Flagstar Assumes Signature Bank's 313K SF Lease On Broadway For A Discount
Signature Bank’s new owner will be keeping its space in an Empire State Realty Trust office property in Manhattan, albeit at a rent reduction.
Flagstar, the subsidiary of New York Community Bank that acquired most of Signature Bank’s deposits after regulators closed the institution in March, will assume the 313K SF lease at 1400 Broadway, ESRT announced in a release Tuesday.
Signature's lease ran through 2039, which Flagstar agreed to honor after extracting a $3-per-SF rent reduction for the first five years, which amounts to around a 1.5% rent reduction over the entire lease, according to an ESRT release.
ESRT said in its first-quarter earnings statement that it was expecting to collect $6.4M less in rent as a result of its exposure to Signature. Now, as a result of the lease assumption, $5.8M of that has been reversed. The adjustment will have an approximately 2-cent-per-share impact on ESRT’s 2023 funds from operations.
In total, Signature Bank leased around 412K SF in Manhattan in four separate locations, according to Avison Young data provided to Bisnow in March. Most of the space was at 1400 Broadway, but Signature also leased 87K SF at Silverstein’s 1177 Sixth Ave., 31K SF at Stawski Partners’ 565 Fifth Ave. and 14K SF at Jack Resnick & Sons’ 485 Madison Ave., per the brokerage’s analysis.
In all, the banking crisis has thrown a significant portion of Manhattan’s office space into question. Combined, Credit Suisse, Signature Bank and First Republic Bank occupied more than 2M SF in the borough at the beginning of the year. None of those banks survived the spring.
The broader market environment hasn't been good for leasing, brokers have told Bisnow, as clients put decision-making on hold.
“The government and the still-standing banks have done a good job cauterizing the run on the banks and protecting the institutions, but what they're not cauterizing is the lack of confidence in tenants in the market,” Rob Kluge, senior managing director at Current Real Estate Advisors, said in March. “This is really very nerve-wracking, and it directly affects the banking where people get their money from. It's obviously a slight contagion effect."