MSG 2016-09-Xx Pitch FINAL 2.Pdf
PAGE 2
PROJECT TEAM
CURRENT SITUATION
STRATEGY / PROCESS
WHY CBRE? PAGE 3 | REAL ESTATE DISCUSSION PAGE 4
MARY ANN TIGHE CEO PROJECT Tri-State Region TEAM
CHRISTOPHER CORRINET GREGORY TOSKO Senior Vice President Vice Chairman Consulting Consulting
MEDIA & ENTERTAINMENT LARGE/RENEWALS VORNADO STRUCTURING
ROB HILL PETER GAMBER Senior Vice President Senior Financial Analyst Brokerage Consulting
Capital Markets Research Workplace Strategy Project Management Cost Segregation 2PAGE 5PENN PLAZA
BUILDING OVERVIEW
OWNER: 100% owned by Vornado YEAR BUILT: 1968 RSF: 1.6 Million HEIGHT: 29 Floors*
LEASE ROLLOVER
589K RSF 597K RSF (39.1%) (39.6%)
170K RSF (11.3%) 102K RSF (6.7%) 44K RSF 4K RSF (2.9%) (0.2%)
’16 ’17 ’18 ’19 ’20 ’21+
*Floors 30 & 31 currently storage; might be converted to office use in future PAGE 6
MSG OCCUPANCY OVERVIEW
ESCALATED RENT (2)
2017 2020 2024
FLOOR RSF LXD $ / RSF (3)
PARTIAL 26TH 6,945 $61.28 $65.47 $75.64
PARTIAL 26TH 10,832 $59.68 $63.82 $73.93
PARTIAL 19TH 33,263 $57.94 $62.08 $72.19 4/30/2024 PARTIAL 19TH 28,488 $58.92 $60.40 $74.50
14-16TH 153,347 $61.07 $65.21 $75.32
PARTIAL 8TH 24,667 $79.38 $83.53 $93.63
DIRECT SPACE (1) | WTD. AVG. 257,542 $62.15 $65.98 $76.53
ENTIRE 12TH (2) 60,475 1/31/2020 $32.79 $36.93 N / A
ALL SPACE | WTD. AVG. 318,017 $56.55 $60.45 $76.53
(1) Does not include the 24th floor which is being surrendered in Q2 2017 $18.0MM $19.2MM $19.7MM (2) Sublet from McGraw-Hill; expires January 31, 2020 (3) $5/RSF rent bump 5/1/2022
HEADCOUNT (EST.)(4) 1,000 1,000 1,000
RSF/RENT PER HEADCOUNT 318 / $18,000 318 / $19,200 257 / $19,700
(4) As per MSG PAGE 7 | REAL ESTATE DISCUSSION
EARLY THOUGHTS
CHALLENGES GOALS
Workplace enhancement (improve collaboration/internal GARNER communication, image, employee retention) Reasonable economics including contribution towards MSG leasehold improvements 12th floor January 31, 2020 LXD OBTAIN Vornado’s contemplated façade work coterminous space envelope and flexibility via renewal, expansion, contraction options Restack disruption to staff/operations SECURE Swing-space availability sufficient swing space
Renovating in place will extend renovation time and likely MINIMIZE entail a significant cost premium due to staging, start/stop disruption to business/employees work cycles and incremental overtime work COORDINATE Unamortized capital/write offs tenant work with building renovation
Ties to the Garden’s location MANAGE P&L impact / cash outlay
ENSURE building systems can handle increase in density PAGE 8
2 PENN PLAZA
Elevators Floor RSF 31 MECHANICAL / STORAGE 30 MECHANICAL / STORAGE 29 56,301 INFORMATION BUILDERS (12/2023) 28 56,301 INFORMATION BUILDERS (12/2023) 27 56,301 INFORMATION BUILDERS (12/2023) 26 55,591 MSG - 10,832 RSF (4/2024) EMC CORPORATION - 37,756 RSF (11/2018) VHB - 7,003 RSF (3/2017) 25 61,185 S&P GLOBAL (3/2020) 24 48,779 INFORMATION BUILDERS - 28,000 RSF (12/2023) K-FORCE STAFFING - 12,000 RSF (2020) MSG - 8,779 RSF (Surrendering 2017) 23 61,294 PROSKAUER ROSE (Sublease from S&P, 3/2020) 22 56,699 S&P GLOBAL - 28,000 RSF (3/2024) MORGAN STANLEY - 28,699 RSF (2/2018) 21 61,294 S&P (3/2020) 20 61,294 S&P (3/2020) 19 61,751 MSG (4/2024) 18 55,000 EMC CORPORATION (11/2018) 17 61,543 EMC CORPORATION - 10,773 RSF (11/2018) SIGNATURE BANK - 6,459 RSF (3/2021) CUMULUS MEDIA - 44,311 (6/2019) 16 60,080 MSG (4/2024) 15 59,734 MSG - 33,290 RSF (4/2024) UNITED BUSINESS MEDIA - 26,444 RSF (12/2025) 14 59,976 MSG (4/2024) 12 60,531 MSG (Sublease from S&P) (3/2020) 11 61,102 AMER. FOUNDATION FOR THE BLIND – 17,649 RSF (10/2021) URBAN ENGINEERS – 12,270 RSF (2024) (1) BEACON HEALTH (SUB. FROM S&P) – 31,232 RSF (3/2020) 10 57,432 SCHOOLOGY - 46,094 RSF (SUB. FROM S&P, 3/2020) SUBLET AVAILABLE - 7,781 RSF (2018) AVAILABLE - 3,557 RSF 9 60,594 S&P (3/2020) 8 54,667 AMC (SUB. FROM HP) - 30,000 RSF (1/2018) MSG - 24,667 RSF (4/2024) 7 58,704 AVAYA - 29,131 RSF (2027) ASSOCIATION FOR COMPUTING MACHINERY - 29,573 RSF (2021) 6 59,987 JACOBS ENGINEERING (SUB. FROM S&P) - 41,987 RSF (3/2020) AMC - 18,000 RSF (9/2017) 5 50,754 MTA - 32,562 RSF (2020) GANNET FLEMING, INC. - 18,192 RSF (2020) 4 55,000 AMC (7/2017 – with rights to extend) 3 54,000 TECTRATECH - 41,000 RSF (2020) FOREST ELECTRIC - 13,000 RSF (7/2017)
EXISTING POTENTIAL SWING POTENTIAL SWING AND/OR LONG TERM
(1) Recently renewed: 7 years, $62(3), $66(4), $15 work, 5 months free. 2 PENN RENOVATION PAGE 10 PAGE 11 | REAL ESTATE DISCUSSION
PRELIMINARY TIMELINE
Current Situation
Strategy Discussion / Selection
Term Sheet Negotiations
LXD Transaction Documentation 4/30/2024
Space Design / Construction Drawings
Bid & Award Construction
Swing Space Prep
Floor Demo / Renovations
Contingency
N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
2016 2017 2018 2019 2020 2024
Based on 2 floors renovated every 6 months PAGE 12
STANDARDS Open/enclosed, sizes, collaboration ratios, executive area, amenities
RESTACKING HEADCOUNT Swing space, threshold for pain an Current headcount (FT, FTE, contract (by group?), progression workers, seasonal) open requisitions, growth rate, time horizon
CONSENSUS IS CRITICAL
ADJACENCIES CONSTRUCTION Required/preferred, Clarity on finish, technology, stair/elevator/building/NYC amenity spaces, restack premium
FINANCIAL Cash, P&L, near term, stabilized, NPV, writeoffs PAGE 13 | REAL ESTATE DISCUSSION
RENEWAL RENT PRICING
The Garden/2024 LXD $105.29 $21.45 Rent Overlap FF&E, $50.00 Capital Technology (above Work Allowance) $50.00 TENANT RISK $100.00 MARKET MARKET RENT 2017 2% Annual Net Rent Growth through 2020 and 5% Annual Net Rent Growth Rate to 2024 2024 RENT $65.00 $83.84
Downtime / Free Rent (18 months) Work Allowance LANDLORD RISK (2024) ($75.00 psf) Restack Costs $18.50 $65.34 Restack Plan
Note: All calculations use a 7% discount rate and a 15-year extension term. PAGE 14
PENN PLAZA REDEVELOPMENT 2 PENN RENOVATION
GENERAL MARKET HUDSON YARDS VORNADO PORTFOLIO PAGE 15 | REAL ESTATE DISCUSSION
MARKET OVERVIEW
$ / RSF
$110
$100 3 Years +74% (+20.3% CAGR) 5 Years $90 +43% (+7.4% CAGR)
$80 7 Years +92% (+9.8% CAGR) $70
$60 7 Years +260% (+20.1% CAGR) $50 3 Years -33% $40 4 Years (-12.4% CAGR) -20% (-5.3% CAGR) $30
$20 4 Years -26% (-7.2% CAGR) $10
$0 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Forecast based on Q2 2016 CBRE Econometric Advisors Market Forecast applied to 2015 year-end rent of $79.91 psf. PAGE 16
MANHATTAN OFFICE DEVELOPMENT Historical Office Construction Completions and Residential Conversions by Decade
Total SF (millions)
65.0
55.0
45.0
35.0 64.6 56.0 54.6 25.0
15.0 11.4 18.7 5.0 10.4 9.6
-3.7 -5.0 -12.7 -11.1
-15.0
-25.0 1960s 1970s 1980s 1990s 2000s 2010s
Completed Under Construction Conversions
Source: CBRE Research. HUDSON YARDS PAGE 18
50 HUDSON YARDS 30 HUDSON YARDS NORTH TOWER 2.8M SF | 2021+ Related |2.5M SF | 2019 / 2020 Time Warner - 1.4M SF, KKR (343K SF): condo purchase, Wells Fargo (500K SF): condo purchase, Related (258K SF), Oxford (45K SF), DNB Nor (45K SF) THE SPIRAL 2.8M SF | 2021+ KKR: 2015, $1,400 / RSF Purchase Price DNB: 2016, $175 / RSF Starting Rent
55 HUDSON YARDS MANHATTAN WEST NORTH TOWER Related/Mitsui | 1.35M SF | 2017 / 2018 Brookfield | 2.1M SF | 2019/2020 Boies, Schiller & Flexner (110K SF), Skadden Arps (anchor) for floors 28-45, Milbank Tweed (260K SF), MarketAxess (84K SF) NHL Office and Flagship Retail Store (pending) Point72 & Intercept (Pending)
RETAIL Nieman Marcus 3 HUDSON BOULEVARD Moinian | 1.8M SF | 2021+
35 HUDSON YARDS Related Residential | 2019 MANHATTAN WEST SOUTH TOWER Brookfield | 2.1M SF | 2021+
3 MANHATTAN WEST Brookfield Residential | 2018
15 HUDSON YARDS 450 WEST 33RD STREET Related Residential | 2018 Brookfield |1.7M SF | 16 stories DELIVERY TIMING
10 HUDSON YARDS SOUTH TOWER 2016 2019-2020 CULTURE SHED Related | 100K SF | 2016 1.7M SF building 2017-2018 2021+ Coach (700K SF), L’Oreal (438K SF), SAP (144K SF), BCG (193K SF), Vayner Media (65K SF)
Coach: 2013, $707 / RSF Purchase Price L’Oreal: 2013, $68 / RSF Starting Rent PENN PLAZA PAGE 20 VORNADO
7.2 MM RSF 7.3% Vacancy 1 PENN PLAZA 100 WEST 33RD STREET 17.7% 3 Year Roll Parsons Brinckerhoff Interpublic Multiple Tenants Apparel 350,000 RSF Available Rocket Fuel
7 WEST 34TH STREET Amazon
2 PENN PLAZA
330 WEST 34TH STREET New York & Co. Footlocker Yodle Deutsch
11 PENN PLAZA Macy’s AMC MSG PAGE 21 | REAL ESTATE DISCUSSION
OPTIMAL LEASE TERM? LEASE TERM
RENT OPERATIONAL AVERAGING CONTROL
2024 AMORTIZATION FLEXIBILITY OF CAPEX
SHORTER LONGER
WORKPLACE PAGE 22
DEAL STRUCTURING
FORWARD DEAL FORWARD FMV UTILIZE RENEWAL OPTION
+ Extend lease term / control of space + Extend lease term / control of space + Amortize assuming extension
+ Avoid rent averaging + Extend amortization period + Extend amortization period + Flexibility via “termination option” + Cost certainty + Avoid rent averaging – Amortization period/control not – Near term P&L impact via rent averaging + Deflect Vornado optimism extended as long
– Vornado’s optimistic projections – Cost uncertainty – Cost uncertainty
– 2029+ uncertainty
One 5 year renewal option • Minimum 100,000 RSF • Cannot orphan 15th floor • Notice by 10/31/2022 • Greater of FMR and escalated rent (~$75 PSF) • True baseball arbitration FMV definition important Extend 12th floor (2020 LXD)
RENT AVERAGING
Defer / grow concessions | Accelerate base years | Claim “new deal” | Create uncertainty PAGE 23 | REAL ESTATE DISCUSSION
POTENTIAL RENEWAL SCENARIOS
REMAINING OBLIGATION FIXED RENT EXTENSION (2024) FMV RENEWAL (2024) EXERCISE 5-YEAR RENEWAL
FLOORS 8, 14-16, 19, 26 12 12, 14-16 & 19 (2) 12, 14-16 & 19 (2) 12, 14-16 & 19 (2)
RENT RE-AVERAGING DATE N/A July 1, 2017 May 1, 2024 May 1, 2024
RENTABLE SQUARE FEET 257,542 60,475 275,573 275,573 (1) 275,573 (1)
LEASE EXPIRATION DATE April 30, 2024 Jan 31, 2020 April 30, 2034 April 30, 2034 April 30, 2029
INITIAL BASE RENT ($/RSF) $62.15 $32.97 $85.00 2024 $85.00 2024 $80.00 2024
RENT INCREASES ($/RSF) $5.00 N/A $6.00 $6.00 N/A
FREE RENT (MONTHS) N/A 6 2024 6 2024 0
TI ALLOWANCE / YEAR N/A $60.00 2018 $60.00 2018 $0.00 FUNDED
RET/OPEX BASE YEARS Various 2024 2024 2024
SWING SPACE 2.25 Yrs | 60,000 RSF | $50.00 2.25 Yrs | 60,000 RSF | $50.00 2.25 Yrs | 60,000 RSF | $50.00 (TERM | RSF | RENT)
CONSTRUCTION PERIOD 2018-2019 2018-2019 2018-2019 2018-2019
TOTAL CAPITAL PSF $200.00 $200.00 $200.00 $200.00
NET OUT-OF-POCKET $200.00 $55.1 mm $140.00 $38.6 mm $140.00 $38.6 mm $200.00 $55.1 mm CAPITAL
DEPRECIATION - TI 5.83 15.83 MAX 15.83 MAX 10.83 MAX
DEPRECIATION – FFE/TECH 7.00 3.00 7.00 3.00 7.00 3.00 7.00 3.00
(1) Assumes 12th floor extended @ $75 with $60 TI, 6 mos free. (2) Assumes floors 8 and 26 are surrendered as of 1/1/2018. PAGE 24
P&L ($MMs) AVERAGE
2017-2023 2025- 2030- 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL 2029 2034
2 Penn Plaza | Remaining Obligation $132.7 20.6 19.5 19.5 17.8 18.0 18.4 18.8 6.4 N/A N/A
SCENARIOS:
1. Remaining Obligation with $204.6 20.6 23.9 29.1 32.3 32.7 32.8 33.2 11.2 N/A N/A Capital Expenditure
2. Fixed Rent Renewal on 12, 14 - 16, $192.0 23.5 28.2 30.0 27.2 27.5 27.6 27.8 25.3 24.9 27.1 & 19, and Surrender of 8 & 26
3. FMV Renewal on 12, 14 - 16, & 19, $156.8 19.9 21.0 22.8 22.8 23.3 23.4 23.6 26.4 28.6 30.8 and Surrender of 8 & 26
4. 5-Year Option Renewal on 12, 14 - 16, & 19, and Surrender of $191.2 21.2 25.0 28.2 28.7 29.2 29.3 29.6 29.8 30.1 N/A 8 & 26 in 2024 PAGE 25 | REAL ESTATE DISCUSSION
IS RELOCATION POSSIBLE?
TIMING VORNADO (COMPARED INTERIM PORTFOLIO TO RESTACK) PAIN/BENEFIT
EXIT CURRENT LEASE EARLY EVALUATION
Sublease | Takeover ABILITY TO CRITERIA IMPLEMENT NEW ACCESS WORKPlACE TO MSG ENVIRONMENT TIME RELOCATION TO LEASE EXPIRATION ECONOMICS PAGE 26
MANHATTAN WEST MANHATTAN WEST NORTH TOWER SOUTH TOWER 1 PENN PLAZA
441 9TH AVENUE
450 WEST 33RD STREET
FARLEY POST OFFICE
341 9TH AVENUE PAGE 27 | REAL ESTATE DISCUSSION PAGE 28
CBRE EXPERIENCE
SAMPLE VORNADO TRANSACTIONS
DTZ AMC Colliers 1% Early renewal of staggered lease expirations with expansion 11 Penn Plaza 2% and swing space in 100% leased building 385,000 RSF Savills Bloomberg Studley Early renewal of staggered lease expirations with valuable 731 Lexington Avenue 6% leasehold improvements in place 200,000 RSF JLL 10% Fiduciary Trust Favorable economics related to remainder 280 Park Avenue of building’s lease-up 130,000 RSF MANHATTAN TENANT Google NGKF CBRE Linear campus expansion; fixed economics on additional REPRESENTATION 85 Tenth Avenue 12% 180k SF (future delivery). 2000-2015 52% 180,000 RSF (>250,000 SF) Limited Consolidated into Vornado’s rebranded building 1740 Broadway with takeover of Limited’s remaining 4 year 370,000 RSF lease obligation. C&W 17% Macy’s 11 Penn Plaza Early renewal with limited geographic flexibility 600,000 RSF
New York & Co. Early relocation via buyout to anchor Vornado 330 West 34th Street building redevelopment 180,000 RSF PAGE 29 | REAL ESTATE DISCUSSION
STEVE ROTH JAMES DOLAN
DAVID GREENBAUM JOEL FISHER PAGE 30 280 PARK AVENUE PAGE 31 | REAL ESTATE DISCUSSION
EXPERIENCE WITH VORNADO
280 PARK AVENUE 330 WEST 34TH STREET
PJT Fiduciary Foot New York & TENANT GIC Deutsch Yodle Capital Trust Locker Company
BROKER JLL STUDLEY CBRE JLL NEWMARK C&W CBRE
YEAR 2015 2015 2015 2015 2014 2014 2014
RSF 49,851 141,858 126,516 144,987 74,346 83,639 178,342 AVERAGE DIFFERENCE: FLOORS P9 E15-17 P6, E7-8 E2-4 E13-14 E16-18 E6-9
TERM (YEARS) 15 10 15 15 10 10 15 21%
INITIAL RENT $90.00 $98.17 $86.00 $67.00 $59.00 $62.00 $50.00
TI ALLOWANCE $70.00 $78.78 $75.00 $75.00 $75.00 $75.00 $70.00
FREE RENT(MONTHS) 10 12 22 11 10 7 13
NET EFFECTIVE RENT $79.86 $77.72 $67.03 $56.35 $44.56 $49.10 $40.63
% DIFFERENCE +19% +16% +39% +10% +21% PAGE 32
2 PENN PLAZA 11 PENN PLAZA
TENANT MSG AMC
BROKER C&W CBRE
YEAR 2014 2014
RSF 250,597 339,701
FLOORS P8, 14, P15, 16, P19, 26 2, 15-23
TERM (YEARS) 7 9 (3)
INITIAL RENT (1) $62.15 $69.80
TI ALLOWANCE $19.95 $72.50
FREE RENT(MONTHS) 0 8
NET EFFECTIVE RENT @ 7% $58.54 $51.94 (2)
100% leased building NOTES: +13% Staggered leases
(1) Includes 2017 estimated Opex / Real Estate Tax escalations. (2) Excludes value of discounted swing space (3) Weighted average PAGE 33 | REAL ESTATE DISCUSSION
CBRE EXPERIENCE
LARGE TAMI
BLOOMBERG 919 Third Avenue 550,000 RSF NHL (PENDING) 1 Manhattan West 160,000 RSF BLOOMBERG 120 Park Avenue 400,000 RSF NY TIMES 620 Eighth Avenue 800,000 RSF CBS 555 West 57th Street 250,000 RSF OGILVY 636 Eleventh Avenue 500,000 RSF CONDE NAST 1 World Trade Center 1,200,000 RSF SHOWTIME 1633 Broadway 200,000 RSF FAIRCHILD 750 Third Avenue 280,000 RSF
GOOGLE Pier 57 280,000 RSF SIMON & SCHUSTER 1230 Ave. of the Americas 300,000 RSF
GREY 200 Fifth Avenue 330,000 RSF SONY 11 Madison Avenue 550,000 RSF
GROUPM 3 World Trade Center 600,000 RSF UNIVERSAL MUSIC 1755 Broadway 255,000 RSF GROUP HARPER COLLINS 195 Broadway 180,000 RSF Y&R 3 Columbus Circle 330,000 RSF JWT 237 Park Avenue 190,000 RSF
MLB (PENDING) 1271 Ave. of the Americas 380,000 RSF WARNER MUSIC 1633 Broadway 290,000 RSF PAGE 34
LARGE RENEWALS
ALSTON & BIRD 90 Park Avenue 115,000 RSF JWT 237 Park Avenue 190,000 RSF
AMC 11 Penn Plaza 340,000 RSF LINKEDIN 350 Fifth Avenue 280,000 RSF
BLOOMBERG 731 Lexington Avenue 200,000 RSF MACY’S 11 Penn Plaza 600,000 RSF
BRYAN CAVE 1290 Sixth Avenue 130,000 RSF MCGRAW HILL 55 Water Street 900,000 RSF
CBRE 200 Park Avenue 130,000 RSF MORGAN STANLEY 750 Seventh Avenue 425,000 RSF
CITIBANK 388/390 Greenwich St. 2,600,000 RSF NBA 645 Fifth Avenue 200,000 RSF
CITIBANK 601 Lexington Avenue 450,000 RSF SAATCHI & SAATCHI 375 Hudson Street 820,000 RSF
CREDIT SUISSE 11 Madison Avenue 1,200,000 RSF SIMPSON THACHER 425 Lexington Avenue 600,000 RSF
DAVIS POLK & WARDWELL 450 Lexington Avenue 650,000 RSF VIACOM 1515 Broadway 1,500,000 RSF
ESTEE LAUDER 767 Fifth Avenue 400,000 RSF WEIL, GOTSHAL & MANGES 767 Fifth Avenue 390,000 RSF PAGE 35 | REAL ESTATE DISCUSSION
AWARD-WINNING CREATIVITY
26 THE REAL ESTATE BOARD OF NEW YORK (REBNY) selects transactions that most exemplify creativity and ingenuity.
CBRE HAS DOMINATED these awards by developing and implementing winning solutions for its clients.
12 11
4 4 3 2 2 2 1 1 1 1 1 1 1
CBRE Other Competitors PAGE 36 WHY CBRE?
LARGE OCCUPANCY REQUIREMENTS STRATEGY DEVELOPMENT
RENEWALS OF SIZE STRUCTURING EXPERTISE
MEDIA & ENTERTAINMENT CLIENTS CREATIVITY
VORNADO SUCCESS TALENT
FIELD INTELLIGENCE DEPTH