The Daily News is exploring a roughly 100,000 square foot lease at Four New York Plaza according to sources.
The paper, owned by Mort Zuckerman, currently occupies space at 450 West 33rd Street, an office building west of 9th Avenue that is also home to the Associated Press’s New York headquarters.
Recent written reports had indicated that the Daily News was exploring locations in lower Manhattan, including the World Financial Center, where the paper was reported to be looking at a block vacated by the Wall Street Journal before that paper was acquired by the News Corporation and subsequently brought to midtown.
Brokers familiar with the Daily News’s search say that Four New York Plaza offers significantly cheaper rents than the World Financial Center, a four building complex that is known as one downtown’s higher end office locations and usually charges top tier rents for lower Manhattan.
One broker familiar with the offers being marketed at Four New York Plaza said that a tenant could potentially arrange a deal there for as low as in the $20s per square foot after factoring in incentives such as free rental periods and landlord contributions towards the cost of outfitting the space with an office installation.
The building, along with 77 Water Street, which has a large block of low cost sublease space being marketed by Goldman Sachs, is widely considered one of the most financially compelling deals in an area where rents have already been sagging due to an decrease in occupancy and leasing activity.
Price sensitivity would appear to be an important component in the Daily News’s search. Written reports earlier this month indicated that the paper was conducting a third round of employee buyouts to cut the size of its staff. Meanwhile, Mort Zuckerman has been named as a potential acquirer of Newsweek in a purchase that, if it takes place, could immediately boost the amount of space the Daily News is seeking if Zuckerman decides to merge the operations of the two.
One person with knowledge of Four New York Plaza said that the Daily News was looking to lease the entire second and fourth floors, which are about 50,000 square feet apiece. The source said that the paper needs large floors because it prefers to keep its newsroom in one cavernous space rather than segment it between a number of smaller floors. The paper is said to be indifferent to what brokers have widely described is one of Four New York Plaza’s chief drawbacks, its widely spaced, slit-like windows and fortress-like façade.
“In the newsroom, it’s not about having great views, or any views at all, it’s important for them to have a space big enough so that the whole operation can be on one floor to foster communication,” a source said.
The deal would be a victory for the pair of investors that purchased the tower late last year when the health of lower Manhattan’s leasing market appeared to be in serious jeopardy.
Harbor Group International — and minority investor Capstone Equities — acquired the 22-story, roughly 1 million square foot tower from JP Morgan Chase for about $110 million in December 2009.
In a sense, the deal’s purchase price, which amounted to a paltry $100 per square foot, curtailed the level of risk the group was taking according to real estate experts. On top of that, JP Morgan Chase, which occupies about three quarters of the building, agreed to continue to lease the space, limiting vacancy to a roughly 250,000 square foot block in the building’s base.
In recent months however, any empty space downtown looked as though it would be hard to fill because large tenants in the neighborhood such as AIG, Goldman Sachs and Merrill Lynch have either already created, or are expected to create, vacancies that will weigh heavily on the market. Falling rents in midtown meanwhile have reduced the impetus for tenants to go to downtown, which has traditionally served as a lower cost alternative.
Yet the area has so far weathered the downturn better than some experts initially expected. The World Financial Center for one, which could have a large vacancy if Merrill decides to leave the building when its lease expires there in 2013, has seen interest from other tenants to remain in place. Nomura Securities, a financial company that bases its New York operations at the World Financial Center for instance, has been shopping around Manhattan for hundreds of thousands of square feet, but is also strongly considering renewing its existing space according to sources. Oppenheimer Funds, another sizable tenant in the World Financial Center with an expiring lease, is also said to be contemplating a renewal.
Last week, Real Estate Weekly reported that the law firm Darby & Darby had ceased operations and handed back the two floors it occupied in 7 World Trade Center to the building’s landlord, Larry Silverstein. Brokers say that the space is already attracting numerous law firms from midtown as potential takers and will likely soon be filled with a replacement.
Four New York Plaza is represented by an agency team from the real estate services firm CB Richard Ellis, led by company executives Brad Gerla, Howard Fiddle and Jonathan Cope. None could be reached for comment nor could an executive at Capstone Equities. Michael Burgio, an executive at Cushman & Wakefield who represents the Daily News, wouldn’t comment for this article. A human resources executive at the Daily News also couldn’t be reached.