Owners looking to maximize sale proceeds should consider selling components of the property separately as opposed to the property in its entirety. As most buyers today specialize by asset class, they may value a portion of a property higher than someone looking to purchase the entire building. If a seller does not analyze this possibility, they may be surprised to see a buyer spin off a portion of the property at or shortly after sale.

One example where our team was able to maximize value was at 200 East 11^th Street on the corner of Third Avenue. Benchmark Real Estate Group purchased the entire property for $57 million. The buyer then separated the building into two condominium units – the retail and the residential. We sold off the retail condo for $24,35 million to HubbNYC, which substantially lowered Benchmark's basis in the residential from $1,086/SF to $710/SF, a 35 percent reduction. HubbNYC also fared well in the transaction as they were able to release the corner space and stabilize the retail. A true win-win.

We are currently handling a sale on the Upper West Side which is the reverse of the above. Here the seller is an owner/user of the retail. We are selling the residential portion whereby the seller will retain a retail condo.

We have also worked with several not-for-profits (NFP) who have benefitted from unused air rights. We have sold to developers who redeveloped the property and delivered back to the organization a community facility condo. This is a great way for the NFP to monetize these rights while also benefiting from a new space which will be delivered back to them.

There are a couple ways to structure partial sale transactions. The attorney general does not allow a seller to offer up a condominium unit before they actually exist. If an owner wants to explore carving out a portion of their property, they can offer the space as a long term leasehold that could be terminated on a future creation of a condominium unit. For owners looking to implement this strategy, they must be cautious not to let the lessee secure financing where the underlying owner subordinates their interest. If the borrower defaults, an owner could lose their property.

Some owners might elect to consider a sale-leaseback if they want to keep their business in a portion or all of the property. However, we are starting to see owners shy away for this due to new FASB accounting rules, where their future lease payments are treated as liabilities. This is why an owner might want to instead keep the unit as a condominium. Accounting advice should be sought before contemplating.

We have also seen buyers team up on an assignment. A few years ago SL Green and Stonehenge partnered on a portfolio where SL Green would end up keeping the retail and Stonehenge would keep the residential. This is a great strategy as they may be able to collectively give more value to the asset than a generalist who would look to purchase the whole.

This strategy has been used in multiple situations across all asset classes. One example is at Hyatt's $390 million dollar acquisition of the hotel portion at One57, Extell Development's luxury condo project. Another is 77 Bowery Street where Keystone Equities sold off the retail component prior to converting the office portion to condos.

That all being said, we would never discount the premiums that some buyers pay for controlling an entire asset. Many buyers will not consider owning only a portion of the property as they want to control the use and operations of the entire property. For example, an undesirable use of the retail could negatively impact the value of the residential upstairs. In all, we believe it can be best to present both options to a market and see what ends up creating the most value.