McGraw Hill to Depart Namesake Tower in Move to DowntownDavid M. Levitt and Matt Robinson
McGraw Hill Financial Inc. plans to move about 250 employees to lower Manhattan as it leaves the Midtown building that bears its name, becoming the latest information-related company to depart the area.
The move from the McGraw Hill Building on Avenue of the Americas between 48th and 49th streets will help the company by “consolidating our real estate footprint, enhancing collaboration by bringing more of our employees together and lowering our future costs,” said Jason Feuchtwanger, a McGraw Hill spokesman.
Most senior management, human resources and finance workers are moving to 55 Water St., the current home of the company’s Standard & Poor’s division, said a person with knowledge of the plans. McGraw Hill has also held preliminary talks with the developers of the World Trade Center and Hudson Yards, the city’s largest office-development sites, to relocate once its downtown lease expires, said three people with knowledge of the discussions.
McGraw Hill joins an exodus of media and information companies, including Conde Nast Publications Inc. and the New York Daily News, moving from Midtown to the cheaper rents of lower Manhattan. Magazine publisher Time Inc. is considering leaving the Time-Life Building, a block to the north of the McGraw Hill tower, and is concentrating its search on downtown, three people familiar with the matter said in January.
“Of the three criteria that drive the marketplace right now -- financial, operational and qualitative -- downtown seems to offer the best of all worlds for somebody making a decision based on those criteria,” said Andrew Peretz, executive managing director at commercial-property brokerage Newmark Grubb Knight Frank.
McGraw Hill Chief Financial Officer John Callahan Jr. said on a Feb. 4 conference call with analysts that the company “has decided to exit its midtown New York City office.” The company paid $60 million to terminate its lease before its 2020 expiration, he said. The tower’s landlord is Rockefeller Group Inc., which also owns the Time-Life Building.
McGraw Hill has transformed into a financial-products and data provider after the 126-year-old company sold its education unit in March 2013 for $2.4 billion in cash to Apollo Global Management LLC. The company has cast off publications including Chemical Engineering, Modern Plastics and BusinessWeek, which was bought by Bloomberg News parent Bloomberg LP in 2009.
McGraw Hill, which has been in the 52-story Midtown tower since it was completed in 1972, will depart by the end of next year, according to the earnings call. The building will then be identified by its address, 1221 Avenue of the Americas, said one of the people with knowledge of the matter. The people asked not to be identified because the future plans are private.
Rockefeller is in advanced discussions with the law firm White & Case LLP for most of the space that McGraw Hill will be vacating, one of the people said. Francine Minadeo, a White & Case spokeswoman, declined to comment.
Dwayne Doherty, a spokesman for Rockefeller Group, said the company had no comment.
McGraw Hill would give up its offices near the top of the tower, where it has been reducing its presence for several years, one of the people said. The company has about 413,000 square feet at the property, according to data from CoStar Group Inc., a research firm which tracks office leasing.
The company also intends to reduce its presence at 2 Penn Plaza, a 1.5 million-square-foot (140,000-square-meter) building that sits over the Seventh Avenue end of Pennsylvania Station, the busiest U.S. commuter rail hub, and next to Madison Square Garden, two people said. It has about 440,000 square feet in that building, owned by Vornado Realty Trust. Wendi Kopsick, a spokeswoman for New York-based Vornado, declined to comment.
The 53-story tower at 55 Water, which sits on the East River near the foot of Manhattan, is owned by Retirement Systems of Alabama. Chief Executive Officer David Bronner didn’t return phone calls seeking comment on McGraw Hill’s move.
The inquiries into a potential relocation to the World Trade Center site or Hudson Yards, the Related Cos. development on the far west side, are in early stages and a commitment may be at least a year away, according to the people with knowledge of the matter. McGraw Hill would want at least 750,000 square feet at wherever it moves, one person said.
McGraw Hill’s lease on about 1 million square feet at 55 Water runs out in 2019 or 2020, one of the people said.
At the World Trade Center site, the company is focusing its interest on 3 World Trade Center, where developer Larry Silverstein is seeking additional tenants to join British advertising firm GroupM Inc., according to the person. Silverstein is in negotiations for a government guarantee to help him finance the skyscraper, which would be the third at the lower Manhattan site.
Bud Perrone, a Silverstein spokesman; Joanna Rose, a spokeswoman for Related; and Robert McGrath, a spokesman for CBRE Group Inc., which is representing McGraw Hill, declined to comment.