Building owners are always looking for ways to slice and dice their properties to maximize profits. On the commercial side, selling off condo interests for either office or retail space has become commonplace. On the residential side, savvy developers such as RAL Companies have created private rooftop “cabanas.”

But some building owners in Times Square are now looking to milk their prime locations by “condominiumizing” their properties’ lucrative signage. Though telecommunications antennas have been condo-ed for years, sources said, signage-specific condos are a new phenomenon and could allow developers to tap another source of profits on their buildings.

While the trend is limited to the Times Square area, if all goes well there, it could spill over into other areas and create a new incentive for buying buildings with major signage potential.Creating a condo for a sign usually involves taking an unrentable portion of the building’s interior, such as a supply closet, and documenting it in a condominium offering plan. The move allows the owners to comply with the requirement that an offering plan can only be drawn up on the basis of actual physical space in the building.

According to Jay Neveloff at the law firm Kramer Levin: “If you have a revenue stream, whether it’s a sign or big antenna, you can create a condo unit — it could be as small as a closet. A tax lot would be assigned, and then you sell it separately and finance it separately.”

Splitting the building up in this manner allows landlords to reach out to more investors. Creating signage condos could also help landlords appeal to more lenders. According to Nicholas Kaiser at law firm Cohen & Gresser: “You can maximize the amount of leverage by slicing it into different pieces and reaching out to lenders amenable to those kinds of assets.”

Private equity firms Carlyle Group and Capstone Equities, who paid $83 million for an office and retail building at 570 Seventh Avenue last year, are now considering condo-ing the signage, according to a source familiar with the property. The owners are asking an annual rent of $8 million for both the signage — which includes 3,178 square feet of LED signage and 5,852 square feet of static signage — and the building’s 20,000-square-foot retail space.

Apparently, in Times Square, you don’t need to erect a building. All you need is to build a signpost. (Source: The Real Deal Magazine)