Case Study

1657 Broadway

Acquisition Date:September 2006
Asset Type:Block-front retail in northern Times Square area with office component
Size:65,000 SF office
35,000 SF retail
Tenants:McDonalds Corp.
Duane Reade (a wholly owned subsidiary of Walgreen Co.)
Acquisition Cost:$60.1 million
Equity:$12.0 million
Unrealized Value (Total Capitalization):$111.1 million
Projected Gross IRR: 26.8%
Projected Gross Equity Multiple: 5.1x
Strategy
  • Re-lease retail spaces to increase rental rates, tenant credit quality and retailer diversification
  • Reduce operating expenses by creating efficiencies and reducing staff
  • Create value in underutilized space
Execution
  • Madison executed a lease with a credit tenant that incorporated a 3-year put option on underutilized basement space creating significant additional value, future flexibility, and establishing future market rental value on ground floor and basement
  • Madison replaced underperforming tenants through tenant buyouts and litigation with credit tenants at market rates, increasing the gross income by 100% in less than 5 years
  • Madison reduced expenses and created operational efficiencies at the property
  • Madison licensed storage space that was previously non-income producing to an existing tenant