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
