Midtown Manhattan's Worldwide Plaza's Value Drops $500M as Major Tenants Prepare To Exit

Worldwide Plaza, the iconic Midtown office tower with its distinctive pyramid-shaped top, is facing a significant decrease in its estimated value. The departure of a major tenant, along with the potential loss of another, has resulted in a hefty $500 million decline, according to industry experts.

A recent report by Wall Street securities firm Evercore ISI reveals that the implied value of Worldwide Plaza now stands at $1.2 billion, which is nearly one-third lower than its valuation in 2017. This decline follows the acquisition of a 49.9% interest by SL Green and RXR Realty at a valuation of $1.7 billion. Evercore estimates the building's worth at $600 per square foot, a stark contrast to the $1,123 per square foot that Related Cos. recently paid for SL Green's 625 Madison Ave.

Evercore analyst Steve Sakwa points out the potential risks faced by Worldwide Plaza. Should efforts to re-lease the space fail, the property may have to be returned to lenders, resulting in a significant loss of equity value. This situation poses a challenge for the current owners, including RXR, SL Green, and New York REIT, who have not provided any comments on the matter.

A Modern Marvel

Step into the world of architectural brilliance with Worldwide Plaza, a groundbreaking project brought to life by the visionary mind of William Zeckendorf Jr. in 1989. Spanning a staggering 2 million square feet, this remarkable venture encompasses a towering 49-story office masterpiece, a luxurious 38-story condominium, a chic 7-story condo with captivating Ninth Avenue views, an inviting outdoor plaza, and an intriguing underground theater space. With its grand scale and meticulously designed spaces, Worldwide Plaza stands as a testament to the union of innovation and functionality.

Within the vast expanse of this architectural wonder, prominent businesses thrive. Immerse yourself in the corporate world as you discover the impressive presence of the esteemed law firm Cravath Swaine & Moore, who proudly occupies one-third of the office space and contributes significantly to the dynamic energy of the plaza. Furthermore, the influence of the renowned Japanese brokerage house Nomura is undeniably felt, as its substantial lease cements its position as a key player in this bustling space. Notably, Viacom CBS also contributes to the vibrant atmosphere of Worldwide Plaza as a prominent tenant.

A Significant Shift in Manhattan's Real Estate Landscape

Manhattan's prestigious Worldwide Plaza is undergoing a transformative period as key tenants prepare to make their exits. Cravath will be bidding farewell to its 600,000 square-foot space and relocating to 2 Manhattan West near Hudson Yards. Nomura, a major contributor to the rent, is also contemplating its departure, while CBS awaits the expiration of its lease in three years. These impending changes have prompted bond rating firms to issue warnings of a potential downgrade for Worldwide Plaza.

The Cravath space, which has been on the market for a staggering 51 months, presents both an opportunity and a challenge for prospective tenants. Ruth Colp-Haber, partner at commercial broker Wharton Property Advisors, highlights the need for extensive updates due to the law firm's long occupancy. Estimates suggest that refurbishments would come with a hefty price tag of $150 per square foot, totaling a staggering $90 million.

As Worldwide Plaza features prominently in the Class A space market, property owners are now faced with a crucial decision. Is the investment in necessary updates justified when considering the relatively low rental rates? Colp-Haber explicates that the plaza sits towards the lower end of Class A space, which may influence the assessment of its financial viability as an investment. For property owners, carefully weighing these factors will determine the future of this prominent Manhattan property.

Worldwide Plaza's Distinct Character

Amidst the bustling cityscape of New York, Worldwide Plaza stands as a distinctive architectural marvel. While it may not boast the slender grace and subtle elegance of Rockefeller Center, this iconic landmark exudes its own charm. Nestled above subway lines, it holds a prime location that captures the essence of bustling city life.

Managed by New York REIT, Worldwide Plaza has seen a significant shift in its ownership. As part of the liquidation process, all properties except this captivating structure have been sold off. While the majority owner has chosen to distribute 10 cents a share to shareholders, further quarterly payouts are not expected. Moreover, pending lease expirations have led to the suspension of distributions from the plaza.

Speculation surrounding the future of Worldwide Plaza has been rife. Reports from last October suggested that a sale of the property seemed imminent, with an estimated date set for April. However, the notion of a sale has been refuted by individuals familiar with the matter. The building's fate remains uncertain, leaving tenants and investors on edge.

One such tenant, Nomura, occupies a vast space within Worldwide Plaza, spanning 700,000 square feet. As rumors of a potential sale swirl, Nomura holds the right of first offer in the event that 100% of the property is put under contract. This unique arrangement adds an intriguing layer of complexity to the situation.

Worldwide Plaza stands as a testament to the ever-evolving landscape of New York City. Its distinct character, though different from renowned architectural marvels, has captured the attention and admiration of many. As the future of this captivating structure hangs in the balance, the city waits with bated breath for the next chapter to unfold.