TRD Insights: Here’s what tenants are paying at Michael Shvo’s latest office acquisitions

The 2 Manhattan retail/office properties are mostly closed; some tenants have sought rent relief

New York Insights /
Jun.June 19, 2020 07:30 AM
Michael Shvo, 530 Broadway and 711 Fifth Avenue (Shvo)

Michael Shvo, 530 Broadway and 711 Fifth Avenue (Shvo)

In the 18 months leading up to the coronavirus crisis, developer Michael Shvo and his partners were among the most aggressive investors in the market, acquiring $3.5 billion in real estate across the U.S., including Chicago’s “Big Red” office tower and San Francisco’s Transamerica Building.

In New York, the group’s big-ticket buys included a pair of mixed-use office buildings: the Coca Cola building at 711 Fifth Avenue, and Jeff Sutton and Joe Sitt’s 530 Broadway.

Newly released ratings documents for those deals — both financed
with CMBS loans — provide an inside look at the properties: how much tenants are paying, and how the coronavirus crisis has affected them.

Shvo’s group includes Turkish developer Bilgili Holding, private equity firm Deutsche Finance America and German pension fund Bayerische Versorgungskammer (BVK).

530 Broadway Tenants

#TenantExpirationBase Rent ($000's)% of Total Base RentSF% of Total SFRent / SFTypeSectorCovidOther notes
1Anomaly Partners LLC2024$6,43028.50%84,66242.70%$75.95OfficeAdvertising
2Club Monaco 2029$4,77621.20%11,3825.70%$419.61RetailApparelRequested rent reliefRalph Lauren subsidiary
3Knotel2029$3,18314.10%48,52424.50%$65.60OfficeCo-workingRequested rent relief
4Skechers USA Inc.2033$2,41610.70%4,9412.50%$488.97RetailFootwear
5Vince Camuto2026$1,6477.30%4,8962.50%$336.40RetailFootwear50% rent deferral for Apr-June, to be repaid between Oct and Dec 2020.Dark and expected to exercise termination option, exercisable if store sales don't exceed $10.0 million ($2,042 per sf) for the period of Dec 2020 to Nov 2021
6AT & T Mobility2023$1,4376.40%2,3751.20%$605.05RetailTelecom
7Avalanche Studios NY Inc.2022$1,1885.30%17,9909.10%$66.04OfficeVideo games
8Alanda Music Ltd.2022$7343.30%13,5736.90%$54.08OfficeMusic
9JKR Inc.2027$7253.20%9,7054.90%$74.70OfficeDesign

Source: Kroll Bond Rating Agency

530 Broadway, which is fully leased to five office and four retail tenants, is closed with tenants working remotely, according to the documents. At 711 Fifth Avenue, which is 76.5% leased to five office and two retail tenants, the majority of the office tenants are working remotely except for security and essential staff.

Two retail tenants have already been granted coronavirus-related rent relief as of June 1. At 530 Broadway, footwear retailer Vince Camuto has been granted a 50-percent rent deferral for April through June, which is to be repaid in full in the fourth quarter. The Vince Camuto space had gone dark prior to coronavirus, and the tenant is expected to exercise a termination option which will become available if sales fall below $10 million next year.

711 Fifth Avenue Tenants

#TenantExpirationBase Rent ($000's)% of Total Base RentSF% of Total SF TypeSectorCovidOther notes
1Ralph Lauren Retail Inc.2029$27,52442.60%38,63811.40%$712.36RetailFashionIn discussions with Polo Bar (0.6% of base rent) for rent relief.Retail space vacant for over two years, Polo Bar open
2The Swatch Group2029$23,34336.20%14,2744.20%$1,635.35RetailWatchmaker50.0% rent deferral for Apr-Jun, with all funds to be repaid by Mar 2021.
3Suntrust Banks2024$5,9239.20%84,51624.90%$70.08OfficeBanking
4Allen & Company2033$4,9497.70%70,97220.90%$69.73OfficeInvestment banking
5Loro Piana USA2025$1,7412.70%24,3887.20%$71.39OfficeFabrics and clothing
6Sandler Capital2027$6761.00%17,2005.10%$39.30OfficeInvestment management
7Catalyst Investors2023$4040.60%6,0341.80%$66.95OfficeVenture capital

Source: Kroll Bond Rating Agency

At 711 Fifth Avenue, watchmaker Swatch Group has also received a 50-percent rent deferral for April through June, to be repaid by next March. Swatch’s base rent at the location, a whopping $1,635 per square foot, is well above market and more than twice what any other retail tenant at the two buildings is paying.

Additionally, Ralph Lauren is seeking rent relief at both properties: for a subsidiary, Club Monaco, at 530 Broadway, and for the Polo Bar restaurant at 771 Fifth. The Ralph Lauren retail space at the Coca Cola building has been dark for years.

Finally, co-working firm Knotel is the only office tenant at the two properties that is reported to have requested rent relief. The company accounts for about a quarter of the total base rent at 530 Broadway.


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