Roth Sells Stake in Marquis Theatre

The Marquis Theatre will soon have some new names on its ownership marquee.

Steven Roth, the founder of Vornado Realty Trust, confirmed that his company sold almost half of its stake in the Broadway theater to a group of investors as part of a larger deal last week. The transaction, which involved a portfolio of retail and office properties located on Broadway and Fifth Avenue, will generate $1.198 billion for the firm.

“We are delighted with this transaction and delighted to be partnering with the Investors with whom we look forward to much future business,” commented Roth.

One of Vornado’s previous business partners, Crown Acquisitions, and a sovereign wealth fund, the Qatar Investment Authority, are among the group of investors, and will together own a quarter of the Broadway theater. “This investment underlines QIA’s ambition to substantially increase our U.S. investments over the coming years, and our belief in the exciting long-term possibilities offered by New York City,” stated Mansoor Al-Mahmoud, the chief executive officer of the foreign fund.

Tucked inside the Marriot Marquis hotel, the 1,611-seat theater has generated rental income of $4,144,700 over the past five years. Vornado charged rent of about $13.68 per square foot in 2018, which might seem like a bargain when other landlords charge more than $1,900 per square foot for street-level retail space across the street in Times Square.

Following protests and lawsuits over the demolition of five historic theaters, architect John Portman and Marriott Corporation built the hotel and the theater in 1985, and Marriott agreed to lease it from the government for 75 years. The real estate development project received over $90 million in tax credits, and was seen as the linchpin of New York City Mayor Ed Koch’s plan to revitalize Times Square.

“It’s part of the whole rejuvenation of Midtown, West side,” commented Herbert Sturz, the chairman of the City Planning Commission, at the time. ”It would tie-in and buttress what we’re trying to do with 42d Street redevelopment and, of course, complement the [Javitz] Convention Center,” he said. “As you get one big thing going, others follow,” Sturz said, adding that “there’s a synergistic effect.”

“Anything that can be done to resurrect the declining fortunes of the Broadway area … must be done as quickly as possible,” echoed Broadway producer Hal Prince. “The loss of three theaters, as lamentable as that may be, is not the overriding factor here,” he said. “It does not outweigh the benefits of cleaning up 45th and 46th Streets between Broadway and Eighth Avenues, and the ultimate gain to the entire theater district,” Prince argued.

While the blueprints for the Marquis Theatre were still being drawn, the builders approached the Shubert Organization about leasing it. Managing more Broadway theaters than any other company, “[i]t’s acknowledged that they have more experience in the area than anyone else,” explained an executive at the hotel company.

But, executives at the Shubert Organization expressed some doubts about the theater.

“There’s no question they have been after us, but we’re not sure about them,” admitted Lee Silver, its director of corporate relations, during the negotiations. “I’m not sure that theater is a plum,” added its chairman, Gerald Schoenfeld. “I don’t know if it’s a plum, a watermelon, a cherry or whatever,” he joked.

Bernard Jacobs, the president of the Shubert Organization, complained about the small size of its loading area, the lack of an entrance to the theater except through the hotel, and the location of all the bathrooms in the hotel lobby. But the builders were unwilling to make changes to its design, and, after the negotiations came to a standstill, the builders signed a 35-year lease for the theater with the Shubert Organization’s rival, the Nederlander Organization. The lease has been renewed through 2050.

While Marriott later opted to purchase the $200 million hotel and theater from the government at the fixed price of $19 million in what one city official described as “one of the worst deals since Manhattan was sold for $24,” Vornado signed a deal to become the landlord of the hotel’s retail space and the theater in 2012. There was some speculation that the real estate firm’s founder would boot the Nederlander team from the Marquis Theatre, and hand the keys to the kingdom over to a relative. “Chairman Steve Roth’s Tony award-winning wife, Daryl, owns a theater and operates and produces on Broadway, while their Tony award-winning son, Jordan, is president and principal of the Jujamcyn Theaters,” observed one columnist.

Yet, the Nederlander firm still operates the Broadway theater, and the musical adaptation of Tootsie opened to rave reviews there last night.

This post first appeared on Forbes.com. To see the original, click here.