New-York News

Worldwide Plaza’s top tenant shrinks footprint

Worldwide Plaza’s largest tenant, Nomura Holdings, has shrunk its footprint and has the right to move out of move space over the next two years before terminating its lease early, a scenario that would spell further trouble for the financially struggling Midtown tower.

The pyramid-topped 2 million square-foot building on Eighth Avenue is already facing the loss of its second-biggest tenant, law firm Cravath Swaine & Moore, which is leaving more than 600,000 square feet of space in August and relocating to 2 Manhattan West, near Hudson Yards. Brokers and real estate dealmakers say demand for Worldwide Plaza space is weak because of the building’s age – it was developed in 1989 – and relative distance from commuter hubs Penn Station and Grand Central Terminal.

The building’s 50.1% owner, New York REIT Liquidating LLC, didn’t reply to a request for comment, nor did minority owner SL Green. Another minority owner, RXR Realty, declined to comment. Last year Fitch Ratings advised investors to brace for “outsized losses” in the building’s $1.2 billion mortgage that comes due in 2027.

Worldwide Plaza’s top tenant for the past dozen years has been Nomura, a major Japanese financial institution that leased more than 800,000 square feet when the mortgage was sold to institutional investors in 2018. The firm paid $45 per square foot, documents describing the deal show. Cravath paid $93 a square foot.

But Nomura has exercised its first option to reduce space and relinquished 40,000 square feet, or 5% of its footprint, according to an annual review of the mortgage published Monday by bond-rating firm KBRA. It isn’t clear exactly when the reduction took place. The lease for another tenant, CBS, expires in 2027. KBRA said Worldwide Plaza’s cash flow has fallen by $8 million, or 14%, in the past year, to $54 million.

Nomura said it continually evaluates its current and future real estate requirements.” 

KBRA said Nomura has the right to move out of nearly 100,000 additional square feet through 2026 and can terminate its lease in January 2027, six years before the scheduled expiration date, upon payment of a fee equal to six months of rent.

On Monday, the firm announced a rebranding of its U.S. asset and investment management division, with Nomura Private Capital being renamed Nomura Credit Management as the firm “refines focus.” 

“The firm expects the consolidated go-to-market approach of NCM will play a vital part of Nomura Group’s growth strategy,” the firm said.

Since last fall, all excess cash flow from Worldwide Plaza has been funneled into a reserve account to ensure mortgage investors get paid. The account holds $11 million and will be fed until reaching $43 million, KBRA said. Because money is being routed into the reserve account, real estate experts say the building probably isn’t generating enough cash to pay distributions to its owners.

Aaron Elstein , 2024-03-12 17:22:42

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