(Reuters) - Advertising company Young & Rubicam has reached a preliminary agreement to lease 300,000 square feet to become the major tenant at New York's 3 Columbus Circle in one of the city's biggest leasing deals this year, according to a source familiar with the situation.
The company's parent, WPP Plc, has signed a letter of intent to take the space in the 768,565 square foot tower owned by New York developer Joseph Moinian, head of the Moinian Group, and real estate investment trust SL Green Realty Corp, the source said on Tuesday.
A letter of intent outlines an agreement and a final agreement could fail to materialize.
Representatives for the Moinian Group and SL Green declined comment. Representatives for brokerage Newmark Knight Frank, which worked with the landlord, and CB Richard Ellis Inc, which worked with WPP, also declined comment.
In addition to Young & Rubicam, WPP owns more than 100 companies including public relations and advertising firms Burson-Marsteller, Hill & Knowlton and Ogilvy & Mather.
On Tuesday, UBS raised its rating on SL Green to a "buy" from a "hold," saying fears of a leasing slowdown in Manhattan have helped drive down the stock 33 percent since late May.
UBS said that Midtown's vacancy rate of less than 10 percent and a dwindling supply of big blocks of space to rent should help counter effects of further layoffs the city may encounter.
The potential deal at 3 Columbus Circle is the latest chapter in a saga spanning the U.S. commercial real estate boom and bust.
The Moinian Group, which went on a buying spree in the middle of last decade, bought the office tower in 2004 to convert it into a sleek modern building. The 26-story building, which was originally constructed in 1923, overlooks Central Park and Columbus Circle.
But Moinian defaulted on the mortgage in January 2010. Last year the company sued Related Cos, which had bought the debt on the tower in an attempt to foreclose on the building. The tower, also known as 1775 Broadway, is located across from the Time Warner Center, which Related co-developed.
SL Green, New York City's largest office landlord, in January agreed to provide $138 million in equity to complete the redevelopment. It also refinanced the mortgage with a bridge loan that eventually was replaced by a $260 million mortgage provided by The Bank of China. The deal gave SL Green a 48.9 percent interest in the building.
A total of $90 million was spent to redevelop the building.
(Reporting by Ilaina Jonas; Editing by Phil Berlowitz)