By David Kara Wetzel on September 13, 2013.
Sept. 13 (Bloomberg) -- Warner Music Group Corp., whose artists have included Frank Sinatra, Led Zeppelin and Bruno Mars, is negotiating to move its headquarters to a tower north of Manhattan’s Times Square, two people with knowledge of the discussions said.
Warner, the third-largest music-content provider, agreed to terms on a 15-year lease of almost 300,000 square feet at 1633 Broadway, also known as Paramount Plaza, said the people, who asked not to be identified because the negotiations are private. The company, part of Time Warner Inc. until 2004, has to leave its longtime headquarters at 75 Rockefeller Plaza next year, when its rental agreement expires.
The deal would keep the company in midtown Manhattan at a time when media firms have been flocking to older buildings below 30th Street, in the area known as midtown south. Paramount Plaza is about 86 percent leased, according to property-research firm CoStar Group Inc. The 48-story, 2.5 million-square-foot (230,000-square-meter) tower is majority-owned by the German investment firm Paramount Group Inc.
“The story in the media that has been circulating was that these assets were obsolete as the tech/media companies only wanted to be in the older buildings located in midtown south, Flatiron or Chelsea submarkets,” Peter Hennessy, New York regional president of brokerage Cassidy Turley, said in an e-mail. “This proposed lease affirms what we in the industry have believed, that it was only a matter of time until this submarket started to make a comeback.”
Cassidy Turley isn’t involved in the deal. Robert McGrath, a spokesman for CBRE Group Inc., which represents both Warner Music and Paramount Group, declined to comment.
Last year, Digital Generation Inc., operator of a network that connects advertisers with TV and radio stations, took about 86,000 square feet on the lower floors of the tower at about $55 a square foot, according to CompStak Inc., a New York-based provider of leasing data. The law firm Dickstein Shapiro LLP took about 40,000 square feet on typically more-expensive higher floors, for just more than $60 a foot.
The people didn’t say how much Warner Music agreed to pay for its space. The company is paying slightly less than $40 a square foot at 75 Rockefeller Plaza, according to CompStak.
Kathleen McMorrow, a spokeswoman for Paramount Group, and James Steven, a Warner Music spokesman, declined to comment on lease negotiations.
Scott Rechler’s RXR Realty LLC. acquired a leasehold interest in 75 Rockefeller Plaza, the youngest building in the Rockefeller Center complex, earlier this year, with plans to vacate the entire tower and renovate it. Warner Music, like all the building’s tenants, subleases its space from Time Warner. The agreement expires in mid-2014.
Warner Music also plans to vacate about 130,000 square feet it rents at 1290 Avenue of the Americas, a tower next to Rockefeller Center owned by Vornado Realty Trust, according to the person with knowledge of the 1633 Broadway talks. A call to Wendi Kopsick, a Vornado spokeswoman, declined to comment.
Other tenants at 1633 Broadway, which is on the northwest corner of West 50th Street, include Morgan Stanley and CBS Corp., according to CoStar.
Warner Music yesterday announced that it would share revenue with Clear Channel Communications Inc., the biggest owner of U.S. radio stations, in a strategic partnership designed to increase radio audiences and exposure for its artists. Clear Channel is also a tenant at 75 Rockefeller Plaza.