The real estate investment trust may convert the office building into residential but before it can do so it would need to buy the 27-story tower.
One of the city’s largest commercial landlords is mulling a residential project in lower Manhattan.
Vornado Realty Trust, which owns more than two dozen office properties in the city, is considering a residential conversion of either a portion or all of the 27-story, 473,000-square-foot downtown office building at 20 Broad St.
Sources familiar with the decision say Vornado may still choose to maintain the property as an office building rather than repurpose it as apartment space, which would likely cost tens of millions of dollars to create.
Vornado is exploring options for the property because, according to recent reports, the building’s biggest office tenant, the New York Stock Exchange, which leases nearly 400,000 square feet, is set to leave next year.
However, converting the property into residential won’t be easy. It may be difficult to lay out the building’s lower floors, which are larger than the spaces at the top of the tiered property, for apartments, sources said. An even bigger hurdle is the building’s complex ownership structure.
The New York Stock Exchange used to both own and occupy 20 Broad St.. Several years ago it ground leased the property to Vornado, while still remaining a tenant at the building.
Residential condo units are difficult to sell in ground-leased properties because the building’s ownership eventually reverts back to the owner of the ground. Apartment buyers are wary of that arrangement because it means their units will not be theirs in perpetuity and the land may also become less valuable as the ground lease nears expiration.
But now that NYSE is leaving 20 Broad, Vornado could purchase the building outright from NYSE and pursue the conversion. Some say Vornado could tear the existing building down and erect a new residential tower in its place.
Several owners have converted downtown office buildings into residential space or erected apartments from the ground up. Alchemy Properties, for instance, is converting the upper floors of the Woolworth Building into luxury apartments. And last week, Chinese firm Oceanwide Holdingsreached a deal to purchase 80 South St., a development site that can accommodate a 1,000-foot tall tower with residential space.
Though Vornado is predominantly an owner of office and retail, the firm also has built high-end residential space. The company is developing one of the highest profile condo projects in the city, a nearly 1,000-foot tall tower with soaring Central Park views at 220 Central Park South. Vornado revealed in a recent earnings call that it has sold $1.1 billion worth of apartments in just a few weeks of opening the property to the market.