The Real Deal New York

SL Green expects office tower One Vanderbilt to make almost $200M per year

Figure likely includes expected $42M in income from observation deck
By Konrad Putzier | January 27, 2017 08:00AM

Marc Holliday and One Vanderbilt

SL Green Realty expects its office tower One Vanderbilt to throw off a net operating income of $198 million once built and fully leased – per year.

The estimate is in 2028 dollars and based on the assumption that the tower is leased out at an average of $155 per square foot, SL Green’s CEO Marc Holliday said during an earnings call Thursday.

Office market sources told The Real Deal that the $198 million figure, if realized, would make the 1.7-million-square-foot, 1,401-foot-tall tower one of New York’s most profitable office buildings and put it in a league with significantly larger trophy properties. SL Green’s TRData LogoTINY figure likely includes the $42.2 million annual net operating income it expects to make through admission to the building’s observation deck.

To compare, Empire State Realty Trust, which owns the Empire State Building along with its lucrative observation deck and several other office properties, had a company-wide operating income of $151.37 million in 2015, according to SEC filings (although that figure would be much bigger if it weren’t for $171.47 million in depreciation). The Empire State Building’s observation deck created $112.17 million in gross income in 2015, minus $29.83 million in observatory expenses.

Another major tower, One World Trade Center, is about twice the size of One Vanderbilt, but its current average asking rent of $70.6 per square foot (according to CoStar) is less than half the $155 per square foot rate SL Green expects to achieve. In 2014, the developers of One World Trade Center projected that its office space would produce an annual operating income of $144 million by 2019, provided it is 95 percent leased, according to the Wall Street Journal. They projected that the observation deck would add another $53 million – bringing the tower’s annual operating income to $197 million. As of June, One World Trade Center was 69 percent leased. In 2015, the tower generated a profit of $12.5 million, according to Port Authority documents cited by Patch.com.

SL Green expects One Vanderbilt to cost more than $3.2 billion. On Thursday, the REIT announced that National Pension Service of Korea took over a 27.6 percent stake in the building. The deal, along with an investment by Hines, will inject $525 million into the project. Construction is expected to finish in 2020.