Broad Street Sells $155M Midtown Asset

NEW YORK CITY-Locally based Broad Street Development LLC, an investor group focused on acquiring real estate assets, has closed on its sale of 370 Lexington Ave. to New York City-based Sherwood Equities Inc. and JP Morgan Chase for $155 million. Broad Street Development acquired the asset two years ago for $97.2 million.

Daniel Blanco, principal of Broad Street Development, explains that “following the company’s extremely successful repositioning campaign of this asset, including bringing the property to over 90% occupancy, we felt this was the ideal time to sell 370 Lexington Ave.” Following the acquisition in 2006, BSD launched a leasing and capital improvement campaign. The programs included a major lobby renovation, adding pre-built and built-to-suit offices and numerous infrastructure advancements. Blanco tells GlobeSt.com that the renovation program costs approximately $10 million, and renovations continued up until the closing of the sale. Just a block from Grand Central, on the corner of 41st Street, 370 Lexington Ave. the 27-story, 305,000-sf property has asking rent around $64 per sf to $68 per sf, according to Blanco.

Katz

Raymond Chalmé, principal of BSD, says in a prepared statement that the sale of 370 Lexington is the firm’s first office disposition. The sale “will enable our team to embark on an aggressive acquisition campaign for value-added assets that can benefit from BSD’s exceptional in-house management and leasing skills,” he notes.

Jeffrey Katz, CEO of Sherwood, says that the firm plans to make 370 Lexington “the premier small-tenant building in the Grand Central submarket, and that is primarily the market we will be targeting–more specifically, the 1,000-sf to-10,000-sf user, who we think is woefully under-served today.”

Katz tells GlobeSt.com that the building’s great location was one of its attractions since it is an “ideal location for small business owners and office workers.” Other attractions, Katz explains are that “the building’s average in place rents are over 30% below market, and over 60% of the building rolls in the first five years.” He also points to the discount to replacement cost. “The break even rent for a newly constructed office building in Midtown is over $100 per sf, thus we’re offering a significant discount to that. The supply of relatively inexpensive office space in Midtown is fixed, you can’t create anymore of it,” he says.