticism over the company’s stock price performance.

While such deals could take place on the individual asset or “sub-portfolio” level, the process could also involve a potential sale of the entire company, Happel confirmed in the company’s third quarter earnings call Thursday. He added that he would “fully support” any decision to sell the REIT.

Occupancy within the REIT’s 3.4 million-square-foot office portfolio stood at 97.2 percent at the end of the third quarter, unchanged from the previous period. But the company will have 189,000 square feet of vacancies at its 25-story, 748,000-square-foot 1440 Broadway office building in Midtown come the end of next quarter.

It is negotiating leases on over half of the 189,000 square feet due to become vacant at 1440 Broadway, with rents in the building “usually” north of $60 per square foot, Happel said.

He added that a “very strong” Manhattan leasing environment with double-digit year-over-year rent increases means it is a good time to be looking for new tenants.

New York REIT also continues to pursue the sale of non-core assets in Brooklyn and Queens, having retained Cushman & Wakefield and HFF to market five properties in the outer boroughs. It expects to make about $120 million from those sales.

The company has already sold one of those properties, a rental building at 163 Washington Avenue in Clinton Hill, for $38 million, and has three Brooklyn retail properties and one Queens retail property remaining on the market.

While announcing plans for a $150 million share repurchasing plan earlier this year, New York REIT has yet to execute on the buyback, and Happel cited the desire to wait until closing most of the non-core asset sales to repurchase the shares “on a debt-neutral basis.”

The company also wants to stay liquid to exercise its purchase option on its prized 49-story, 1.8 million-square-foot One Worldwide Plaza office building in Midtown West, in which it holds a 49 percent interest. The purchase option in early 2017 will require around $270 million in capital, and Happel said he “fully expect[s]” New York REIT to exercise the option.