Manhattan, NYC.
NEW YORK CITY – Safehold Inc., a real estate investment trust specializing in ground leases, has agreed to create a $180 million ground lease for 685 Third Ave., a 31-story office tower one block from Grand Central Terminal.
The 639,000-square-foot building occupies the full city block and underwent renovations in recent years. The transaction is dated for completion by year-end and is subject to customary closing conditions.
The ground lease transaction follows Safehold's closing of a $275 million ground lease for 195 Broadway in Downtown Manhattan. That ground lease served the institutional venture including L&L Holding, Seoul-headquartered Korea Investment & Securities and Samsung in capitalizing the property after acquiring it in September.
"The closing of 195 Broadway highlights the growing momentum of our modern ground lease solution," said Marcos Alvarado, president and CEO of Safehold, in a prepared statement.
In addition to 685 Third Ave. and 195 Broadway, Safehold has announced four deals in the New York Tri-State area this year, totaling approximately $750 million, GlobeSt.com reported in September. The transactions were a part of the firm's fast-growing expansion strategy to enter new markets.
Ground leases have gained notoriety in the market as investors place greater importance on how a ground lease impacts the value of their property, as seen with the Chrysler Building sale earlier this year. The land beneath the famed building is tied to a 99-year ground lease that the Cooper Union school owns and collects rent on.
The annual ground-lease rent owed to the school soared from $7.75 million to $32.5 million in 2018 and will increase to $41 million in 2028, according to Cooper Union's financial documents.
You hope the timing of the ground lease corresponds with what's advantageous for the owner of the actual building," Robert Stella, principal at Cresa New York, an occupier-focused real estate firm, tells GlobeSt.com.
"If the terms of the ground lease is a fixed dollar amount, then I don't know what recourse you have if it's renewal terms are not subject to fair market value. In a strong real estate market and economy, you have little leverage. Market timing influences all negotiations," he said.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Mariah Brown
Mariah Brown is the New York Bureau Chief and Real Estate Reporter for GlobeSt.com, covering the New York Metro area, Northeast region and national real estate trends. She is responsible for producing multi-media content, including articles, podcasts and video. Before joining the GlobeSt team, she served as a New York Times fellow, reported for the Associated Press in New York and Philadelphia and several other New York City-based outlets.
