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What happens if Trump banishes TikTok, savior of NYC’s office market?

U.S. is considering banning Durst’s star tenant

4 Times Square (Google Maps, TikTok)
4 Times Square (Google Maps, TikTok)

When TikTok inked a massive lease in Times Square in May, the deal was viewed as a beacon of hope for a bleak office market.

But this week, Secretary of State Mike Pompeo told Fox News that the U.S. is considering banning the video-sharing app over concerns that its Beijing-based parent, ByteDance, will share user data with the Chinese government.

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“We are taking this very seriously. We are certainly looking at it,” Pompeo said. “With respect to Chinese apps on peoples’ cellphones, the United States will get this one right too.”

That raises questions about what will happen to ByteDance’s lease at the Durst Organization’s One Five One, formerly known as Four Times Square. The company agreed to take 232,000 square feet across seven floors of the tower as part of a 10-year deal. It was the largest new office lease signed in New York since the pandemic struck and it came soon after several tech companies, including Facebook and Twitter, had sent a shiver down the spines of some New York City office landlords by deciding to let employees work from home even after the pandemic.

A spokesperson for Durst confirmed that the lease has been finalized but declined to comment further on Pompeo’s announcement. Representatives for TikTok and ByteDance didn’t return messages seeking more information.

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In a statement Tuesday, ByteDance noted that “TikTok is led by an American CEO” and has “never provided user data to the Chinese government, nor would we do so if asked.”

TikTok has been taking steps to distance itself from China. It joined other social media companies on Tuesday in voicing concern over Hong Kong’s national security law, a measure imposed by China that criminalizes secession, subversion of state power, terrorism and collusion with foreign entities. TikTok also announced that it would cease operations in Hong Kong, the Associated Press reported.

It’s not clear what the decision will mean for another office lease inked by ByteDance last month: According to Bloomberg, the company agreed to take space in Times Square office tower in Hong Kong’s Causeway Bay. The tower’s owner, Wharf Holdings, didn’t immediately return a request for comment.

Throughout the coronavirus crisis, attorneys for retailers and other businesses have debated whether the pandemic qualifies as a force majeure — an event outside their control that can justify failure to pay rent.

Larry Hutcher, co-founder and managing partner of law firm Davidoff Hutcher & Citron, said barring an explicit clause that covers government action in its lease, a company in TikTok’s position would likely argue that unforeseen circumstances, “a frustration of purpose,” interfered with its agreement.

“It’s very similar to the type of situations we are facing now,” he said, referring to retailers looking to escape lease requirements. “It’s become a huge negotiation issue.”

Write to Kathryn Brenzel at kathryn@therealdeal.com

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Durst OrganizationManhattan Office MarketOffice Leasing