12.11.12 | Crain's

In hot SoHo, developer pays $6M in air rights play

Small residential building is snapped up as Imperium Capital plans to use the air rights to add on to a planned penthouse extension in office building next door.

Imperium Capital is adding to its bold bet on a surging midtown south office market. The company, founded by former Eastern Consolidated executives Sam Schneider and Daniel Glaser, just closed on 26 Vandam St. in SoHo for $6 million in a play to add square footage to a pair of neighboring office buildings the company is planning to redevelop.

26 Vandam St., a roughly 10,000 square foot apartment building, has about 15,000 square feet of air rights that Mr. Schneider said can be added to the top of 161 Sixth Ave. and 233 Spring St.

In total, Imperium will build about 80,000 square feet of new penthouse office space on top of the two buildings, an addition it will be able to construct by way of both the air rights above 26 Vandam St. and also unused existing development rights at the two properties.

The buildings at 161 Sixth Ave. and 233 Spring St. are adjacent to one another and will also be reconfigured in the $75 million renovation project to share a single lobby under the new joint address One Soho Square.

“We’re going to add 15,000 square feet to the most valuable space we’ll have at the property,” Mr. Schneider said, estimating that when the redevelopment is done in about a year and a half, the space on the top floors will net rents in the $70s per square foot.

Messrs. Schneider and Glaser partnered with real estate investor Larry Gluck in May to purchase 161 Sixth Ave. and 233 Spring St. for roughly $200 million.

After the addition of two to three new office floors on top of the two buildings, the complex will have a combined total of about 750,000 square feet of office space in a market that has seen a dramatic uptick in demand. Mr. Schneider said the owners were about to begin work on the project, which will be designed by the architectural firm Gensler, early next year and that he and his partners were buying office tenants out of their leases where possible in order to clear space to be included in the renovation.

“Many of the leases are well below market paying rents in the $20s per square foot,” Mr. Schneider said. “The more space we can free up, the more Class A offices we can create.”

Imperium has been an active investor in the city. The company announced on Tuesday morning it had acquired 309 West 57th St., a 102-unit apartment building, for $42.5 million with a partner, Bronstein Properties.

Mr. Schneider said the purchase price equated to an initially low rate of return, about 4%, but estimated the property would net higher returns as the owners slowly rent more units at market rate rents. About 60% of the building is rent stabilized, he said.

Imperium was also keen on the buildings roughly 13,500 square feet of retail. That space is currently rented by a party venue and a nail salon. A former church space, with wood-framed vaulted ceilings, the retail space is eye-catching and could be a valuable location when its leases expire. 309 West 57th St is located in a burgeoning neighborhood where Nordstrom recently committed to opening a department store and major luxury residential towers are either underway or slated to rise.

“With Nordstrom and One 57 just a block away, we think there’s major upside to both the retail and the residential space,” Mr. Schneider said.