The ingredients of good real estate investment are much more than "location, location and location." Executing a sound, creative leasing strategy and having the vision to realize value in a property are critical.

Smart leasing is crucial, observes Fred C. Posniak, a vice president of W&M Properties and director of marketing for the Wien & Malkin LLP Supervisory Services department. "When economies are booming, it's easy to fill up your buildings," says Mr. Posniak. "Our objective is to understand a property and its market place and establish a program for the best long-term dependability of cash flow while taking the most advantage of current market conditions."

A good example of developing and executing a strategy is the approach taken at 1010 Third Avenue, a Manhattan retail condominium acquired in a 1998 Wien & Malkin offering. The property is located directly across East 60th Street from Bloomingdale's flagship store, and one block away from the giant Vornado redevelopment of the former Alexander's department store site.

When acquired, 1010 Third Avenue was a mix of office, retail, and parking uses on four levels, occupying the base of a residential tower. Its location is superb: key subway and bus lines intersect there, and the property is adjacent to destination retail and entertainment, as well as residential and office marketplaces. But there was litigation between the commercial and the residential condominiums, and also between the retail condominium and its tenants. The common areas were tired and there were vacancies spread amongst the ground, second, and third floors.

"Most buyers saw a mess, but W&M Properties saw potential," Mr. Posniak says. "The property is remarkable for its versatility. It could continue to accommodate small stores, office uses, and parking, or it could make an excellent location for a larger, high-profile creditworthy tenant. The problem was that all of the leases had different durations, and relations with the tenants were not great, so it was not possible to assemble all of the space at once."

Fully assembled into one 47,000 ­ square-feet block of space, the condominium would make an excellent location for a large retailer. There could even be different retailers on different levels, each with street-level access.

"A health-care facility is still another alternative," Mr. Posniak explains. "There are several major hospitals nearby, and the trend today is very much toward establishing satellite facilities away from the main hospital campus. This property, especially with its underground parking, could fill a number of roles extremely well."

Strategic Decision

W&M Properties decided on a strategy to manage the leasing to make all of the space available at one time. This required entering into a program to renegotiate, renew, and make new leases for all tenants and vacancies in the building to achieve a common expiration date. It took a concerted effort spanning 24 months, but the objective was achieved. In the process, common areas and bathrooms were upgraded, new leases were executed over the patchwork of vacancies, and all existing leases were either extended or pre-leased to other users.

"Under most circumstances, we pursue staggered lease expirations to minimize risk to cash flow," Mr. Posniak says. "But in this case, the opportunity to transform the property lies in keeping all options open. Our investors are earning a solid cash on cash return today, which will grow over the next seven years, while retaining all the redevelopment potential of a prime East Side Manhattan block for tomorrow."