Sotheby’s New York Headquarters to Welcome a New Tenant

Cornell University’s medical school and research arm in New York will take five floors in the auction house's York Avenue building.

Sotheby's New York headquarters. Photo by Stephen Chernin/Getty Images.

Capping months of speculation, Sotheby’s is letting go of about half of the space at its longtime headquarters in Manhattan amid a strategic transformation of its real estate footprint.

Weill Cornell Medicine, Cornell University’s medical school and research arm in New York, said it will lease 200,000 square feet at 1334 York Avenue, Sotheby’s home since the 1980s. Specifically, the medical institution will take over five floors (5th through 9th), replacing sleek galleries displaying multi-million artworks with medical labs researching neuroscience, cancer, and women’s health.

The change is the latest step in asset reshuffling by Sotheby’s billionaire owner Patrick Drahi, who sits atop a telecom empire and a $60-billion debt pile amassed during an era of aggressive acquisitions fueled by cheap money in a low-interest rate environment. Now, he’s prepared to sell parts of his kingdom while also fighting massive tax charges in Switzerland and an ongoing corruption probe embroiling top executives and acolytes in Portugal. “Everything is open… It’s just a question of offer and demand,” the tycoon told debt investors in September, according to Bloomberg News.

The institutional change of guard at 1334 York Avenue is also part of a larger shift on the Upper East Side. Just a few blocks over, RFR Holdings, which owns 980 Madison Avenue, notified its tenants, led by Gagosian gallery, and bondholders of a long-term lease of more than 85 percent of the space to Bloomberg Philanthropies.

Sotheby’s is a small but flashy part of the Drahi empire. He famously acquired the storied auction house in 2019 for $3.7 billion, financing the purchase with a mix of debt and personal funds in a take-private deal. Sotheby’s headquarters in a 10-story, 407,259-square-foot, block-size building was part of the deal. The building had just undergone a $50-million renovation, with reconfigured galleries and offices, and the addition of an outpost of Sant Ambroeus restaurant. 

After taking Sotheby’s private, Drahi separated the auction house from the real estate by setting up a holding company that owns the building and leases it out. Sotheby’s has a lease on the building through 2035, according to the public records. It’s been the sole renter at 1334 York Avenue since 2020, paying $42.1 million a year million in annual rent, filings show.

The holding company, 1334 York, LLC is the borrower behind a $423.5 million securitized loan for which the building is collateral, according to New York City property records and filings related to the mortgage bonds. That amount—the biggest chunk of a larger debt package backed by the buildingcomes due in 2025, filings show.

Weill Cornell Medicine said it will launch the first phase of its expansion at 1334 York Avenue early next year on the fifth and six floors, just below Sotheby’s 7th-floor salesroom. The anticipated opening date of the research facilities is in fall of 2026, according to a press release. 

In July, Sotheby’s announced its purchase of the Breuer Building from the Whitney Museum of American Art for more than $100 million. Earlier this year, Sotheby’s bought a converted manufacturing building in Long Island City, Queens, for $82.5 million. Known as Gantry Point, it has 240,000 square feet of commercial space, with a two-story base and a nine-story tower with Manhattan skyline views, and a roof terrace on the eighth floor.

Sotheby’s will “continue to host exhibitions and auctions without disruption” at its headquarters until the Breuer Building is ready in 2025, a spokesperson for the auction house said in a statement. Given the limited office space at the brutalist icon, the company is on the lookout for more spaces around the museum, according to a spokesperson. 

Finding a prestigious new tenant for 1334 York Avenue is a coup for Team Drahi as post-pandemic doldrums have hit commercial real estate particularly hard. It’s also a realization of an old, pre-Drahi plan, which kept getting derailed over the years, according to people familiar with those discussions.

Sotheby’s location between East 71st and 72nd Streets on York Avenue, along what’s known as “the hospital row,” puts it in immediate proximity to major New York hospitals. Over the years, “every hospital was interested in Sotheby’s,” said a commercial real estate broker involved in some of those negotiations. But either the timing was off, or the parties couldn’t agree on details. “They didn’t want patients and buyers of art to enter from the same place,” the broker said.

Having a prominent tenant could give Drahi a lot more flexibility on whether to refinance the loan, sell the building, or just walk away from it (an unlikely scenario, considering that Drahi likes to own real estate), according to bond investors and commercial real estate experts.

Weill Cornell Medicine, located a couple of blocks south from Sotheby’s, is in expansion mode via its $1.5 billion fundraising campaign. Over time, the new facility will house more than 700 Weill Cornell Medicine faculty and staff, the hospital said.

“This state-of-the-art new medical research center, only steps from where our doctors see patients, will enable investigators to share ideas and technologies; drive discovery across disciplines; attract and retain the brightest scientific minds; sustain growth in our research funding; and further a sense of community,” said Dr. Robert Harrington, Dean of Weill Cornell Medicine and provost for medical affairs for Cornell University, in a statement.

 

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