33 Broad Street,
Soon after forming Fairlane Properties
in 1997, Michael Grill contacted MGI Properties, a NYSE
REIT and former client, about 33 Broad Street. MGI had purchased
the 37,662 square foot property in 1994 and was facing capital improvements
and leasing challenges, including the potential loss of 60% of leases
expiring in 1999. Operating expenses had ballooned during renovation
projects, and potential buyers were unlikely to reduce these expenses
in the underwriting of the property.
the coming months, the property was not offered to sale to the marketplace.
Building information was provided, however, to Fairlane, who closed
on the sale for $3.15 million in October 1997 with debt financing
of $2.525 million and equity capital of $1.275 million from eight
Fairlane completed capital improvements to the lobby, roof, cooling
tower, façade and construction of a handicapped-accessible
restroom. Interior common areas were redesigned, transforming the
property into a sophisticated professional environment with renovated
lobby and refurbished elevators. Fairlane also reduced operating
expenses by 18% between ‘97 and ‘98. Six of the eight
tenants with expiring leases renewed. Capital improvements, tenant
improvements and leasing commissions of $480,000 were budgeted with
a total project budget of $3.8 million.
The 1997 business plan for 33 Broad Street called for a refinancing
of the property in 2001 with a 50% return of equity. In January
2000, 47% of investor contributions were returned as part of a short-term
financing. The remaining equity was returned with the placement
of long-term financing in March 2001 with an additional 45% in excess
proceeds returned to investors at that time. From 1998 to 2003,
the building’s floors were remeasured, increasing the total
rentable square footage to 40,680.