BACKGROUND
In late 2012, Chicago-based L3 Capital and Washington D.C-based ASB Real Estate Investments purchased this 5-story, 43,000 SF mixed-use building in the heart of SoHo. Immediately upon acquisition, we were engaged to deploy our property, asset and project management teams, as well as our Lee & Associates NYC office leasing team, to help reposition this premier SoHo cast iron property.
DEVELOPMENT
One of the initial decisions to be made by ownership was whether or not to buy out any of the three (3) residential rent-stabilized tenants on the top floor of the building and, if so, how best to monetize the space. The initial strategy contemplated by ownership was to simply convert the residential units to condominium units. After we performed an analysis and compared the potential returns for both residential and commercial uses, it was determined that a more efficient strategy would be to take advantage of the commercial market. Pursuant to our new business plan, ownership proceeded to buy out one of the residential tenants for a healthy seven figure amount. We then converted the space to office, with the help of our construction management team, and signed a long-term office lease with a credit tenant at over $80 psf as a result of our leasing team’s efforts. In addition to this lease signing, since acquisition, the building has been fully leased to national retailers and other quality fashion and technology office tenants. We were also engaged to undertake significant major repairs and building system upgrades, many of which would typically strain tenant relations absent clear communication and a calculated plan to minimize disruption to the building’s tenants’ operations. For example, the building is divided as such so that there is one elevator servicing the north side of the building and one elevator servicing the south side of the building, with no access between the north side and the south side except on the occupied 2nd floor. The elevator servicing the south side was entirely replaced with a new hydraulic elevator. The other elevator was remodernized and a new cab installed. Although the projects were not performed simultaneously, each project disrupted the tenants and resulted in no elevator service for several weeks at a time. We managed the disruption by directing traffic to the stairs serving the building using a doorman and placing temporary air-conditioning in the stairwell. On the heels of this work, NYC required the sidewalk be removed and the structural members of the vault and the sidewalk be replaced. This required coordination with the NYC Department of Transportation and Department of Buildings, the Landmark Preservation Commission, the tenants to insure the work was phased in a manner that was the least disruptive to their operations and access.
Other base building work included the upgrade to a 1 million BTU boiler which provides heat to the entire building; a new fresh air intake system, window replacements and façade restoration, all of which required approvals and coordination with the Landmark Preservation Commission; the installation of new intercoms and elevator access control; new upgraded main electrical and gas services; and strategic and cost efficient roof repairs to abate major building leaks.
VALUE CREATED
Nearly three (3) years after our teams were retained to manage, reposition, upgrade and tenant the property, the building is worth over 200% of the acquisition price. We continue to work with the ownership in positioning the asset for a long term hold consistent with its business plan.