In a quick pivot, SL Green Realty is now looking at transforming its trophy Times Square office tower into a roughly 1,000-room hotel and entertainment venue after its bid to open a casino there was rejected.
The New York-based real estate investment trust is proposing the adaptive reuse of 1515 Broadway, a landmark nearly 2 million-square-foot skyscraper. SL Green, Manhattan's largest office landlord, told Wall Street analysts that planning a casino for the property — even though the project fell through — provided the groundwork for turning the building to a hospitality use.
"The casino showed us how easy it is to convert the 1515 tower to hotel," Brett Herschenfeld, SL Green executive vice president for retail and opportunistic investments, said Friday during the REIT's investor day presentation. "It will have the best hotel views in the city, and I think a hotel in the middle of the world's greatest tourist destination might be a pretty good idea."
With its plan, SL Green is looking to make lemonade out of lemons. In September, its application — with partners Caesars Entertainment and rapper Jay-Z's Roc Nation — to open a $5.4 billion casino at 1515 Broadway was nixed by a community advisory committee. And in another blow to the property, one of its longtime tenants will be moving its headquarters out of the location. Media giant Paramount, in the wake of its $8 billion merger with Skydance, is relocating its global headquarters to its lot at 5555 Melrose Ave. in Los Angeles.
The Paramount Skydance lease expires in 3½ years, according to Herschenfeld.
BMO Capital Markets analyst John Kim described SL Green's adaptive reuse proposal for 1515 Broadway as "Plan B."
The REIT "plans to move forward with a similar design and conversion plan — without the casino," Kim said Monday in a note to clients.
"This would entail converting the 1.75 million-square-foot office building to a 992-room hotel, and establishing Summit Times Square atop the building, an expanded podium to house experiential entertainment, additional signage — and potentially a High Line-type pedestrian podium connected to other buildings," Kim said.
SL Green would also open an observatory similar to Summit One Vanderbilt — a tourist attraction at the REIT's One Vanderbilt skyscraper — atop 1515 Broadway.
During the investor event, Herschenfeld used illustrations of 1515 Broadway's floor plates to show how the conversion would work.
"Here is the existing office floor plan, and note the center core and the tower has legal light and air on all four sides," he said. "To convert, we wrap a corridor around the core and create standard bays for hotel rooms along the current exterior column system. Voila: 32 floors of office becomes 992 hotel rooms."
Floors 22 to 53 would be converted into hospitality space.
In addition to that transition, "think about a multiuse entertainment complex with expanded signage, virtual reality, e-sports, museums live in virtual performance theatres, family attractions with rides" for 1515 Broadway, Herschenfeld said.
The building's podium now includes the Minskoff Theatre, where "The Lion King" plays. But the REIT wants to have new immersive offerings added there.
"Imagine we remap the podium with a greatly expanded box, containing multiple levels of ticketed experiential use within," Herschenfeld said. "For the podium programming, when was the last time any of you visited a theme park and saw the latest and greatest in ride technology? It's all virtual now. It's become so real that you feel like you've traveled the distance of a Coney Island roller coaster, but yet, you remained in the confines of a 10,000-square-foot room."
The podium's floors are 60,000 square feet, according to Herschenfeld, and "technology advancements mean we could put an entire theme park of the future at the base of 1550 [Broadway]."
Expanding signage at that level would also create "enormous incremental revenue," he said.
SL Green did not provide any additional comment to CoStar News on Monday.
But on investor day, Herschenfeld also discussed creating more pedestrian space while preserving vehicular traffic in Times Square, which has 130 million visitors a year.
"The answer is, we think three-dimensional," he said. "What if we created elevated pedestrian platforms traversing [Times Square] like the High Line of New York or one of several districts in Hong Kong? Vehicles can still travel underneath, and in so doing, you've doubled the amount of ground floor retail in Times Square, both at ground and platform level, and those pay pretty good rents."