New York University is expanding its portfolio around its Greenwich Village campus.
The university plans to take over 770 Broadway from Vornado Realty Trust through a long-term masterlease. During a third quarter earnings call on Tuesday, Vornado CEO Steve Roth confirmed that the university had reached a deal to masterlease the 1.1 million square feet of office in the building.
The university owns more than 14 million square feet of space in the city, according to a TRD analysis in 2022. Much of that space is near its main Washington Square Campus in Greenwich Village. Last year, NYU purchased an office building at 400 Lafayette Street for $98 million.
Facebook parent, Meta, downsized its office space in the building this year, when its lease for 275,000 square feet expired in June. The company still has 500,000 square feet in the building.
Vornado will still control the space occupied by Wegmans, which inked a long-term lease in 2021 for the space formerly occupied by K-Mart in the building.
Roth said he expects the deal with NYU to close in January. He did not provide details on the value of the deal, but indicated that the university will make an upfront rent payment “sufficient” to pay off the real estate investment trust’s $700 million loan on property. NYU will then pay annual net rent over the lease term.
Roth said the lease works out to less than $100 per foot, but emphasized that the prepaid rent makes the overall value closer to the $115 per square foot previously paid in the building.
NYU will also have the option to buy the building in the 30th and 70th year of the lease.
Some state lawmakers want to end private universities’ tax exemptions worth millions of dollars. NYU and Columbia University, among the top 10 property owners in the city, collectively saved $327 million in property taxes last year, according to the New York Times. A bill proposed last year seeking to repeal these tax exemptions did not move forward.
Vornado recently reached another major deal at 666 Fifth Avenue. Uniqlo agreed to pay $350 million for 17,000 square feet of its space in the building. The retailer reached a separate deal to buy its remaining 75,000 square feet, which is owned by Brookfield.
The REIT reported $102.8 million in funds from operations for the quarter, or $.52 per share on an as-adjusted basis. That’s down from $.66 per share during the same quarter last year, a decline the company attributed, in part, to Meta’s departure from 770 Broadway.
During Tuesday’s call, Roth noted that the former Hotel Penn, which was demolished last year, is “down to grade and ready for development.” Vornado has floated building a platform on the site, to temporarily use for New York Fashion Week and U.S. Open tennis matches. The company previously planned an office tower on the site.
“I believe this site, in the heart of our Penn District and directly connected to Penn Station, is the single best site available in booming West Side of Manhattan,” Roth said.
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