Real Estate News, Space Opportunity, Market Commentary

1 Vanderbilt Arbitrage Opportunity

Jason Roberts

At this point, every New Yorker is familiar with 1 Vanderbilt.  Whether you’re in business or not, it’s now almost impossible to miss as it fills in the Grand Central skyline.  The financial services community has really taken notice with banner transactions from KPS Capital, Sentinel Capital, The Carlyle Group and TD Bank.  But where does that leave pricing now that the the majority of the availability is on the upper floors?

Asking rents range from $135 to $310 per square foot, eye-popping numbers which begs the question, “where is the arbitrage?”  It’s on the 24th and 25th floors as 5 and 10 year option floors for TD Bank.  Asking rents here are $115 and $120 per square foot, a $35-$40 per square foot discount to the 26th floor directly above.  Couple this with the news that broke yesterday of Charles Schwab’s acquisition of TD Ameritrade and the planned consolidation to the new Westlake Texas campus, perhaps there will be even more opportunity here in the form of a sublease.  We continue to monitor the situation as the story unfolds.

What defines an option floor?  An option floor is simply encumbered future expansion space for an anchor tenant in which they have the “option,” or first right to expand into that space/floor at a defined date.  Subject to the businesses’ future needs, that Tenant may waive their option making it free and clear for a longer term deal with a renewal option.  Given this uncertainty, there is an inherent discount attributed to the space/floor, hence the arbitrage opportunity.

Having spent the past decade advising financial services clients, I understand the “good trade” mentality and that doing just a “market deal” isn’t good enough.  It’s that innate need to pay less than the other guy and it’s arbitrage opportunities like this that offer that opportunity.

If you’re looking for high profile space but have that need to get a deal, let’s talk.

25th Floor Floorplan