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Canadian group buys downtown.

A Canadian group has purchased the fee interest in 22 Cortlandt Street for $7.4 million.

The 34-story office building is close to the World Trade Center and recently underwent an extensive lobby renovation. The building is leased well into the next century by the Helmsley-Noyes Company but the lease payments will be renegotiated for payments beginning in January of 1995.

The purchasers' attorney, Gregory D. Frost, a partner with Brown Raysman & Millstein, said the terms after that will be renegotiated about every 15 years with the lease expiring in 2062. The renewal price is based on an appraisal of the value of the land with a floor being the previous rent, he added.

Some of the principals of the Canadian group have invested in other Manhattan properties, Frost said. The Cortlandt Street property, built in 1971, was purchased for investment purposes, and, Frost said, the deal was structured to give the group a long-term return on capital. Woolworth also took back a $5.55 million purchase money mortgage. One broker, who asked not to be identified, said the renewal price will be the key to whether the economics work.

Helmsely-Noyes President David M. Baldwin, a principal in the leasehold, and a partner in the first mortgage with Metropolitan Life, said 200,000 square feet of the 668,000-square-foot building is vacant at the present time.

"It's a tenants' market," he noted, "and it's unfortunate because I'd rather have the high rents and be paying more [on the leasehold]." As the lessee, Baldwin believes he is in a strong position to renegotiate since the Downtown real estate market is in such poor shape. "From the renewal viewpoint of a ground-lease we are at a unprecedented low," he added.

"Watch the fight," advised Frost, "because I'm sure Helmsely-Noyes is not going to agree with us or on how one values the building and the lease is unclear as to the methodology of doing the appraisal. I hope we can come to something."

The city values the building at $83 million, and Helmsely-Noyes is paying taxes on it in excess of $4 million per year, figures that Baldwin finds incredulous.

The building's key tenants are AT&T, the Mercantile Exchange and the Municipal Credit Union. Century 21, the very successful retailer, is also housed in more than 20,000 square feet on the ground floor and lower level that was formerly a Woolworth store. "They paid big dollars for that lease," Frost noted. Century 21 is also seeking permission from the new owner to break through the wall to the East River Savings Bank building next door. Company officials did not return calls but employees were unaware of expansion plans.

Frost indicated his client group is interested in talking to the mortgagees with regard to their position in the building, as well.
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Title Annotation:Helmsley-Noyes Co. buys fee interest in 22 Cortlandt Street in New York, New York
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Mar 31, 1993
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