Citadel records lease with Vornado for office in Midtown East, part of plan to build 1.7M sf office tower

Kenneth Griffin’s Citadel through the entity Citadel Enterprise Americas LLC signed a 10-year lease valued at $262.6 million with Vornado Realty Trust through the entity 350 Park EAT LLC for the office building (O4) at 350 Park Avenue in Midtown East, Manhattan. This is the first stage in a complex process that could lead to the development of a new 1.7 million square foot office tower. Citadel will pay $36 million per year.
The deal closed on January 24, 2023 and was recorded on January 31, 2023. The property at 350 Park Avenue has 536,992 square feet of built space according to PincusCo analysis of city data. The sale price per built square foot is $489 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
The signatory for Vornado Realty Trust was Michael J. Franco. The signatory for Citadel was Gerald A. Beeson. This is part of a complex deal in which Citadel is leasing 350 Park Avenue from Vornado for 10 years paying $36 million per year, and will also lease from Rudin Management 40 East 52nd Street. Vornado Realty Trust in the partnership with Rudin will buy Rudin’s 39 East 51st Street for $40 million. Between 2024 and 2030, Ken Griffin will have an option to join as a developer with Vornado and Rudin to build a 1.7 million square foot building at the site.

Prior sales and revenue

The seller Vornado Realty Trust had not purchased any other properties and sold 23 properties in 17 transactions for a total of $728.4 million over the past 24 months. The 536,992-square-foot property generated revenue of $70.6 million or $132 per square foot, according to the most recent income and expense figures.

The property

The 350 Park Avenue parcel has frontage of 200 feet and is 145 feet deep with a total lot size of 27,925 square feet. The zoning is C5-3 which allows for up to 15 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $301.5 million.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property since September of 2020. In addition, according to city public data, the property has not received any significant violations in the last year.

Development

There are no active new building construction projects or major alteration projects with initial costs more than $5 million on this tax lot.

The neighborhood

In Midtown East, the majority, or 81 percent of the 61.6 million square feet of commercial built space are office buildings, with hotel buildings next occupying 7 percent of the space. In sales, Midtown East has the 2nd highest sale turnover among other neighborhoods in the city with $3.4 billion in sales volume in the last two years. For development, Midtown East is the most active neighborhood among other neighborhoods. It had 15.1 million square feet of commercial and multi-family construction under development in the last two years, which represents 24 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other office buildings in the past 12 months.

The block

On this tax block, PincusCo has identified the owners of six of the 15 commercial properties representing 1,469,979 square feet of the 2,067,997 square feet. The largest owner is Vornado Realty Trust, followed by RFR Holding and then Macklowe Properties.
There are no active new building construction projects on this tax block.

The majority, or 95 percent of the 2.1 million square feet of built space are office buildings, with mixed-use buildings next occupying 2 percent of the space.

The seller

The PincusCo database currently indicates that Vornado Realty Trust owned at least 57 commercial properties in New York City with 15,245,100 square feet and a city-determined market value of $6 billion. (Market value is typically about 50% of actual value.) The portfolio has $5.1 billion in debt, with top three lenders as JPMorgan Chase, Goldman Sachs, and Morgan Stanley respectively. Within the portfolio, the bulk, or 77 percent of the 15,245,100 square feet of built space are office properties, with retail properties next occupying 13 percent of the space. The bulk, or 96 percent of the built space, is in Manhattan, with Bronx next at 4 percent of the space.

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