In Plans to Compete with WeWork, Private Investor Buys 370 Lex for $190M

At 370 Lexington Avenue is a 27-story building, measuring about 315,000 square feet. It was formerly owned and operated by the Japanese investment firm Unizo, who bought it in 2015 for $247 million. It’s now been bought by former owners Broad Street Development for $190 million (a $60 million dollar loss for Unizo) who owned the same building back in 2008, before selling it to Sherwood Equities.

Broad Street Development has purchased the building in cooperation with Terra Capital Partners after taking out a loan of $155 million from the company Invesco. This loan was made up of a $120 million senior mortgage and a “mezzanine loan” of $35 million, according to Daniel Blanco, chief operating officer of Broad Street Development.

Mr. Blanco has expressed how Broad Street Development intends to restructure functioning of the office building to cater to smaller companies who wish to get away from working in communal spaces, or “coworking” offices, getting back to more old-fashioned leases. Such companies might purchase space in “WeWork” type office buildings that have shared dining areas, for example. But according to Mr. Blanco, “You lose your identity in a WeWork space, and we can give a tenant that identity back. There are tenants who want to know a space is theirs and they’re not sharing it with a guy next door. They always talk about collaboration in coworking spaces, but oftentimes there really is no synergy.”

Mr. Blanco and Broad Street Development apparently intend to proffer more accommodating lease terms for potential tenants including leases of up to three years, although they won’t be as flexible in their month-to-month terms as other coworking companies are. As he states, “The rise of coworking has definitely forced landlords to build nicer spaces for tenants and give them more flexibility than in the past.”

While last least 80,000 square feet of the property is currently vacant, Broad Street apparently intends to bankroll up to $30 million in office improvements. This will involve refurbishing the the lobby and building systems, including the elevators and heating, as well as ventilation systems and air conditioning. Spaces for potential tenants will also be further developed. While, Mr. Blanco has declared that Broad Street Development will control the property, he doesn’t wish to say if Terra Capital Partners will own most of the building’s equity.

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