NEW YORK CITY-Vornado Realty Trust is planning to sell 1 Park Ave., an office tower east of Herald Square, almost three years after rescuing the building from possible default, three people familiar with the offering tell Bloomberg.com.
The real estate investment trust hired brokers Douglas Harmon and Adam Spies, senior managing directors of Eastdil Secured, to market the 20-story, 925,000-square-foot tower, according to the sources. Vornado is seeking about $650 million for the property.
The 1920s-era building, situated between east 32nd and east 33rd streets, had about $250 million of securitized debt that was under the threat of "imminent default" in early 2011, according to servicer notes compiled by Bloomberg. The transaction with Vornado retired the debt. Murray Hill Properties—led by investor Norman Sturner, president of the company—kept a 5% stake.
Murray Hill Properties and a unit of Cerberus Capital Management sold a 95% interest in 1 Park Ave. to Vornado in a 2011 deal that valued the property at about $427 million, according to industry data. The two sellers spent about $15 million renovating the building, including upgrading the lobby and elevators, said one of the people familiar with the plans for the tower. Its lobby features ornate barrel-shaped chandeliers hanging from vaulted ceilings and marble-clad elevators. It was designed architecture firm York & Sawyer, which also designed the Federal Reserve Bank building in lower Manhattan.
After the 2011 deal, 1 Park Ave.'s largest tenant, New York University's Langone Medical Center, agreed to extend its lease to 2041 and expand to 420,000 square feet, about half the building, according to data from CoStar Group Inc., a Washington-based research firm that tracks office leasing. About 15% of the tower's offices are listed as available, though most of the vacant inventory is for sublet.
While the building is on the northern edge of Midtown South, where demand by technology and media firms has driven vacancies to a national low, aside from Langone the tenant roster at 1 Park Ave. is comprised primarily of financial institutions, business services firms and wholesalers.
Should the property sell at Vornado's asking price, the transaction would represent a significant climb in Manhattan office values as well the potential profits for investors who snapped up distressed real estate after the 2008 financial collapse. A spokeswoman for the REIT declined to comment, noting, “we don't comment on rumors or speculation.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
