The collapse of Weil, Gotshal & Manges creates an unexpected prize for either the law firm or its landlord -- a big chunk of prime office space on Fifth Avenue with sweeping views of Central Park.
Weil occupies about 10 floors, or nearly 450,000 square feet, at the General Motors Building in Midtown Manhattan. It pays about $121 a square foot under a lease renewal signed in 2014 that runs through 2034, according to credit rating firm KBRA.
Office tenants would likely pay more than $200 a square foot today for the firm's space that boasts some of the building's best views, according to brokers.
"There is a complete vacuum of trophy space in Midtown and this is the best tower floor block in a trophy asset," said Josh Kuriloff, executive vice chairman of Cushman & Wakefield.
For now, it is unclear whether that windfall will go to Weil or the building's owner, a venture led by real-estate giant BXP.
If the law firm seeks bankruptcy protection, it could ask for court approval to sell its below-market lease to another tenant. But BXP could argue that a replacement tenant can't meet the lease's obligations.
Another possibility would be for BXP to pay Weil to surrender the lease as the firm dissolves, freeing the landlord to rent the space at the current higher rates.
BXP also has to refinance its 3.43% mortgage next year, which could give Weil some leverage in negotiations. The landlord has an incentive to resolve the issue before approaching lenders, who will want to know how much rent they can count on to cover the new loan.
The landlord would certainly relish getting the lease back, office brokers say. BXP President Doug Linde said on an earnings call this week that there was a "vast gap" between existing rents at the GM Building and current market rents.
The GM tower was designed by Emery Roth & Sons and completed 58 years ago at the southeast corner of Central Park, across from the famed Plaza Hotel.
The 50-story tower opened as a showcase for American corporate might, housing General Motors' New York headquarters and a ground-floor showroom displaying the automaker's latest models. Weil moved in that same year, beginning a tenancy that has lasted nearly six decades.
In 1998, Donald Trump teamed with insurer Conseco to buy the tower for $878 million. Trump also managed the property and emblazoned his name in four-foot-high gold letters on its white-marble facade.
The partnership unraveled into a bitter struggle for control, ending in 2003 when Conseco won a ruling forcing Trump to sell his stake. The gold letters pried from the building became collectors' items, turning up in offices around the city.
The building continued to make headlines after developer Harry Macklowe bought it for $1.4 billion in 2003. He brought in Apple, whose underground store opened in 2006 beneath a striking glass cube and became one of Fifth Avenue's biggest retail draws.
In 2008, amid mounting debt troubles, Macklowe sold the tower to a BXP-led venture for $2.8 billion -- twice what he had paid and then a record for a U.S. office building.
Today, the GM Building is benefiting from Manhattan's emergence as the country's strongest office market.
Coco's at Colette, a members-only restaurant perched on the 37th floor, has emerged as New York City's new power lunch spot. Toy store FAO Schwarz attracted generations of tourists and children there for decades, in a space now occupied by luxury brand Moncler's global flagship store.
While much of the U.S. has suffered high vacancy following the pandemic, New York's leading law firms and financial companies are paying up for prime locations, sweeping views and lavish amenities.
Manhattan's office availability rate fell to 13.4% in the third quarter and was approaching single digits for the highest-quality space, according to Avison Young.
"The fight for talent and the fight for retention is playing out in real estate," said Rory Murphy, head of Avison Young's New York office.
With options shrinking, interest is already growing in Weil's top shelf offices high above Central Park. "I think every broker in this market is tracking the GM Building," Murphy said.
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