Weil Gotshal's Demise Created a Surprise NYC Office Windfall — WSJ

What happened

Weil, Gotshal & Manges is collapsing, leaving about 450,000 square feet across nearly 10 floors at the General Motors Building in Midtown Manhattan, where it pays about $121 a square foot under a lease running through 2034.

Confirmed

Global impact / market context

The below-market lease is a valuable asset because tenants would likely pay over $200 a square foot today, so either the law firm or landlord BXP could gain by selling or surrendering it and re-renting at higher rates.

Analyst inference

Midtown is described as having a complete vacuum of trophy space, which means prime office floors are scarce. BXP must refinance its 3.43% mortgage next year, giving Weil possible negotiating leverage over who captures the lease windfall.

Analyst inference

What to watch

1. Whether Weil seeks bankruptcy protection matters, because that could let it ask a court to approve selling its below-market lease to another tenant. Confirmed
2. BXP could pay Weil to surrender the lease as the firm dissolves, which would free the landlord to rent the space at current higher rates. Proposed
3. BXP's refinancing of its 3.43% mortgage next year may shift bargaining power toward Weil, affecting who captures the lease value. Analyst inference

Evidence

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