McDonald’s inked a 99-year lease for a two-story building next to luxury condominium tower One Madison Park, capping years of legal turmoil for the fast food chain that has fought to return to a block it left in 2005.
McDonald’s on April 15 signed the lease for 26 East 23rd Street, owned by a company called Flamingo LLC, controlled by investor Abe Shrem, city records published last week show.
The deal is a triple net lease, meaning the tenant will cover all expenses. The city valued the lease at $4.7 million, but neither Shrem nor McDonald’s would discuss the price.
The location is on the south side of Madison Square Park, facing popular burger joint Shake Shack. The fast food giant, headquartered in suburban Chicago, had been battling to take space within One Madison Park as the 50-story project lurched through bankruptcy.
Ultimately, the original developers lost control of the development, and now Related Companies and HFZ Capital Group are finishing the project.
McDonald’s sold its building at 22 East 23rd Street in December 2005 for $3.4 million to developer Peter Fine, who in turn sold it to Slazer Development, the company that began developing One Madison Park, located at 23 East 22nd Street.
In conjunction with the sale, Fine committed to setting aside space at One Madison Park for the fast food restaurant.
But Slazer did not provide McDonald’s the option of taking a space in the building, which led to a dispute between the two. The developer was ultimately forced to put the project into bankruptcy, and as part of the resolution, McDonald’s received $8.1 million through two settlements from the debtors in Bankruptcy Court, according to news reports.
Shrem purchased 26 East 23rd Street in 1972, and then inked a 25-year lease with Wendy’s in 1990 that had three five-year renewal options extending it to 2030, city records show.
To make way for McDonald’s, the Wendy’s lease there was terminated in August 2012, city records show. McDonald’s is now in possession of the space, one source said.
“We are thrilled to be opening a restaurant in this location and returning to serve the Flatiron District community,” a McDonald’s spokesperson said.
The company declined to comment on the legal proceedings, other than to say, “While this matter has been resolved, the terms of the agreement are confidential.”