Case Study

1111 Third Avenue

Acquisition Date:October 2008
Disposition Date: August 2014
Asset Type:Significant block-front retail on two avenues with large parking and medical office components
Size:28,990 SF retail
18,009 SF office
55,843 SF parking (225 cars)
Tenants:Lululemon Athletica
Club Monaco (a division of Ralph Lauren)
Staples, Inc.
Duane Reade (a wholly owned subsidiary of Walgreen Co.)
Acquisition Cost:$86.0 million
Equity:$30.1 million
Disposition Value (total capitalization): $126.5 million
Gross IRR:16.8%
GROSS Equity Multiple:2.3x
Strategy
  • Leverage tenant and broker relationships to pre-lease 40% of the premises
  • Pre-build existing vacant office unit and lease at market rates
  • Renew existing tenants at market rates
  • Expand existing tenancies to create value in underutilized, nonincome producing space
Execution
  • Madison identified an opportunity to pre-lease 7,910 square feet of space to Duane Reade (a wholly owned subsidiary of Walgreen Co.) in 2009 at a rental rate approximately 40% above market. The space included two former tenant spaces, one expiring in the near term (2 years) and one adjacent space where the tenant’s sales were underperforming.
  • Madison Capital worked with architects and space planners to combine two office units, creating an attractive layout and design and leased the space at pro forma rates immediately upon construction completion
  • Madison worked with an existing office tenant to renew its lease at market rates - a 77% increase from expiring rent
  • Madison retained an existing tenant who exercised its renewal option in a difficult economic market
  • Madison expanded an existing tenant’s lease by 20%, creating additional value from previously non-income producing storage space