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RFR Realty once had lofty ambitions for the Parke-Bernet Galleries building at 980 Madison Avenue.
Before the Great Recession, Aby Rosen and Michael Fuchs’ firm had sought to add a 30-story glass tower on top of the existing six-story limestone structure. That plan had to be scrapped amid pushback from local residents, and ultimately came to nothing.
But RFR has since invested additional capital to renovate the 70-year-old property, bringing in more art-oriented tenants to fill the building’s mix of gallery, office and retail space.
“The building has an established identity as home to leading fine art galleries,” RFR director of leasing AJ Camhi told Real Estate Weekly in February. ”And now we are seeing strong interest from family offices thanks to its cherished Upper East Side location and chic design aesthetic.”
This month, the developer refinanced the property with a $238 million CMBS loan from Credit Suisse subsidiary Column Financial. Documents associated with the securitization provide an inside look at the property’s finances.
The 135,000-square-foot building is now 93 percent leased to 17 tenants, according to a report from Fitch Ratings. Most of the space on floors two through six, or just over half of the total rentable area, is designated as gallery space.
The largest tenant, Gagosian Gallery, takes up 42 percent of the total space and has used the address as its global headquarters since 1989. In addition to gallery space on the top three floors of the building, the tenant also has 8,200 square feet of ground floor retail space through an affiliate, Artblock LLC.
Other gallery tenants include JN Contemporary, Dickinson Roundell, Nahem Madison, Robiliant + Voena and Yoshii, all on the third floor. Average annual base rent for gallery tenants is $129 per square foot, roughly in line with the average of $126 per square foot for office space. Four new and expansion leases signed since the start of the pandemic have higher base rents, averaging $146 per square foot.
The building’s current office tenants are all located on the second floor, although the gallery space is also interchangeable as office space, according to Fitch. The largest office tenant, Ramsfield Hospitality Finance, signed its lease recently and has yet to start paying rent.
The ground floor retail tenants, with prime frontage on Madison Avenue, pay an average of $306 per square foot in annual base rent. These include a Douglas Elliman office and several luxury retailers.
With the exception of two retail tenants that have received deferrals or abatements to the end of the year, all tenants at the property are current on their rent.
“Overall, the building is unique in its ability to draw demand from gallery and boutique tenants, given its history, size and positioning within its Upper East Side neighborhood,” Fitch analysts wrote. “There are also no comparable buildings that compete with the property on a large scale, as a majority of competing gallery spaces are located within smaller-scale developments such as townhouses.”
980 Madison Avenue was originally built in 1949 as the headquarters for Parke-Bernet, which had become America’s largest auction house by the time it was acquired by Sotheby’s in 1964.
RFR acquired the property for $126 million in 2004, property records show. After the Recession, the property went through a few years of financial pain, with one loan entering special servicing in 2011.
The developer put the building on the market two years later, but did not sell. RFR landed a $160 million refinancing later that year, and in 2014 invested $8 million in capital improvements “to maintain the property’s strong positioning within the market,” according to Fitch.
While the building was reportedly expected to fetch a bit over $100 million in 2013, a recent appraisal by Newmark Knight Frank values it at $350 million.