Vornado’s Penn Plaza properties have been a hotbed of tech leasing activity this year.
Months before Facebook’s 730,000-square-foot lease at the Farley Post Office redevelopment was officially announced, the social media giant had already sent a fellow FAANG firm looking for space elsewhere. In February, Apple signed a 220,000-square-foot lease at 11 Penn Plaza, Vornado’s massive 23-story building across the street.
Apple’s new lease has it taking four floors at the office tower from Macy’s, which has been headquartered at the 1.1 million-square-foot property since 1983. The department store chain plans to relocate its HQ to Tishman Speyer’s JACX complex in Long Island City, although it is reportedly already seeking to sublease some of that new space due to the impact of coronavirus.
Vornado refinanced 11 Penn Plaza with a $450 million CMBS loan in 2013, which is set to mature this December. CMBS loan documents — and annual surveillance reports from Kroll Bond Rating Agency — provide detailed insight into the property’s finances.
As the latest rent roll for 11 Penn Plaza shows, Macy’s is the largest tenant by far, accounting for more than half of both total square footage and total base rent. Recent relocation plans notwithstanding, the retailer is locked into a lease at the property until 2035, and Kroll is not aware of any early termination options. The entire Macy’s space has been put on the market for sublease.
The second largest tenant is entertainment company AMC Networks, which has been at the property since 2001 and uses the space as its corporate headquarters. The Madison Square Garden Company is the third largest tenant, and its space includes “high-end editing and production facilities” as well as 15,400 square feet of retail space, according to the 2013 loan prospectus.
Just as the Macy’s office space had the advantage of being a few blocks away from the Macy’s flagship store in Herald Square, MSG’s offices are also just a block away from the company’s namesake indoor arena. The Madison Square Garden Company completed the spinoff of its entertainment and sports-venue business into a separate entity this April.
The top three tenants collectively account for 95 percent of base rent and 91 percent of square footage at the property. In 2019, the base rent for the top three tenants ranged from $55 to $61 per square foot, somewhat below the average asking rent of $66.99 per square foot in the Penn Plaza/Garment three- to five-star office submarket, according to CoStar data cited by Kroll.
Vornado’s latest quarterly financial disclosures indicate that the office space at 11 Penn Plaza is 100-percent leased, while the 40,000-square-foot retail space is 95-percent leased. The landlord is currently suing one of its retail tenants, fast-casual chain Dig Inn, for $87,000 in unpaid rent.