Ralph Lauren recently agreed to a reduction of its space at its headquarters in Manhattan’s Plaza District — complete with a significant discount on its previous rent.
The company is paying 30 percent less on a per square foot basis for its space at Vornado Realty Trust’s 650 Madison, Crain’s reported. Details of the lease for the luxury retailer were disclosed this week by Fitch Ratings.
As of 2020, Ralph Lauren was paying $88 per square foot for its headquarters, according to a report from KBRA. Back-of-the-napkin math pegs the company’s rent at $62 per square foot, an even further cry from the $113 per square foot the company was paying in 2019, according to a rent roll of Vornado’s property; Oxford Properties Group and the Ontario Municipal Employees Retirement System are co-owners.
A spokesperson for Vornado, implying that the rent comparison is apples-to-oranges, told The Real Deal that the $88 figure was gross rent and the $62 is net rent.
When the lease takes effect next year, Ralph Lauren will occupy about 100,000 fewer square feet. The company is expected to occupy between 133,000 and 140,000 square feet.
If it takes up the latter amount of space, that would mean Ralph Lauren will start paying about $8.7 million per year in rent. The previous rent bill exceeded $21 million annually.
Ralph Lauren has been a tenant of the building below East 60th Street since 1989. A deal signed in 2009 was set to expire at the end of this year before the latest extension.
A joint venture led by Vornado and Oxford acquired the building in 2013 for $1.3 billion. The owners before the pandemic refinanced the 27-story mixed-use property for $800 million; it was 98 percent occupied at the time. Vornado’s stake in the building is 20.1 percent.
During the pandemic, the building lost its second-largest tenant, Memorial Sloan Kettering Cancer Center. In June, Fitch downgraded the loan backing the building due to worries about vacancies and the approaching Ralph Lauren lease expiration.
Around the same time Ralph Lauren extended at 650 Madison, it also signed a 10-year renewal for retail space at 867 Madison on the southeast corner of East 72nd Street.
This article has been updated with a comment from a spokesperson for Vornado.
— Holden Walter-Warner