The Real Deal New York

Spotify looking for 350K sf HQ ahead of IPO next year

$8B startup considering moving Swedish offices to NYC

September 22, 2016 04:05PM
By Rich Bockmann

From left: Daniel Ek, 620 Sixth Avenue, Kenneth Siegel and Jim Wenk

From left: Daniel Ek, 620 Sixth Avenue, Kenneth Siegel and Jim Wenk

This playlist is on shuffle. Spotify will soon be looking for New York City digs as large as 350,000 square feet.

The Swedish-based music-streaming app, which currently has an office in Chelsea at RXR Realty’s 620 Sixth Avenue, hired brokers at JLL to start the search for a new headquarters, sources told The Real Deal.

The tenant team hasn’t entered the market yet, but when the time comes, they won’t be moving to the beat of any slow songs. That’s because the assignment, which is for 300,000 to 350,000 square feet, comes with the directive to find a space where the tech company can begin building out its offices by next summer.

Spotify, which reportedly has about 140,000 square feet at RXR’s property, has been there for only three years, according to CoStar data.

But the 10-year-old company has big plans for 2017. CEO Daniel Ek wants to launch an initial public offering in the second half of next year, Bloomberg reported earlier this summer. The company was valued at $8 billion in March after it raised $1 billion in convertible debt from investors.

As part of the terms of the funding round, investors have the opportunity to convert stakes into shares at a 20 percent discount to the price of the IPO, and the discount grows greater as time goes on, according to Bloomberg.

The Spotify founders are also considering moving the company from Sweden to New York City, in part because Swedish tax law makes it more difficult for the company to offer employees generous stock options, a tool it uses to attract top talent.

“We love Sweden and believe that this is basically the best environment for us. But at the same time, we cannot magically remove the political obstacles,” Ek and fellow co-founder Martin Lorentzon wrote in an open letter in Swedish, according to CNN. “Thousands of Spotify jobs could go to the U.S. instead of Sweden.”

Ken Siegel and Jim Wenk at JLL are handling the leasing assignment. Neither the brokers nor representatives for Spotify were immediately available for comment.

The property-service union 32BJ SEIU recently bought four commercial condominium units at RXR’s Chelsea property for $144 million.

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