Vornado Realty Trust pays $34M to Kmart to buy out lease at 1 Penn Plaza

Vornado Realty Trust through the entity One Penn Plaza LLC paid Kmart’s Transform Operating Stores LLC $34 million to buy out the remaining term on its lease at 1 Penn Plaza at 250 West 34th Street in Penn Plaza. The deal closed on December 18, 2019, and was recorded on April 15, 2020.

Vornado bought out Kmart’s lease that had 16 years remaining. The purchase was discussed on the most recent earnings call, as reported by SeekingAlpha. Michael Franco, Vornado president, said on the call, “During the fourth quarter, we bought out Kmart’s 141,000 square foot lease at PENN1 which had another 16 years to run for a $34 million payment for which 10 million is expected to be reimbursed. Steve and Eddie had been ringing me about this for years and years and we think we’ve time to buy out at exactly the right time and gather at a fair price.

“Despite the nominal short-term FFO loss from Kmart’s rent this was a big win for us and allowed us to immediately integrate this space into our overall redevelopment plan for PENN1 adjacent Plaza and the LIRR concourse and to populate this space with high quality retailers and offices; overall a big uptick for the neighborhood. During January, we executed a relocation transaction with the Information Builders, which will move them from the Tower of PENN2 in two separate spaces at PENN11 and PENN1 totaling 78,000 square feet. This deal was the last piece of space we needed to get back to execute redevelopment plan at PENN2.”

Over the past five years, there have been 393 NYC Department of Buildings permit applications filed for this parcel valued at more than $20,000. There were 2 major renovation applications including a certificate of occupancy change (A1) filed with a total estimated value of $15,335,000. There were 391 renovation/alteration projects (A2) applied for with a total estimated value of $133,886,974.
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