The Real Deal New York

Vornado has plans to clear out more space for Facebook in Midtown South: sources

Several major retailers could be on their way out to make room for tech giant
By Rich Bockmann | January 04, 2018 02:30PM

From left: 770 Broadway, Steve Roth and Mark Zuckerberg

Facebook and Vornado Realty Trust are discussing major expansion plans in Midtown South.

Vornado is in talks to buy out other tenants at 770 Broadway, which would allow Facebook to expand its footprint at the 1 million-square-foot landmarked office building, sources told The Real Deal.

J. Crew, which occupies about 300,000 square feet in the behemoth of a building overlooking Astor Place, hired JLL to find it a new corporate headquarters. If the fashion company finds what it’s looking for, Vornado is ready to buy up the remaining term on its lease and then rent that space to Facebook, sources said.

The home of the former Wanamaker’s department store is so much a part of J. Crew’s identity that the company has a line of jeans tagged “770.” But J. Crew is struggling to overcome the same litany of challenges faced by its competitors in the choppy retail space, and in November announced plans to close 39 locations, including its 21-year-old flagship store at 99 Prince Street in Soho.

Vornado, meanwhile, recently paid roughly $46 million to Kmart – whose department store occupies about 30,000 square feet on the ground, mezzanine and lower-level of the building – in what appears to be a buyout of the retailer’s lease, according to city property records. Observers said it’s unlikely that Vornado boss Steve Roth would take such a risk without a replacement tenant lined up, and speculated that Facebook could be looking to make a splash with a high-profile storefront, a la Microsoft’s store on Fifth Avenue.

A representative for Vornado declined to comment, and a spokesperson for Facebook could not be immediately reached.

Mark Zuckerberg’s company, which has a market cap of $537 billion, moved into Frank Gehry-designed offices at 770 Broadway in 2013 and has since expanded to about 355,000 square feet. It’s the largest tenant in the building, where neighbors include original Internet king AOL.

But the Menlo Park-based tech giant, which competes with firms like Google for talent, has a voracious appetite for space in the city, and in 2016 it inked a deal to take about 200,000 square feet at Orda Management’s 225 Park Avenue South.

That same year, Vornado bought J. Crew out of one floor on the building, which Facebook expanded into. The building at 770 Broadway is unique in Midtown South in that it’s one of the few properties that can offer the kinds of large, open floors that are in high-demand with tenants, with floor plates of about 80,000 square feet. Because of that, it’s also one of the priciest buildings in the submarket, with asking rents north of $100 per square foot.

In May 2016, Vornado refinanced the cast-iron building with a $700 million mortgage from Morgan Stanley. It bought the building in 1998 — when AOL reigned supreme — for a mere $149 million.