(AT Express) – New York REIT Inc., a publicly traded landlord led by Nicholas Schorsch, agreed to pay $335 million for a two-building property in Manhattan’s Chelsea section that’s home to Twitter Inc. (TWTR)’s East Coast headquarters.
The price works out to about $1,188 a square foot for 245-249 West 17th St., which has 282,000 square feet (26,000 square meters) of rentable offices. Purchases for more than $1,000 a square foot were once seen only in Midtown, the largest and most expensive U.S. office district.
The transaction shows how far pricing has come in midtown south, the area roughly from 30th to Canal streets, where leasing demand by technology tenants has surged. The complex, consisting of a 12-story building and an adjacent six-floor, mixed-use property, is midblock between Seventh and Eighth avenues. Values for such buildings traditionally have been lower than those on New York’s broad avenues.
What New York REIT agreed to pay “is most likely the high-water mark for an office property in midtown south that was not overly influenced by the value of the retail,” Dan Fasulo, managing director of research firm Real Capital Analytics Inc., said in an e-mail.
The seller, investment firm Savanna, paid $75.8 million, or $267 a square foot, for the property in November 2012, Real Capital data show. The price was contingent on the buildings being delivered vacant, Real Capital said on its website.
“They successfully executed a redevelopment and lease-up in an improving market — a recipe for big returns,” Fasulo said.
Savanna spent $29 million on renovations to the buildings, which were completed in 1902 and 1909, the New York-based company said today in a statement. The older portion originally was a warehouse and wagon house for a department store.
The property is 99 percent leased, New York REIT said in a regulatory filing disclosing the purchase. San Francisco-based Twitter in January took 214,765 square feet in a lease that expires in 2025, the real estate investment trust said.
The social-media company’s choice of the complex “demonstrates the importance of this location and further testifies to the institutional quality of the property itself,” Michael Happel, president of New York REIT, said in the statement. “We are confident that these buildings, located in New York City’s epicenter of creativity, technology and style, will add significant value to our growing, first-class Manhattan portfolio.”
Other tenants at the 17th Street property include Flywheel Sports Inc. and Room & Board Inc., which occupies the retail portion, New York REIT said. Schorsch is chairman and chief executive officer of the company, which listed its shares on the New York Stock Exchange in April.
Doug Harmon and Adam Spies of Eastdil Secured LLC and Brian Ezratty of Eastern Consolidated represented Savanna in the transaction.
Asking office rents in midtown south have jumped 65 percent since 2009 to an average of $66.86 a square foot as technology companies such as Facebook Inc., EBay Inc. and International Business Machines Corp. flocked to the market, data from CBRE Group Inc. show.
The 17th Street property is around the corner from Google Inc. (GOOG)’s New York headquarters at 111 Eighth Ave., an almost 3 million-square-foot former warehouse that the Internet company bought for $1.8 billion in 2010. Mountain View, California-based Google plans to expand into as much as 500,000 additional square feet in the building as tenants are either bought out or their leases expire, Crain’s New York Business reported on July 29.