Vornado (VNO) Enters PPP Venture to Develop Studio Campus in NYC
Vornado Realty Trust VNO recently entered into Manhattan’s first public-private partnership (“PPP”) venture with Hudson Pacific Properties HPP, Blackstone BX, the City of New York and New York City Economic Development Corporation to build a 266,000-square-foot purpose-built studio campus at Pier 94 with a joint investment amount of around $350 million.
More than 1,300 construction jobs and 400 permanent jobs are anticipated to be created through the project. In addition, the local economy will likely benefit from a contribution of $6.4 billion over the next 30 years. This will make New York one of the leading places for the film and television industry. Consequently, Vornado’s portfolio of premier New York City office and retail assets is likely to benefit from the expected favorable economic conditions of the region.
Vornado, Hudson Pacific and Blackstone’s institutional Core+ Real Estate strategy will own a stake of 49.9%, 25.6% and 24.5%, respectively, in the studio campus. Notably, Vornado contributed its long-term leasehold for Pier 94 to the PPP venture. Also, this will mark Hudson Pacific’s first New York location and Blackstone’s growing studio platform and synergistic with its existing Los Angeles operations.
The construction of this first-of-its-kind space with state-of-the-art film and production technology is set to begin in the third quarter of 2023 using the $183 million in construction financing led by RBC. The project is expected to be completed by year-end 2025.
Vornado will be in charge of the development, while the design oversight and management of the facility’s leasing and operations will be taken care of by Hudson Pacific.
Pier 94 Studios will sport six purpose-built soundstages with production control room facilities and production support space and offices spanning 145,000 square feet. The space will overlook the Hudson River and offer ample room for on-site parking. Moreover, multiple stages will be equipped with technological infrastructure for the adaptation to virtual production.
Given the facility’s location, design, size and technological capabilities, world-class convenience and flexibility for episodic television, live audience television and feature films can be facilitated here.
A program to support workforce development and training programs to connect local residents to opportunities in film, television, commercial and other media production will also be in place.
Furthermore, the local communities will benefit from several public amenities, including new public restrooms for Hudson River Park, a 1,850-square-foot community amenity space, 25,000 square feet of waterfront open space and pier access, and safety improvements to the bikeway.
Regarding sustainability, Sunset Pier 94 Studios will target achieving LEED Gold and Fitwel certification and powering its operations with 100% renewable energy. This strategy is in sync with the broader Sunset Studios portfolio.
Per Michael Franco, president and CFO of Vornado Realty Trust, “Our partnership with Blackstone, Hudson Pacific, and the City of New York will solidify New York as a leading market for content production and studio space, create jobs, drive economic momentum, and deliver a host of amenities to the surrounding community. Together we’ll raise the bar for one of New York City’s signature industries and breathe new life into a key waterfront site.”
Vornado has been experiencing healthy leasing activity across its portfolio of top-quality office spaces in a few select, high-barrier-to-entry markets of New York on the back of healthy demand for premium assets with class-apart amenities.
However, given a choppy office real estate market, demand for office properties may remain subdued in the near term, raising concerns for the company. Elevated supply and high-interest rates add to its woes.
Shares of this Zacks Rank #3 (Hold) company have gained 16% in the year-to-date period against the industry’s decline of 2.3%.
Image Source: Zacks Investment Research
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Blackstone Inc. (BX) : Free Stock Analysis Report
Vornado Realty Trust (VNO) : Free Stock Analysis Report
Hudson Pacific Properties, Inc. (HPP) : Free Stock Analysis Report
