When God closes a bank, He opens a … bank.
Flagstar Bank will occupy all 313,000 square feet of offices at 1400 Broadway, where failed Signature Bank had consistently expanded its footprint until going broke in March.
Building owner Empire State Realty Trust announced the agreement on Tuesday, including a $3 per-square-foot concession for the first five years of the lease, set to expire in 2039, which amounts to a 1.5 percent rent reduction over the life of the agreement.
News of the lease by Flagstar, a subsidiary of New York Community Bank which bought most of the Signature’s customer deposits, alleviated fears of a large and sudden vacancy in Midtown.
Shares of the publicly traded REIT rallied 11 percent by noon to trade at $6.55 per share, down from a post-pandemic high of $12 per share amid a stubbornly slow return to offices.
Asking rent at the nearly one-million-square-foot 1400 Broadway was $67 per square foot when Signature expanded its footprint in 2022. The failed bank was Empire State Realty’s second largest tenant, according to Crain’s. Flagstar now lists Signature’s former headquarters at 565 Fifth Avenue as its own.
As New York continues to see attrition in the office market, ESRT has notched leases at 1400 Broadway, 501 Seventh Avenue and One Grand Central. Still, office landlords SL Green and Vornado are looking to sell in the down market — a move that others have resisted — to reduce their debt burden and buy back stock.
“Office is for morons,” quipped one commercial real estate broker at the ongoing ICSC retail conference in Las Vegas, where retail specialists reveled in the fact that offices are faring worse than storefronts for the first time in decades.
As a result of ESRT’s lease agreement, Flagstar will reverse most of a $6.4 million reserve fund it had set aside in case of vacancy at 1400 Broadway. The move will net shareholders an additional 2 cents per share this year, according to ESRT.
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