Background

150 East 42nd Street (New York, NY)

Wells Hill has been the real estate advisor to the Goelet family office since 2005. Among its holdings, the family owns the fee interest in the full city-block between 41st and 42nd Streets and Lexington and Third Avenues in Manhattan. In 1954, the Goelet family leased the property to a developer who constructed a 1.7-million-square-foot trophy office property as headquarters for Mobil Oil. At the early stages of Wells Hill’s involvement, the firm assisted in restructuring the family’s ownership interests in the property, known as 150 East 42nd Street or The Mobil Building, by consolidating the majority of such ownership interests through an alliance agreement between two family lines. Wells Hill then arranged for such majority to purchase the remaining minority interests held by another family line through a friendly and mutually beneficial transaction financed by non-recourse debt on the property.

After executing the aforementioned internal steps, Wells Hill achieved the successful restructuring of the ground lease that had encumbered the property and, subsequently, marketed and sold the restructured leasehold interest on behalf of the family in partnership with the ground lessee. The transaction allowed the family to share in the leasehold sale proceeds on a tax-efficient basis and to maintain its fee position as ground lessor, while collecting a significantly higher ground rent at more favorable terms than previously. In follow-up to the successful restructuring and, thereby, increased value of the fee interest, Wells Hill was able to achieve a sizeable, long-term, interest-only financing allowing our client to further monetize its fee position in a favorable capital markets environment.

Prior to the above transactions, the values of the fee and leasehold interests aggregated to less than the value of the real estate in fee simple. The sum of the proceeds of sale of the amended leasehold and the value of the new fee interest, as established by the fee mortgagee’s appraiser, was substantially higher than the value of the fee simple interest in the entirety, as established by the same appraiser.