Worldwide Plaza is a mixed-use building located on Eighth Avenue between 49th and 50th Streets in Manhattan containing approximately 2.05 million rentable square feet.

NEW YORK CITY—An investment sales market that is well off its peak forced New York REIT's hand in selling only a portion of its Worldwide Plaza building here, instead of its initial goal of selling all of its nearly 99% interest in the 2.05-million-square-foot mixed-use tower.

Today, New York REIT Inc., which is undergoing a liquidation plan, announced it reached an agreement to sell a 48.7% interest in World Wide Plaza to a joint venture of SL Green Realty Corp. and RXR Realty LLC. The deal puts the value of Worldwide Plaza at $1.725 billion. A key part of the transaction will be the refinancing of the existing $875 million in debt on the property. According to an 8-K filed today with the Securities and Exchange Commission, SL Green and RXR has received a term sheet from an institutional lender with aggregate mortgage and potential mezzanine indebtedness financing of approximately $1.2 billion.

New York REIT CEO Wendy Silverstein, in a conference call, said the loan would have a term of 10-years and would be at a rate of under 4%. She added that the favorable refinancing terms achieved by SL Green and RXR were not available to New York REIT on a stand-alone basis “due to our lack of financial capacity to sponsor a loan of this size.”

The purchase price for the 48.7% interest is expected to be approximately $255.7 million, based on the $1.725-billion property valuation minus the principal amount of any financing secured by SL Green and RXR, according to the 8-K filing. The closing is expected to occur on or before Nov. 3, 2017.

New York REIT remains the majority owner with 50.1% interest. A passive investor owns the remaining 1.2% of the building that features 1.8 million rentable square feet of office space.

Based on the property valuation, New York REIT will receive approximately $346.2 million in cash, which is net of $116.5 million of defeasance cost and a “conservative” $90.7 million capital reserve to cover potential future capital and leasing costs at the property. New York REIT's Silverstein says that the joint venture of SL Green and RXR will also contribute to the capital improvement program on a pro-rated basis. After the deal closes, an affiliate of SL Green and RXR will serve as exclusive property manager and leasing agent for the property.

“We are pleased to have the opportunity to partner with SL Green and RXR, two of the best owners and operators of real estate in New York City. With their combined investment of money and expertise into Worldwide Plaza we believe this joint venture transaction represents the most value maximizing option available to NYRT and its shareholders,” Silverstein says.

“The acquisition of Worldwide Plaza allows us to expand our footprint on Manhattan's West Side through investing in a Class A asset that is fully leased to institutional tenants,” commented SL Green co-chief investment officer David Schonbraun. “We are excited to partner with NYRT and RXR in our efforts to drive value at the property and participate in the growth of this neighborhood.”

In June, New York REIT paid $276.7 million to acquire a 49.9% interest indirect equity interest in World Wide Plaza at 825 Fifth Ave.

In the conference call, Silverstein noted that in February the REIT retained Eastdil Secured and a month later added CBRE to its brokerage team charged with selling the building. After going through several rounds of bids, the final three prospective purchasers submitted offers ranging from $1.725 billion to a verbal offer of $1.74 billion, well below estimates. Silverstein says that New York REIT had hoped to secure a sale price of $1.7 billion with the buyer agreeing to the assumption of the $875 million in debt.

She notes the investment sales market buyer pool was not as deep as it had been recently and therefore dictated a change in strategy to sell only a partial interest in the building.

“Simply put if NYRT were to sell 100% of its interest in Worldwide Plaza today we would be leaving too much money on the table and not maximize its value for the benefit of our shareholders,” Silverstein says.

While the deal gives New York REIT the flexibility to sell its remaining interest at any time, Silverstein noted that it is likely that no such sale will take place prior to the end of New York REIT's planned portfolio liquidation plan. In that event that a sale does not take place by Jan. 3, 2019, New York REIT's ownership interest in Worldwide Plaza or any other properties it still owns would be transferred to a liquidating trust or another non-publicly traded entity, Silverstein says.

Worldwide Plaza, developed in 1989, consists of a 49-story, 1.8 million-square-foot Class A office tower, a 252,000 retail building with a parking garage, and a large open-air plaza. The property is part of a mixed-use development that encompasses an entire block between 49th and 50th streets and between 8th and 9th avenues. The office building serves as the North American Headquarters for Nomura Holdings, Inc. and Cravath Swaine and Moore LLP. Other major tenants include WebMD, WNet.org, the Rubenstein public relations organization and CBS Broadcasting. The retail building features a five-stage off-Broadway theater, a 475-space parking garage and TMPL, a state-of-the-art fitness gym. The complex is 100% leased.

New York REIT remains the majority owner with 50.1% interest. A passive investor owns the remaining 1.2% of the building that features 1.8 million rentable square feet of office space.

In June, New York REIT paid $276.7 million to acquire a 49.9% interest indirect equity interest in World Wide Plaza at 825 Fifth Ave.

She notes the investment sales market buyer pool was not as deep as it had been recently and therefore dictated a change in strategy to sell only a partial interest in the building.

Instant Insights /

Investment Sales Market Dictated New York REIT's Worldwide Plaza Strategy

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