SITUATION
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, L&A was engaged to deploy its 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.
STRATEGY
One of the first decisions ownership had to make was whether 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. Ownership’s initial strategy was to convert the residential units to condominium units. After L&A 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 L&A’s new business plan, ownership proceeded to buy out one of the residential tenants for a healthy seven figure amount. Lee then converted the space to office, with the help of L&A’s construction management team, and signed a long-term office lease with a credit tenant at over $80/sf as a result of L&A’s 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. L&A was 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 was 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. L&A 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, the city 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 ensure 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; the installation of a new fresh air intake system, the replacement of all windows and the restoration of the façade, all of which required approvals and coordination with the Landmark Preservation Commission. Other work included the installation of new intercoms and elevator access control; upgrading the main electrical and gas services; and performing strategic and cost-efficient roof repairs to abate major building leaks.
OUTCOME
Nearly three years after L&A’s teams were retained to manage, reposition, upgrade and tenant the property, the building’s value had doubled over initial acquisition.