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Vornado is getting rid of five poorly performing properties in prime New York City retail strips, electing to take a multimillion-dollar loss as result.
The firm announced it will sell the assets, three on Madison Avenue on the Upper East Side and two in SoHo, for $184.5M. It didn't disclose a buyer on the deal, which will result in a balance sheet loss of roughly $7M, Vornado said in a press release.
The sales for 677–679, 759–771 and 828–850 Madison Ave., 478-482 Broadway and 155 Spring St. are being spread across three transactions, according to Vornado, which disclosed that street-level occupancy of the sites is just 30%, and they have a negative income.
Retail’s problems have intensified during the pandemic, but the sector was already strained well before the crisis. Rents have been sliding downward, particularly in some of New York City’s priciest locations. Retail leasing volume was at its lowest point in at least the past three years in the second quarter, while asking rents have declined to a nadir for the past decade, according to CBRE.
Across Manhattan, the average retail rent hit $615 per SF, a nearly 11% drop year-over-year. Spring Street in SoHo and the Times Square retail corridor had the biggest decreases last quarter, with rents falling 23%.
The environment has affected the investment sales environment significantly; in April, a valuation showed one Fifth Avenue retail property is worth almost 70% less than it was six years earlier. Several retailers have taken advantage of the environment and taken the opportunity to snap up their own buildings rather than being at the mercy of landlords and changing city rents.
Just eight retail buildings traded in Manhattan during the first quarter, per Avison Young, and almost all of those sales were either vacant or bought by an end user. Vornado's sale of the properties on Madison Avenue is expected to close this quarter, while the SoHo assets would close in the first quarter of next year.
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