Financial pressure is mounting for Worldwide Plaza, the pyramid-topped office tower on Eighth Avenue that’s almost 40% empty.
The 2 million square-foot building has just $1.9 million in cash reserves, down from $11.1 million a year ago, according to a report Thursday from credit-rating agency KBRA. The steep decline indicates that the building has little left in the bank after paying for upkeep.
“Those funds likely include reserves for real estate taxes as well as capex and other expenses, such as debt service,” said a real estate attorney who asked for anonymity because he represents a lender involved in the building. “That leaves no wiggle room for tenant improvements or leasing commissions.”
Developed in 1989, the 49-story Worldwide Plaza has been hit hard by the supertall towers that sprang up on the far west side a decade ago. Nearly 800,000 square feet have sat empty, mainly on the top third of the building, since law firm Cravath Swaine & Moore moved out in August for Manhattan West. New tenants are shying away because the building’s ownership is in flux, a broker said.
Worldwide Plaza’s 50.1% owner is New York REIT, a firm that sprang to life in 2009 to acquire New York properties and over the next few years bought 3.3 million square feet of space across 19 buildings in Manhattan and Brooklyn. But since 2016 the firm has been liquidating its portfolio and has sold everything except Worldwide Plaza. It hopes to nail a deal down by June although the date “is subject to change,” KBRA said. John Garilli, CEO of New York REIT Liquidating LLC, declined to comment.
The remaining 49.9% is split between SL Green and RXR Realty. Either or both could give a cash infusion in exchange for control of the property. Neither would comment.
Another party at the table is Nomura, the Japanese investment bank. It is Worldwide Plaza’s largest remaining tenant, with about 750,000 square feet, and has the right of first offer should 100% of the building be put up for sale, KBRA said. Nomura declined to comment.
Whoever buys the building will have to invest significant resources.
Ruth Colp-Haber, chief executive of Wharton Property Advisors, said the former Cravath space will have to be totally rebuilt to be rentable and estimated it would cost about $80 million, or $130 per square foot. It costs $45 million a year to operate a building the size of Worldwide Plaza and pay for staff, heating oil, and other basic services.
“The building works well for law firms. There are lots of windows, lots of light,” she said. “It’s a beautiful building.”
Alternatively, a new owner may at least partially convert the building into apartments, though that would cost a lot more. Worldwide Plaza may not be an attractive office location anymore, because it’s not close to either Penn Station or Grand Central Terminal, but does sit atop the 50th Street C and E subway station and close to Central Park. SL Green is converting 750 Third Ave., a 560,000 square-foot building, at a projected cost of more than $800 million, or a hefty $1,400 per square foot.
