Vornado pays $40M for office in Midtown East as part of 1.7M sf tower plan

UPDATED 8:15 a.m., October 26, 2023: Vornado Realty Trust through a partnership that includes Rudin Management through the entity V-R 350 Park LLC paid $40 million to the Niarchos shipping family through the entity 39 East 51st Street Corporation in care of Poseidon Services, Inc., for the office building (O2) at 39 East 51st Street in Midtown East, Manhattan.
This is part of a complex deal in which Vornado, Rudin and possibly Kenneth Griffin’s Citadel will develop a 1.7 million office tower at 350 Park Avenue.
The deal closed on June 20, 2023 and was recorded on June 23, 2023. The property has 10,974 square feet of built space according to a PincusCo analysis of city data. The sale price per built square foot is $3,644, but the square foot value of the air rights is significantly lower.
The signatory for the Niarchos family was Stuart Zlotolow. The signatory for Vornado Realty Trust and Rudin Management was Steven Borenstein.

Prior sales and revenue

Prior to this transaction, PincusCo has no record that the buyer Vornado Realty Trust had purchased any other properties and sold 21 properties in 15 transactions for a total of $713.9 million over the past 24 months.
The seller Rudin Management had not purchased any other properties and sold one property in one transaction for a total of $17.7 million over the same time period. The 10,974-square-foot property generated revenue of $783,287 or $71 per square foot, according to the most recent income and expense figures.

The property

The office building in Midtown East has 10,974 square feet of built space and 19,162 square feet of additional air rights for a total buildable of 30,130 square feet according to a PincusCo analysis of city data. The parcel has frontage of 30 feet and is 100 feet deep with a total lot size of 3,013 square feet. The zoning is C5-2.5 which allows for up to 12 times floor area ratio (FAR) for commercial The city-designated market value for the property in 2022 is $3 million.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property for the past 24 months. 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 $1 million on this tax lot.

The neighborhood

In Midtown East, The majority, or 81 percent of the 62.6 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 $3.7 billion in sales volume in the last two years. For development, Midtown East is the most active neighborhood among other neighborhoods. It had 17 million square feet of commercial and multi-family construction under development in the last two years, which represents 27 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 seven of the 15 commercial properties representing 1,489,610 square feet of the 2,067,997 square feet. The largest owner is Vornado Realty Trust, followed by Seven Valleys and then RFR Holding.
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 Rudin Management owned at least 18 commercial properties with 1,725 residential units in New York City with 7,041,837 square feet and a city-determined market value of $2.3 billion. (Market value is typically about 50% of actual value.) The portfolio has $870.5 million in debt, with top three lenders as JPMorgan Chase, Bank of America, and PGIM Real Estate respectively. Within the portfolio, the bulk, or 62 percent of the 7,041,837 square feet of built space are office properties, with elevator properties next occupying 38 percent of the space. They are all located in Manhattan.

The buyer

The PincusCo database currently indicates that Vornado Realty Trust owned at least 56 commercial properties with five residential units in New York City with 15,245,100 square feet and a city-determined market value of $6.7 billion. (Market value is typically about 50% of actual value.) The portfolio has $5.5 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.

Correction: An earlier version of this post identified the seller as Rudin Management. In fact, the seller was an affiliate of the family of shipping magnate Stavros Niarchos, through the entity 39 East 51st Street Corporation, created in 1953.

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