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WALNUT CREEK, CA—Fractionalization of commercial realestate refers to the process of carving up a real estateasset owned in a fee simple estate into separate estates includinga leasehold estate of the land and a leasehold estate of thebuilding, with the objective of creating value of the individualclaims on the realty that is greater than the value of the propertyas a whole. The process has been around since the early 1900's andwas successfully used by real estate icons of that era,Harry Helmsley and WilliamZeckendorf.
Mr. Helmsley's most famous fractionalization was the acquisitionof the Empire State Building in 1961 for $65million. The building was fractionalized into asale-leaseback of the land, a master net lease ofthe buildings operations and a new mortgage of $20 million fromPrudential Insurance Co.
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