Madison Capital JV Refinances Historic Manhattan Asset

PGIM provided the loan, which will enable the partnership to complete renovations at the landmark building in the Flatiron district.
71 Fifth Avenue
71 Fifth Avenue

Less than two years after acquiring the 99-year ground lease at 71 Fifth Ave. in Manhattan’s Flatiron district for $85 million, Madison Capital and Lubert-Adler Partners have refinanced the 11-story trophy office and retail building for $88.5 million with a loan from PGIM.

The three-year bridge financing includes two one-year extension options and will be used while Madison Capital completes re-leasing the remaining top two office floors and Fifth Avenue corner retail space and completes the renovations, including adding new lobbies, modernizing elevators and upgrading tenant spaces. The joint venture owners have been redeveloping the property at the southeast corner of 15th Street and Fifth Avenue, spending a reported $11 million in capital improvements to date.

“Since acquiring 71 Fifth Avenue in 2017, we undertook efforts to modernize the property, enhance tenancy and give the building a stronger identity in the market,” Jonathan Ratner, Madison Capital managing director, said in a prepared statement.

The roughly 152,000-square-foot office portion features loft-style layouts with 12-foot, vaulted ceilings, oversized windows and open, rectangular floor plates. The landmark building, erected in 1907, has several top-tier technology, media and advertising tenants, including WeWork, which leased 45,000 square feet on four floors in June. The 18,441-square-foot retail space features two suites with 18-foot ceiling heights and 70 feet of Fifth Avenue frontage. The WELL, a membership-based wellness club aimed at busy urban professionals and offering integrative medicine doctors and health coaches, leased more than 13,000 square feet in August. The company took 4,710 square feet on the ground floor and 8,330 square feet on the lower level. It will offer services and amenities including a full-service steam and sauna, organic restaurant and vitamin bar, reflexology, yoga and meditation studios and a private gym when it opens in 2019.

“The highly desirable location of this mixed-use property and the strength of the sponsor and their business plan make this an attractive financing opportunity that will provide income-driven cash flow over the loan term for our investors’ portfolio,” Steve Bailey, managing director and portfolio manager for PGIM’s real estate debt strategies, said in a prepared statement.

Justin Levitt, based in New York, led the transaction on behalf of PGIM, while Meridian Capital Group served as the broker.

JLL handling leasing

In May 2017, several months after acquiring the leasehold interest from Samco Properties, Madison Capital named JLL the office leasing agent for the property. JLL Vice Chairman Mitchell Konsker, Executive Vice President Daniel Turkewitz and Senior Vice President Benjamin Bass were tapped to lead the leasing and marketing efforts.

It was the top office building sale in Manhattan for February 2017, according to PropertyShark.

Located one-half block from Union Square, the building has 12 subway lines within three blocks. It is close to major retailers, such as Zara and Michael Kors, Madison Square Park, Eataly and the Gramercy Park Hotel, as well as restaurants, banks, museums and schools.

Image courtesy of PGIM and Madison Capital