Scholastic & ESRT Close Sale-Leaseback of SoHo Headquarters Office

Empire State Realty Trust (ESRT) recently acquired the office property at 555-557 Broadway in New York City. At the start of December, ESRT announced that it had agreed to purchase the property from publishing house Scholastic Inc. for $386 million in an all-cash transaction.

Newmark Group, Inc. served as the exclusive real estate advisor to the seller. One of the world’s largest publishers and distributors of children’s books, Scholastic has been the main occupier in the property and, under the terms of the transaction, will continue operations here through a 15-year lease that also includes extension options. Through the sale-leaseback deal, Scholastic retained use of 222,000 square feet of New York City office space at the property.

“We are pleased to welcome Scholastic to our roster of great companies who are our tenants and look forward to our new relationship with them,” said Anthony E. Malkin, Empire State Realty Trust’s chairman and CEO. “We are excited to bring this combination of contractual revenue, embedded growth, and significant value-creation potential from our ability to market the three uniquely large floors in a more than 110,000-square-feet block.”

Located in the SoHo submarket of New York City, the property is comprised of two edifices collectively referred to as the Scholastic Building with entrances on both Mercer Street and Broadway.

The property at 555 Broadway was completed in the late 1880s as a retail site (Charles Broadway Rouss Wholesale Auction Dry Goods department store) and was later converted to office use 100 years later. The iconic SoHo Cast Iron Historic district building rises 10 stories above Broadway and incorporates nearly 180,000 square feet of highly prized Manhattan office space, in addition to nearly 37,000 square feet of retail.

The historic façade of 555 Broadway in the SoHo submarket of Manhattan still bears the name of the original owner, Confederate merchant Charles Broadway Rouss.

The building at 557 Broadway was a bold headquarters expansion project by Scholastic, completed in 1999. Originally intended to serve as the front door to Scholastic’s headquarters, the building includes a nearly 7,000-square-foot store on the ground floor and mezzanine; a 299-seat auditorium inspired by Palladio’s 16th-century Teatro Olimpico in Vicenza, Italy; and several 10,000-square-foot floors that align with (and expand by 50%) existing floors at 555 Broadway.

Built by Scholastic to expand its HQ in the adjacent building, 557 Broadway presents a modern interpretation of the cast-iron architectural style that defines the historic SoHo neighborhood.

Though the office sector continues to face challenges across the country, the Manhattan office market has stood out as the leading bright spot this year. In fact, our national office report found that office space here commanded the highest asking rate for lease, as well as the highest sale price per square foot. What’s more, sales of office space in New York City added up to the highest year-to-date total through November, when vacancy was among the lowest in the country, and developers were working on the second-largest supply pipeline nationwide.