Vornado has placed a bet on the burgeoning West Side office market.
The REIT announced yesterday (Tuesday) it has purchased the former Otis Elevator Building at 260 Eleventh Avenue with plans to redevelop the property as offices catering to commercial newcomers.
As Related presses on with its 26-acre Hudson Yards development, the surrounding area has become increasingly popular with office tenants, with Google buying its own building on Eleventh and Samsung building a flagship tower there.
The newly-developed 860 Washington is looking to attract more office tenants to a neighborhood where “[Potential tenants] are drawing upon the young intellectual talent that’s coming into the area,” according to Stuart I. Romanoff, vice chairman of brokerage at Cushman & Wakefield, who is marketing the building.
Some 600,000 s/f of office, hotel and retail space is expected to be added to the Meatpacking District in the next several years. Chelsea has seen an influx of tech firms such as Palentir and Apple and vacancy rates for prime office space were at 3.4 percent in the district in February, according to the real estate consulting firm Jones Lang LaSalle.
Flanked on all sides by such progress, 260 Eleventh Avenue is a 235,000 s/f office property leased to the City of New York through 2021. The property also has a 10,000 s/f parking lot and additional air rights.
The 44,000 s/f site is located on Eleventh Avenue from 26th to 27th Streets directly across from the Starrett Lehigh building.
In a statement, Vornado said the transaction is structured as a 99-year ground lease with an option to purchase the land for $110 million. The $3.9 million annual ground rent and the purchase option price escalate annually at the lesser of 1.5 percent or CPI.
The seller, Gould Investors LP, acquired the property in March of 2006, according to documents from the Office of the City Register.