The Real Deal New York

Ralph Lauren’s exit at 625 Madison just compounded a big problem for SL Green

The landlord is fighting the ground-lease holder amid a possible rent hike
November 28, 2018 09:30AM

From left: Ashkenazy CEO Ben Ashkenazy, 625 Madison Avenue, and SL Green’s Steven Durels (Credit: Adam Pincus (Ashkenazy), SL Green (Durels), and Google Maps)

Office landlord SL Green Realty has taken another blow in its bid to hold onto 625 Madison Avenue, as the upcoming departure of tenant Ralph Lauren will affect its payments to the land owner.

Ben Ashkenazy’s Ashkenazy Acquisition Corp., which owns the land on the 583,000-square-foot building and earns $4.6 million a year, is looking to sharply increase its rent when it resets in 2022, according to Crain’s. The firm took the property in 2013 for close to $400 million.

Ralph Lauren, which leased about 300,000 square feet, is set to leave the building next year. The fashion company’s departure further dims SL Green’s chances of affording a substantial rent hike on the ground lease. This poses a problem because new tenants will be wary of filling the retailer’s space if the tenants are forced to exit in 2022, if Ashkenazy assumes control of the building.

Last year, Ashkenazy’s president Michael Alpert said the property is worth at least $1.4 billion, which he argued should allow the ground lease rent to reach $80 million per year by 2021.

In a statement to Crain’s, SL Green’s Steven Durels said ground leases are a normal part of doing business in New York City “and we expect this revaluation to be no different. We have no doubt that we will re-tenant this space as we have so many others, as the leasing market is familiar and comfortable with our ownership of this building.”

In August, Ashkenazy successfully doubled the rent at 660 Madison Avenue, which it owns. Barney’s, which is the anchor tenant at the building, was forced to face a rent hike to $30 million a year, up from $16 million, following an arbitration ruling. [Crain’s] — David Jeans