Keeping Bloomberg at 731 Lexington Avenue cost Steven Roth a pretty penny.
Alexander’s, the real estate investment trust run by Vornado Realty Trust’s Roth, spent more than $300 million to secure a lease renewal from Michael Bloomberg’s company in Midtown East, Crain’s reported. The dollar figure was sussed out by Piper Sandler real estate analyst Alexander Goldfarb.
First, Roth agreed to contribute $200 million towards capital improvements and free rent at the 57-story tower.
Bloomberg is paying $98 per square foot on its 900,000-square-foot lease, which runs through 2040. But Roth promised rent would not exceed $109 per square foot over the life of the lease, capping his own rent revenue. On top of that, Roth promised $124 million for capital improvements. Roth, who didn’t comment to Crain’s, referred to the costs as a “killer” in a shareholder letter.
Then, there’s the financing issue. A $500 million mortgage on the property came due in June. Alexander’s took out the three-year mortgage in 2017, then exercised each of four extension options. Even with securing the building’s dominant tenant, however, the loan was sent to special servicing.
This week, Deutsche Bank, JPMorgan Chase Bank and Wells Fargo Bank provided $400 million to refinance the 1.3-million-square-foot property, according to Commercial Real Estate Direct. The four-year loan is set to be securitized in a standalone CMBS deal.
But $400 million is not $500 million, so the landlord kicked in $115 million in fresh capital.
Read more
Commercial
New York
Bloomberg lease extension at 731 Lex didn’t come fast enough
Commercial
New York
Bloomberg extends lease at 731 Lexington to 2040 as mortgage maturity looms
New York
Vornado affiliate’s Bloomberg HQ at 731 Lexington faces mortgage troubles
Goldfarb projected that Alexander’s 2026 earnings would take a significant hit considering all of the levers Roth needed to pull to keep his critical tenant in place. The Piper Sandler analyst suspects those earnings to be 33 percent this year’s earnings.
The alternative, however, would have been too difficult to swallow for Roth.
“You can reasonably assume every landlord in town wanted Bloomberg,” Goldfarb stated.