Vornado Lands $450M To Refinance Penn 11
Vornado Realty Trust is paying $50M to refinance a 1.2M office tower in its prized Midtown South domain around Penn Station.
The REIT locked down a $450M CMBS loan for Penn 11, it announced Wednesday. The five-year interest-only loan has a fixed rate of 6.35% and will mature in August 2030.
Vornado added $50M of its own equity to pay off the $500M loan tied to the building that was set to mature in October.
The new loan was originated by Citi Real Estate Funding, Bank of Montreal and Societe Generale Financial Corp., according to presale reports by Moody’s Ratings and Morningstar DBRS.
A representative for Vornado declined to provide additional comment.
Formerly the Equitable Life Assurance Building, the 26-story Penn 11 previously served as the headquarters for Macy’s. The company vacated the property in 2020, with Sparc Group and Apple filling its space.
Apple is a subtenant with Macy's at Penn 11 via a bilateral recapture lease, paying rent directly to Vornado, according to the reports. The tech giant occupies a total of 460K SF in the building, more than doubling from 220K SF in 2020. Sparc subleases 182K SF.
Macy’s continues to be responsible for $2.8M of the $38.2M of base rent under its lease, according to Morningstar. The building was approximately 97% leased as of March.
Penn 11 is also AMC Networks’ headquarters. The media company occupies 324K SF, though it is anticipated to give back two floors when it renews its lease in November, according to Morningstar and Moody’s.
Penn 11 is a key piece of Vornado’s longstanding investments in the neighborhood. In 1997, Steven Roth’s firm paid $650M for 4M SF of Manhattan properties, including the historic building, from Bernard Mendik. Vornado spent another $1.7B to gain control of 1 Penn Plaza and a handful of other properties around Madison Square Garden and Penn Station.
Roth has spent a decade attempting to redevelop the area, which he has called the “promised land.” However, he has most recently encountered issues related to the pandemic changing office investments, frozen capital markets and challenged partnerships with Gov. Kathy Hochul.
Vornado has already redeveloped 1 and 2 Penn Plaza into Class-A office towers named Penn 1 and Penn 2, with more than 4M SF between them. It also tore down the Hotel Pennsylvania in 2023 and planned to replace it with another office tower before pivoting to exploring temporary uses like a tennis court.
Roth said earlier this year he doesn't think the planned redevelopment, Penn 15, could get off the ground unless it could achieve rents in the neighborhood of $200 per SF.
