Steinway Musical Instruments, Inc. announced that it has entered into an agreement with JDS Development Group to sell its interest in the Steinway Hall building on West 57th Street in New York City for $46 million subject to an upward adjustment associated with certain post-closing conditions. The Steinway Hall building, which is subject to a land lease, is a 247,000-square-foot, 16-story boutique office building that houses the company's flagship retail showroom.
Under the terms of the transaction, Steinway has the right to occupy the premises rent free for a period of 14 months after closing and to extend that period for an additional 4 months subject to an agreed upon rent. "Steinway remains committed to providing the full range of services to the artists and patrons who have cherished Steinway Hall since it opened in 1925," said Michael Sweeney, Chairman and CEO. "Given this history, the Board took great care to balance the needs of all our constituencies – artists, patrons and shareholders – in reaching the decision to sell the company's interest in the building. An important consideration was the significant investment required to maintain the building's infrastructure and appearance." Sweeney added, "Over the next year or so, we will be preparing for the creation of a 21st century Steinway Hall inManhattan. Our Concert & Artist division is working on designs for a space that meets the needs of today's artists and customers just as the Steinway family conceived our current location nearly 100 years ago. We're excited about the opportunity to continue serving the musical and cultural community while preserving the Steinway family heritage."
The purchaser made a deposit of $5.6 million upon signing the purchase and sale agreement. After payment of associated transfer taxes, the company expects this transaction to generate cash proceeds of approximately $43 millionupon closing. In addition, the rent Steinway currently pays under its land lease will terminate upon closing. The transaction is expected to close within the second quarter, at which point the company expects to recognize a taxable gain of $22 million on the sale. "This transaction further strengthens our healthy balance sheet and clears the way for Steinway to focus all of its attention on maximizing the value of the company's core musical instruments business. The Board is now in a position to begin considering options that are in the best interest of the company's shareholders for deploying the net cash proceeds harvested from this non-core asset," said Sweeney.
