The Grand Central Partnership is one of the oldest and most powerful business improvement districts in the city, with more than 76 million square feet of some of the country's most valuable commercial space under its watch. You can also, of course, thank it for the hundreds of tulips that will bloom in the area this spring.

The partnership has used the 3,800-square-foot space on the ground floor and basement for its field operations since 2001. "The appeal for them was the location," Adam Weissleder of Sherwood Equities told The Observer. "They were already there, and it's in the heart of Grand Central." The ground floor also plays host to such tenants as a Café Metro and a Dunkin Donuts.

Sherwood Equities purchased the building in 2008, and the parties approached each other before the lease was set to expire, in June of this year. The asking rent was north of $100 a square foot.

"Like so many locations in this thriving neighborhood, this space ticks all the boxes in terms of accessibility, convenience and adaptability to our needs," Alfred C. Cerullo III, president of the Grand Central Partnership, said in a statement.   

Mr. Weissleder and Jill Burrowes represented the landlord in-house. George Twill of Twill Realty represented the tenant.

lkusisto@observer.com 

370 Lexington Avenue

With all the partying in the Grand Central submarket over all the full-floor leases being signed, at least someone's still looking out for the little guys.

Sherwood Equities has signed more than 100,000 square feet at 370 Lexington Avenue in the past year, totaling 43 transactions, including 24 new leases, 15 renewals and four renewals that were also expansions.

Paper manufacturer NewPage Corporation has taken 2,956 square feet in a new five-year deal. Michael Liss of CB Richard Ellis represented the tenant. Advertising agency Tylie Jones has renewed its 4,626-square-foot lease for five years. Alan Friedman of CBRE repped the tenant. Law office Alan Greenberg has also taken 2,400 square feet in a new seven-year deal. David Menaged of Intrepid Real Estate Group repped the tenant.

The average asking rent is $48 a square foot in the tower, according to a spokesman.

When Sherwood Equities purchased lovely 370 Lexington Avenue in 2008 in partnership with JPMorgan Investment Management, CEO Jeffrey Katz declared his intention to make the building the top choice for small tenants in the Grand Central submarket. The plan seems to have succeeded, with an almost constant stream of small deals since.

"Three-seventy Lexington Avenue has become the building of choice for the smaller tenants in the Grand Central Market," Mr. Katz said in a release. The building is now 90 percent occupied. "We are extremely pleased with the number of deals we were able to complete in this economic environment and are looking forward to a strong 2011," said Adam Weissleder, senior leasing agent for the building.

The 307,000-square-foot, 27-story building, which was built in 1929 and features a stunning golden lobby, underwent a $24 million renovation that was completed in 2009.

lkusisto@observer.com

370 Lexington Avenue

Credit Market Analysis Limited (CMA) doubled its space from 3,695 to 8,144 square feet at Sherwood Equities' 370 Lexington Avenue. CMA will move from the seventh floor to the second floor.

David Amsterdam and Rob Lowe of Cushman & Wakefield and Holly Duran and Lois Durkin of Holly Duran Real Estate Partners LLC represented the tenant. Adam Weissleder and Jill Burrowes represented landlord Sherwood in-house.

"We are delighted that CMA has chosen to extend its lease and more than double the size of its space in our building," Mr. Weissleder said in a statement. "CMA's commitment to 370 Lexington Avenue is a testament to the high level of service provided by the building to all of our tenants, along with our very convenient Grand Central location.

Asking rent was in the $40s per square foot, according to Crain's, which had news of the lease on July 28.

Ten leases were signed in the first quarter at 370 Lexington Avenue, a 26-story office tower at 41st Street. The deals included seven new leases, from Adler & Co., Boyd Law Group, City Light Capital, HealthAce, Johnson Capital, retail store Nooi and Springtree Global Investors. Renewals included Hill Goodridge, Seeds of Peace and Sirius Solutions.

“Activity has been very strong at the building—so strong, in fact, that we actually just negotiated an early termination with a full-floor tenant that was due to expire in 2011 so we could have more space to offer,” says Adam Weissleder, one of landlord Sherwood Equities’s two leasing agents, along with Jill Burrowes.

One of the wisest, most recession-proof acquisitions Van Alen made might be the four plots of land on the southeast corner of Lexington Avenue and 41st Street, now occupied by a 27-story office building designed by Moore and Landsiedel.

Artbilt Realty Corp., the real estate company Van Alen shared with Charles L. Frasier, leased a pair of three-story residential buildings at 370 and 372 Lexington Avenue for $25,000, The New York Times reported on Feb. 26, 1925. Maurice Wertheim, who brokered at least five deals for Van Alen between 1924 and 1927, according to The Times, announced that Artbilt planned to combine the two new lots with two adjacent parcels it already owned and build an office building.

While the 301,000-square-foot building was under construction, Wertheim brokered several other transactions for Van Alen in midtown. Meanwhile, his nearly 20-year marriage to the daughter of Henry Morgenthau, the former Turkish ambassador and later Franklin Roosevelt’s Treasury secretary, was unraveling. Alma Wertheim filed for divorce in Reno, Nev., on Dec. 22, 1929, on the grounds that her “artistic temperament” and her husband’s financial desires were “incompatible,” according to dozens of stories published in newspapers then. “Mrs. Wertheim charged her husband with mental cruelty,” the Associated Press reported on Dec. 26. “She said he showed no appreciation of her feelings but was absorbed entirely in his business. … He sought to dominate her, she said, and at times gave way to outbursts of temper.”

The Wertheims finalized their divorce just over two months after the stock market crash that triggered the Great Depression. The following spring, in 1930, 370 Lexington opened for occupancy.

Within one month, Cushman & Wakefield announced that the building was 66 percent occupied, according to the May 10, 1930, Wall Street Journal. The Delano and Aldrich architecture firm leased 4,500 square feet on the 11th floor, joining tenants like the Blaker Advertising Agency and the Department of Justice, which left its federal office building in Lower Manhattan.

THE ECONOMY IN 1930 was not so different than the climate in September 2008, when Sherwood Equities took over management and leasing of 370 Lexington. 

Sherwood and the SBC Master Pension Trust managed by JP Morgan bought 370 Lexington from Broad Street Development for $155 million and refinanced seven different loans dating back to 1996, with an $80 million mortgage from the Connecticut General Life Insurance Corp.

A joint venture between Broad Street Development and the Dallas-based private-equity fund Crow Holdings Realty bought the building from Jones LaSalle in April 2006 for $97.2 million, in what was its fifth acquisition in less than two years.

Though Sherwood Equities was not impervious to the slump, CEO Jeffrey Katz believes that 370 Lexington is more resistant to economic fluctuations because it caters to an underserved market of tenants.

“Whether you were renting 5,000 square feet or 500 square feet, even if people needed to move, they were waiting for the market to hit bottom,” he told The Commercial Observer. “But we found that the demand for high-quality small space in the Grand Central district is stronger than what you’re hearing about for the rest of the market … When you are looking for a [220- to 300-square-foot] space, you’re really relegated to what’s left over.

“One reason we’ve bought it,” Mr. Katz added, “is because it is impossible to make more buildings like this. The break-even number [to build a new office building in midtown] is $100 per square foot. We are dealing with a commodity, the supply of which cannot be increased at that price.” 

Under Broad Street’s management, occupancy rose from 75 percent to 92 percent. In 2007, rental income was $10,760,648, according to PropertyShark. Despite the stagnant leasing market, Sherwood invested $24 million in capital improvements to woo new tenants in the underserved 3,000- to 1,000-square-foot market. Sherwood upgraded the building’s retail signage; polished the limestone facade; installed a new ventilation system on the ground floor to eradicate the smell of baking bread that wafted from Zaro’s Breadbasket and Subway into the lobby; and successfully campaigned to have an unsightly pay phone outside the main entrance moved around the block.

THE CHANGES HAVE ALREADY paid dividends.

“I think because we cater to the smaller user, we’re actually benefiting from all the downsizing that’s occurring out there in the marketplace,” said Jill Burrowes, 370 Lexington’s on-site broker. She was sitting in the conference room of a 1,600-square-foot unit that was recently vacated, ahead of schedule, by a defunct advertising agency. “All these large firms that are downsizing or are paying $90-per-square-foot rent with views overlooking Central Park and are now more concentrated on self-preservation, when they see a quality building and we’re charging $45 or $50, it’s just a more logical process.” 

Sherwood has leased a total of 46,000 square feet, the majority of which are new leases, since buying the property in September 2008. The asking rents are in the mid-$50s, but Ms. Burrowes said deals are closing in the mid-$40s.

On Sept. 28, they closed their 22nd lease of the past 12 months. The Zacchia Law Group P.C. will in December relocate from 441 Lexington Avenue to a 1,327-square-foot unit on, oddly enough, the 22nd floor. Other new leases signed since last September include the legal department of Napster—yes, that one—for 1,800 square feet on the 19th floor in December; Heineken Americas on the 24th floor; and the hedge fund service provider Meridian Fund Services, which renewed and nearly doubled its size by expanding into an additional 1,542 square feet of prebuilt space, for a total of 4,890 square feet.

The occupancy rate is currently 93 percent, but Mr. Katz, Sherwood’s CEO, has noticed that tenants who waited on the sidelines for the leasing market to bottom out last year have become increasingly anxious to close long-term deals before prices rebound.

“Brokers are telling their clients we’ve hit bottom and now there is a sense that you’ve got to move now because things might be much more expensive a year from now,” he said. “The way that deals are happening now are a little more favorable to the landlord. I hate to get ahead of things and say it’s a landlord’s market, but things are shifting that way.” 

editorial@observer.com