Sister act: Kaufman inking ground lease for NoMad office building
Deal allows landlord to connect 100K sf property with existing Ring building
The Kaufman Organization is inking a long-term ground lease under a NoMad office building on Fifth Avenue, in a deal that allows it to connect the property with a former Ring Portfolio building the company controls around the corner.
The Midtown-based landlord is closing Wednesday on a new 99-year ground lease at 236 Fifth Avenue with longtime property owner LCT Associates, sources told The Real Deal.
Representatives for Kaufman and LCT Associates principal Scott Chiou declined to comment. Robert Khodadadian and Daniel Shirazi at Skyline Properties, who sources said brokered the deal, couldn’t be reached for comment.
The deal gives Kaufman control of the 11-story, 100,000-square-foot office building on the property and access to its frontage along Fifth Avenue between 27th and 28th streets. The building can be connected to a sister building Kaufman controls around the corner at 13-15 West 27th Street. Connecting the two could allow Kaufman to market the office space in both as Fifth Avenue office space, potentially commanding higher rents.
Kaufman controls the leasehold on the 27th Street building through a deal it struck in 2014 with Extell Development for $25 million, property records show. The term gives the landlord control of the property for 25 years, with an option to extend the lease to a total of 99 years.
Extell turned around in 2015 and sold the fee position on the property to Edison Properties for $38.8 million.
While ground leases provide buyers with a chance to own real estate at an attractive basis, they’re not without their risks. Several recent, high-profile cases have highlighted how fee holders can bend their lessees over a barrel when it comes to resetting rents or valuing the underlying real estate.