Hell’s Kitchen’s iconic Worldwide Plaza office faces an uncertain future as key tenants Cravath, Swaine & Moore and Nomura Holdings plan exits. Last week, ratings agency Fitch downgraded the building’s loan, raising questions about the skyscraper’s future as an office block.
With its pyramid top, gray-purple granite face and sprawling two-million-square-foot interior, New York City’s Worldwide Plaza is a landmark above the Hell’s Kitchen skyline.
The 50-story office skyscraper and its two smaller residential towers were created by David Childs (the pyramids are called “David’s Diamonds’) of the renowned architectural firm Skidmore, Owings and Merrill. Now this iconic giant is facing a crisis as key tenants prepare for an exodus, casting a shadow of uncertainty over its financial stability.
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Long before Cravath, Swaine & Moore and Ogilvy and Mather moved in as anchor tenants, the site was a parking lot and, before that, the third Madison Square Garden. It was on this historic site that Marilyn Monroe sang Happy Birthday, Mr. President to President John F Kennedy in 1962. When Cravath chose 8th Avenue in the late 1980s, a move from the solid precincts of Wall Street to a street infamous for pornographic cinemas and the Port Authority Bus Terminal, it signaled more than just a change of address; it signaled a transformation.
Last week, Fitch, the financial ratings agency, downgraded the loan secured by the 2 million square foot office building, labeling it a “Loan of Concern” due to imminent rollovers. The Worldwide Plaza loan downgrading was first reported by Crain’s.
Fitch said that Cravath, Swaine & Moore, one of the original tenants that contributed to the building’s prestige, would leave their 617,000-square-foot space for Hudson Yards by 2024. Furthermore, Japanese investment bank Nomura Holdings, which has a lease expiring on its 16 floors in 2033 but an option to exit as early as 2027, is also exploring options to downsize its workspace.
Losing two tenants, that generate between them over 80% of the cash rent in the building, within a short period will leave a nearly vacant property and a huge hole in Worldwide Plaza’s finances. When New York REIT tried to sell the entire office tower for $1.7 billion in 2017, they attracted disappointing bids and ended up selling a 48.7% stake to RXR Realty and SL Green Realty Trust. Today, with Nomura and Cravath preparing for exit, the value of the tower and its loans are being closely watched.
RXR, SL Green and New York REIT Liquidating LLC did not immediately respond to a request for comment.
New York businesses have been downsizing their physical offices since the pandemic, fuelled by the rise of remote work and the need for operational efficiency. This week, Commercial Observer reported that demand for office space in Manhattan had continued its downward slide in the third quarter of 2023, but the office vacancy rate dropped for the first time in nearly two years.
Amid this tumult, a sliver of hope could come from City Hall. Mayor Eric Adams recently outlined a proposal to convert existing office spaces into as many as 20,000 homes, aiming to alleviate New York’s perpetual housing crisis — a pivot being demonstrated at the McGraw-Hill Building on W42nd Street. However, the initial area for the Midtown South Neighborhood Action Plan does not go as far north as Worldwide Plaza.