UPDATED, 4:37, p.m. Oct. 13: Madison Capital is in contract to acquire a ground lease on a Flatiron District office-and-retail building for nearly $85 million up front, with annual rent payments starting at $3.5 million.
The Midtown-based investment firm, which favors mixed-use properties with strong retail components, recently signed a hard contract to acquire the fee position of an 11-story building at 71 Fifth Avenue, where home furnisher Pier 1 Imports anchors the retail base, sources told The Real Deal.
A representative for Madison declined to comment.
The company will pay about $85 million up front and then make rent payments that start at $3.5 million per year with rent resets scheduled for every 25 years of the 99-year term, according to a source familiar with the negotiations. The rent will reset to the highest and best use of the property at the time.
The owner of the property, located at the corner of East 15th Street, is a partnership between the family firm Samco Properties [TRDataCustom] and the family of WeWork’s global real estate chief Mark Lapidus. Samco and Lapidus will continue to own the land beneath the property.
The 153,000-square-foot building is fully leased, according to CoStar Group. Ovation Corporate Travel occupies the largest chunk — at 26,000 square feet — on a lease that expires in 2019.
Retail rents in the area have ticked down recently amid a broader pullback in the city’s retail sector. Average asking rents for ground-floor space on Fifth Avenue between 14th and 23rd streets fell 4 percent year-over-year to $385 per square foot, according to the Real Estate Board of New York’s spring retail report.
Madison Capital, founded in 2002 by Richard Wagman and J. Joseph Jacobson, recently sold a 30,000-square-foot retail condominium unit it co-owned with PGIM Real Estate on West 75th Street to Vanbarton Group for $103.5 million.