411 Lafayette Street

The Opportunity

In late 1986, Himmel + Meringoff acquired 411 Lafayette Street, a six-story, 102,515-square-foot building in Manhattan's rapidly evolving NoHo neighborhood. The property had been owned by the same family since the early 1900's but no one in the family had the expertise or capital to renovate it. The building was used for manufacturing and distribution with a rental stream substantially below market. Himmel + Meringoff recognized the building's value as commercial office space.

Actions Taken

Attracted by the potential of significant upside, Himmel + Meringoff:

  • Crafted and negotiated a unique deal consisting of a long-term, triple-net, ground lease;
  • Bought out a tenant in possession for over 45 years that was paying $.30 PSF and using the space as a warehouse;
  • Immediately filed for zoning amendments permitting retail use and converting the property from industrial to office tenancy. A retail Certificate of Occupancy was obtained through a special use permit, granting a variance for retail use.

Upon acquisition, Himmel + Meringoff instituted a two-year, $11 million gut renovation, reconstruction and repositioning of the property for office and retail space.

Value Created

An aggressive leasing and marketing campaign was instituted. By early 1989, the renovation was complete and by mid-year the building achieved 100% occupancy. A second phase of improvements was undertaken in 2011, and the Ground Lease was extended for another 21 years, making it a new 49-year Ground Lease.

Summary

By gaining the seller's trust Himmel + Meringoff turned an operating problem into a tax effective guaranteed net income stream. The unique deal structure simultaneously satisfied the seller's requirements while maximizing the building's value in a burgeoning location.

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