Facebook has signed a lease for an additional 370,000 square feet at Vornado Realty Trust’s 770 Broadway in a complex deal that will see J. Crew relocate its offices from the Midtown South building to Brookfield Place, The Real Deal has learned.
The complicated set of transactions illustrates how fortunes are swinging for two different industries and two of Manhattan’s office submarkets. J. Crew, which is facing many of the same challenges the retail sector is up against in the age of e-commerce, was able to capitalize on the value of its pricey Midtown South office space, while at the same time taking advantage of below-market sublet space in Lower Manhattan. Facebook, meanwhile, gets to keep feeding its voracious appetite for space in Midtown South.
J. Crew had been looking to relocate from its office at 770 Broadway to less expensive space, and had negotiating power with Vornado thanks to the term left on its lease, as TRD reported earlier this year.
In the end, Vornado paid $35 million, or roughly $100 per square foot, to buy out the four years remaining on J. Crew’s lease at the 1 million-square-foot office building, according to sources familiar with the transaction.
Facebook then signed a long-term, direct deal with Vornado for the space, which brings its footprint in the building to more than 880,000 square feet. It’s the latest expansion in New York City for the social media giant, which earlier this year took an additional 78,000 square feet in the building. Facebook also occupies roughly 200,000 square feet at 225 Park Avenue South, where it signed a lease in 2016.
A Facebook spokesperson said the company will continue to invest in New York City because of its “talent pipeline, location and technology ecosystem.”
While J. Crew was working on its buyout with Vornado, it was simultaneously negotiating a deal to sublease Bank of New York Mellon’s 350,000 square feet at 225 Liberty Street. The asking rent for the space was in the mid-$50s per square foot, and the term runs for 16 years. The Commercial Observer first reported J. Crew was in talks with Bank of New York in March.
A representative for Vornado declined to comment.
JLL’s Rob Martin, who represented J. Crew in its buyout with Vornado and its sublease with BNY, said the deal was “a great economic result” for the tenant.
“It was a very complicated transaction with a lot of moving pieces … a lot of parties involved,” said Martin, who represented J. Crew in both transactions alongside colleagues Joe Messina and TJ Hochanadel.
“J. Crew’s getting into a great complex for their employees at Brookfield Place, which is a true live-work-play environment,” he added.
JLL’s Peter Riguardi worked alongside Martin on J. Crew’s buyout with Vornado, and also represented Bank of New York in the sublease with Frank Doyle and Mike Berg.
“Brookfield Place is a nice outcome for them,” said Riguardi. “I think it showed that people are attracted to good space.”