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REA
July 17, 2019  

GLL Eyeing Leasehold in Fifth Ave. Building

GLL Real Estate is in advanced talks to buy the leasehold interest in a retail/office building on Fifth Avenue in Midtown Manhattan for roughly $360 million.

An entity controlled by Mactaggart Family & Partners has owned the 184,000-square-foot building, at 589 Fifth Avenue, and the underlying land for 21 years. The London firm — also known as Western Heritable — plans to bifurcate the ownership by selling a 99-year leasehold to GLL while retaining the ground.

The 17-story building’s value is driven by the fully leased retail space, on the lower five floors. Clothier H&M occupies that space under a lease that runs through 2033.

Some of the office space on the upper floors is vacant. The investment play is to lease up available space and raise below-market rents as existing leases roll over. The relatively small floorplates of 5,000-15,000 sf are suitable for smaller office tenants.

The property is at the southeast corner of East 48th Street, in an area where retail rents are dropping. From 42nd Street to 49th Street along Fifth Avenue, the average ground-floor asking rent this spring was $878/sf, down 20% from a year earlier, according to the Real Estate Board of New York. That was the second-steepest decline of the 17 Manhattan retail corridors tracked by the trade group.

GLL, a German investment shop bought last year by a unit of Australia’s Macquarie Group, owns more than $4 billion of U.S. properties. Its largest purchase in Manhattan was the 2014 acquisition of an 83,000-sf retail condominium at 200 East 66th Street from local shop Madison Capital for $113.5 million, according to Real Estate Alert’s Deal Database. The condo is on the ground floor of the Manhattan House residential building.