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Sterling Flips High-End Rodeo Drive Property in $110M Sale to LVMH

Sterling Organization, a private equity firm based in Palm Beach, Fla., doubled its money on the sale of a 7,634-square-foot parcel at 456 N. Rodeo Drive  in Beverly Hills. Sterling netted a cool $110 million for the property—which includes a 6,200-square-foot vacant single-story building and a 1,500-square-foot parking lot between Santa Monica Boulevard and Brighton Way—in the heart of the so-called “Golden Triangle,” one of the country’s most sought-after locations for luxury retail, according to an official release from Sterling. Last week’s sale came a mere day after Sterling closed its purchase of the property from The Karl B. Schurz Trust (Schurz Trust) for $55 million.

The purchaser of the property, a subsidiary of Paris-based, multinational conglomerate LVMH originally considered  leasing space at the property, but the company alternatively expressed an immediate interest in acquiring it. LVMH, which counts Louis Vuitton and Loewe among its portfolio of upscale brands, owns two other stores in the area at 319-323 North Rodeo Drive and 420 North Rodeo Drive, according to The Wall Street Journal, which broke the news of the sale.

LVMH declined to comment on the purchase.

Sterling’s acquisition of the property resulted from a highly structured off-market transaction, when it signed a 30-year ground lease with rights to purchase on Oct. 26, 2017.

Last week’s sale transferred the 456 N. Rodeo Drive  property to the luxury goods behemoth for approximately $17,750 per square foot.

Retail agent Robert Cohen, a vice chairman at RKF in Los Angeles, commenting on the deal, said the move for LVMH was a “very smart move” and part of an overall trend of European retailers investing in brick-and-mortar real estate in top U.S. shopping districts.

“This is a trend we’ve seen more and more of, which is personified on Rodeo Drive for several reasons, the least of which is that it’s only three-blocks long, an easy market and low-density. These retailers don’t have to worry about offices, residential or hotels, which is more difficult,” he said.

“Rents have gone up historically. It’s held its value. Europeans are very smart because they have not only the ability but they understand buying is better long-term than leasing. You control your own destiny.” (This is a trend that WSJ recently noted in Manhattan.)

Cohen pointed out that while $17,000-plus a square foot is high considering the comparables, over time, it works out to make good business sense. Average asking rents per per square foot on Rodeo Drive ranges from $600 to $1,000, Cohen said, so, say, over 20 years, the price paid averages $850 per foot. “You’re at the middle of the market, but now you own the property. Not only are you not paying rent, but you have an asset that is increasing in value,” he said.

Indeed. Rents on this stretch of Rodeo Drive, home to luxury retailers including Hermes, Chanel, Celine, Tiffany & Co. and Givenchy, rank among the highest in the nation. Retail rents on Rodeo Drive were $875 per square foot in 2017, according to statistics from Cushman & Wakefield’s 2017 year-end Los Angeles retail report, making the locale the second-highest in the nation. (Upper Fifth Avenue—49th Street to 60th Streets—in New York City still dominates, the C&W data indicate, closing 2017 at $2,982 per square foot.)

Negotiations for 456 N. Rodeo Drive began in July 2017 between Jonathan Mendis, Sterling’s senior vice president of investments for the Western United States, Brian Kosoy, Sterling’s president and CEO, and the trustee for Schurz Trust. The months of negotiations culminated in the October 2017 ground lease execution and purchase of the fee interest.

“When a circumstance presents itself to acquire a Rodeo Drive property, you aggressively pursue it, regardless of the complications involved in getting a deal done,” Kosoy said in prepare remarks. “This was a win-win-win for all three parties involved with each securing what they desired. The deal round-tripped a lot faster than we projected, and we are extremely pleased with the exceptional financial results we were able to provide to our investor partners.”

Kosoy told Commercial Observer his firm flipped the property because it felt it was in the best interest of its investor partners.

“Part of the opportunity in the commercial real estate sector pertaining to retail is that the passive observer, analysts, as well as much of the media, seem to repeatedly throw the baby out with the bathwater,” Kosoy said. “There are many areas that are immune to the woes of retailers today and Rodeo Drive is one of them. Great retail real estate is not under assault as many believe.”

He foresees Rodeo Drive real estate going in only one direction value wise: higher. “Continued limited and static supply and high demand assures such,” Kosoy said.

Cohen concurred, calling Sterling’s flip, “a brilliant play.”

“It’s an amazing story,” he added. “From a real estate perspective, they tied this up to a ground lease with an option to purchase, obviously purchased, it and to turn this around in a day and sell it, to basically double your money— that shows how voracious an appetite some of these people— these retailers have for real estate.”

Source: commercial

Thor, Premier Equities Sell Three-Story Meatpacking Retail Condo for $87M

Thor Equities and Premier Equities have closed a deal to sell their three-story retail condominium at 412 West 14th Street for $87 million, sources with knowledge of the deal told Commercial Observer.

The buyer is Union Investment, the investment arm of DZ Bank, as The Real Deal reported last month when the deal was in contract.

Lexus leases the entire 16,500-square-foot condo, plus 5,500-square-foot rooftop at the property between Ninth Avenue and Washington Street via a 10-year deal that expires in April 2024, the sources said. The luxury carmaker is still building out the space for a concept store.

Cushman & Wakefield’s Adam Spies, Kevin Donner and Marcella Fasulo represented Thor and Premier. A spokesman for Thor declined to comment, as did Spies. A Premier representative wasn’t immediately reachable. RKF’s Brian Segall represented the buyer. Segall declined to comment.

Premier and Thor bought the commercial condo in April 2012 for $18 million.

Source: commercial

Eastern Consolidated Retail Pros Jeff Geoghegan and Ravi Idnani Move to RKF

Eastern Consolidated food and hospitality retail experts Jeff Geoghegan and Ravi Idnani have joined RKF’s New York office as directors, Commercial Observer has learned. They commenced on Jan. 17

At RKF, they both will continue to focus on tenant and landlord representation in the New York metro area.

“I chose RKF because of the company’s successful track record and leading position in the industry,” Idnani said in a statement emailed to CO. “I’m incredibly excited to be joining the team.” (Geoghegan declined to provide a comment.)

Geoghegan, a broker, and Idnani, a salesperson, worked on James Famularo’s retail leasing team at Eastern Consolidated since the company launched the division several years ago, as CO reported in January 2014.

“People come and go in this industry,” Famularo said of the duo’s departure. “I enjoyed working with them and wish them luck at their new company.”

Geoghegan, who specializes in the Hell’s Kitchen, Chelsea and Upper West Side neighborhoods, has represented owners and developers. Within an 18-month period, he helped find the PokéSpot’s first location at 120 Fourth Avenue, which opened in August 2016. Then he negotiated a second lease for the tenant at 25 Cleveland Place (it opened in April 2017) followed by a space for an affiliated retail concept, Project Cozy, on the ground floor of New York University’s dorm at 398 Broome Street. That opened in summer 2017. Last year, he helped arrange a lease for celebrity chef David Chang‘s Momofuku Nishi at 232 Eighth Avenue.

Idnani is a pro in the restaurant and fashion industries. His recent deals include leases for Eat Club at 109 West 27th Street in NoMad and YokeyPokey, a virtual reality arcade, café and bar at 537 Atlantic Avenue in Boerum Hill, Brooklyn. He also represented celebrity fitness trainer Tony Molina in leasing a 1,550-square- foot fitness center on the top floor of 56 West 45th Street and arranged a 9,000-square-foot lease for Kiddie Academy at 282 South 5th Street in Williamsburg, Brooklyn, in July 2016.

“We are thrilled to add Jeff and Ravi to our New York team,” Robert Futterman, the chairman and CEO of RKF, said in prepared remarks. “Both have a track record of driving growth and strengthening relationships between landlords and tenants, especially in the restaurant space.”

RKF is bolstering its ranks. Earlier this month, long-time Winick Realty Group broker Darrell Rubens joined the firm, as CO previously reported.

Source: commercial

Church Street School for Music and Art Relocating Within Tribeca

Facing an untenable monthly rent, Church Street School for Music and Art wanted to find a new home. After a two-year search, the Tribeca-based non-profit school for the arts, has found new 8,000-square-foot digs within the neighborhood, at 41 White Street between Church Street and Broadway.

CSS, which serves students of 16 months through adulthood, signed a 15-year lease for a three-level space formerly occupied by the Flea Theater (which relocated to 20 Thomas Street after nearly 15 years on White Street), according to information provided by Lee & Associates NYC. The rent is $25,000 per month. The location comes with two fully built-out performance spaces, acoustical partitions that may be easily divided into classrooms, and several dressing rooms that will be converted into individual practice rooms.

“We now have a doable rent in a space with so many benefits, that we will be able to move in by February,” CSS Executive Director Lisa Ecklund-Flores, who founded the non-profit music and arts school in 1990, said in a statement.

At its current location at 74 Warren Street between Greenwich Street and West Broadway, CSS’ rent has escalated to $48,000 per month. Moving to Benchmark Real Estate Group’s 41 White Street will save the school approximately $276,000 per year, Lee & Associates NYC noted in a news release.

“CSS is an amazing resource and treasure for the Downtown Manhattan community,” Lee & Associates NYC’s Peter Braus, who represented CSS in the deal, said in a prepared statement. “Helping them relocate and stabilize their financial future has been a great honor and pleasure for me.”

Benchmark acquired the mixed-use walk-up building at 41 White Street as part of a three-building package for $59.5 million in July 2017. Andrew Stern of RKF represented Benchmark in the CSS lease. He didn’t immediately respond to a request for comment, nor did a company spokesman.


Source: commercial

Morton Williams Plans Supermarket at One West End Avenue

Morton Williams is opening another store on the Upper West Side.

The 63-year-old grocery chain has leased 29,400 square feet on the ground floor and lower level of One West End Avenue, the first building in the five-tower Riverside Center development, The New York Post reported. Asking rent in the 25-year deal was $85 per square foot.

The store, set to open in 2018, will offer patio seating for shoppers, kosher merchandise and plenty of grab-and-go options, according to the Post.

The grocer will anchor a 43-story, 365-unit highrise between West 59th and West 60th Streets designed by Pelli Clarke Pelli. Thanks to the 421a tax exemption program, the project has 249 residential condominiums and 116 affordable rentals, with the rental and condo portions served by separate entrances. Available condo units in the building are priced from $1.5 million for a one-bedroom to $21 million for a four-bedroom, five-bath penthouse, according to StreetEasy.

Lee & Associates’ Brad Schwarz represented Morton Williams in the transaction, and Gary Alterman, Richard Gelber and Scott Zinovoy of RKF handled the deal on behalf of the landlords, Elad Group and Silverstein Properties.

“I think it would be a great amenity to the neighborhood, which I think is underserved for a high-level product like Morton Williams,” Schwarz told Commercial Observer. “I live in the area, and it’s a rapidly evolving area. With an additional 5,000 residential units coming online, I think this will be coming at the right time.”

Schwarz added that over the past year he’s worked on deals to bring Landmark Theatres and Greek restaurant Ousia to Durst Organization’s Via 57 West, which is two blocks from One West End. And across the street at 21 West End Avenue, he helped sign a recently-opened Soul Cycle.


Source: commercial

Pop to Perm

Traditionally, short-term leases (a.k.a., pop-ups) have been seasonal: Halloween costume shops, Christmas stores and sample sales have been a staple of this retail segment for years. But the advent of experimental fashion pop-ups and influencer events have paved the way for a broader pop-up retail strategy, which is looking better to both landlords and tenants.

These “pop-to-perm” strategies allow for new concepts, online brands to try out bricks and mortar and even established companies looking to expand into a new market.

For new brands, small businesses and emerging concepts pop-ups are an exciting opportunity to test the waters without committing to a long-term lease. There are no high buildout costs, co-tenancy clauses or penalties. Landlords, for their part, reap financial benefits of collecting rent and eliminating vacant storefront space at the base of a building.

Popping-up everywhere

According to a recent national study from Chicago-based marketing firm PopUp Republic, the pop-up industry has grown impressively over the past decade to the point today where total annual sales have reached $50 billion. It wasn’t so long ago that Target dropped a concept pop-up at West 42nd Street and Avenue of the Americas. At the time, some questioned the strategy for such a large retailer. They were just testing the waters back then, and apparently, they liked the temperature because now you can find Target stores throughout Manhattan.

Interestingly, there is a psychological component to the pop-up. There have been several consumer-psychology studies in recent years suggesting that pop-ups stimulate part of a consumer’s brain that enjoys new experiences. Aside from the immediate practical implications (more foot traffic and increased sales), the findings also support the effectiveness of pop-up retail as a lasting experiential marketing strategy.

A perfect example is trendy eyewear purveyor Privé Revaux. The inexpensive celebrity favorite sunglass brand—whose business partners include Hollywood luminaries Jamie Foxx, Hailee Steinfeld, Ashley Benson and Jeremy Piven—recently opted for a short-term lease at 120 West 42 Street for its first brick-and-mortar presence. The new store blends all the best elements of an experiential pop-up, including a graffiti-covered New York City subway car that was left by a previous tenant and cloud installation. Expectations, the company said, are to extend their stay after evaluating the amount of traffic the store generates. Because a pop-up tenancy can last from one day to one year or more, the idea of planting a flag with only a short-term commitment can be extremely attractive.

Made to stay: Brands extending their stay after successful debuts

Since 2015, we’ve seen an increase in commercial leases of three years or fewer, as landlords have recognized the value in negotiating for the shorter term as the market stabilizes. One particularly interesting development contributing to the shortening of leases is the steady stream of online brands seeking a brick-and-mortar presence.

To me, pop-up doesn’t always have to be experimental and edgy and on a shoestring budget. And nobody exemplifies that spirit more than The RealReal. Following in the footsteps of other online only businesses like Bonobos, Warby Parker, Birchbox and even Amazon, The RealReal is expanding from e-commerce into brick-and-mortar retail in a mature way.

While the San Francisco-based company—which offers authenticated, high-end resale items online for women, men and the home—has been busy in recent years rounding up more than $150 million in funding for its online business, it has also launched a brick-and- mortar strategy.

Almost one year after opening its first pop-up in Manhattan during last holiday shopping season—which recorded a reported $2 million in revenue in just two weeks—the luxury consignment website earlier this month opened its first permanent retail space on Wooster Street.

Although it didn’t migrate from the online world to the physical, multibrand boutique Northern Grade also recently made the jump from pop-to-perm. After several years as a roving pop-up shop offering indie fashion and décor, the brand initially took a short-term option at 203 Front Street and signed a six-month lease in the Seaport District. Today, it remains a fixture in the Seaport’s rejuvenated retail scene.

In fact, there are so many successful examples of pop-to-perm in recent years we could fill the pages of this issue. Once brands have found their footing, they seek their own long-term spaces, where they can create opportunities that will bond them with shoppers. Smart brands know the value of providing excellent customer service in a memorable, enjoyable and stimulating setting, one that will prompt shoppers to make a habit of returning. But until then, putting products directly into shoppers’ hands at a pop-up or in a store with a short-term lease is an important way for brands to launch an omnichannel approach to retail.

Retail real estate pioneer and investor Robert K. Futterman is Chairman and chief executive officer of RKF, a leading retail real estate brokerage firm in the U.S.

 


Source: commercial

Gucci Taking Nearly 11K SF of Retail Space at 375 West Broadway

Luxury fashion brand Gucci has reportedly inked a lease to take 10,700 square feet of ground-floor retail space at 375 West Broadway in Soho.

Gucci agreed to a two-year deal with an option to extend its lease long-term at the location between Broome and Spring Streets, according to The Real Deal, which reported news of the deal today.

The space, which was previously occupied by Anthropologie until the clothing retailer shuttered its store last year, is housed at the base of a five-story, 79,000-square-foot office-and-retail building owned by landlord Pearlmark Real Estate Partners. Chicago-based Pearlmark acquired the property, also known as 63 Wooster Street, for nearly $119 million in 2014.

An RKF team of Robert Cohen, Beth Rosen and Jackie Totolo were marketing the space on behalf of the landlord at an asking rent of $400 per square foot, according to marketing materials cited by TRD. Representatives for RKF and Gucci did not return requests for comment.

The block-through retail location features 47 feet of West Broadway frontage and another 38 feet of frontage on Wooster Street, the RKF marketing materials indicate. In addition to the 10,700 square feet of street-level space, the brokerage was marketing 9,300 square feet of lower-level space at the property—though it is unclear whether Gucci is taking part or all of that below-grade space under the terms of its lease.

The Italian luxury brand’s flagship New York City retail location is at the base of Trump Tower at 725 Fifth Avenue.


Source: commercial

David Chang Opening a Fuku in Brookfield Place After Tapping New Chef for Brand

Momofuku chef and restaurateur David Chang is bringing his fast-casual fried chicken chain Fuku to Brookfield Place, Commercial Observer has learned. The opening comes a month after the appointment of Stephanie Abrams, most recently a co-executive chef at Rotisserie Georgette in Manhattan, as the new chef for the Fuku brand.

In early December, Fuku will open in the food hall Hudson Eats, taking space formerly occupied by Little Muenster, according to a spokesman for the property’s landlord, Brookfield Property Partners.

Chang signed a seven-year deal for 672 square feet in the food hall at 200 Vesey Street between West Street and North End Avenue. Brookfield declined to provide the asking rent. This is Fuku’s fourth storefront in the city.

“We first opened Fuku as a fried chicken sandwich shop in the East Village in a space that has served as Momofuku’s unofficial incubator,” Chang said in prepared remarks. “It housed the original [Momofuku] Noodle Bar and [Momofuku] Ko before Fuku. At the time of opening, I don’t think we knew that Fuku would be a concept we would grow beyond that first storefront. Since then, we’ve opened a few more locations, including at major sports arenas. When the opportunity to join Hudson Eats at Brookfield Place, we knew that we wanted to be a part of the collection.”

hudson eats inside brookfield place photo brookfield property partners David Chang Opening a Fuku in Brookfield Place After Tapping New Chef for Brand
Inside Hudson Eats in Brookfield Place. Photo: Brookfield Property Partners

RKF’s Spencer Levy represented Chang in the deal and Michael Goldban and Mark Kostic worked on behalf of Brookfield in-house.

“Hudson Eats continues to evolve and keep things fresh and interesting for the community,” Kostic said in a statement. “We are excited to welcome David Chang to the property and have every confidence that our visitors will be as impressed as we are with his offerings.”

Little Muenster opened in Hudson Eats in June 2014, and closed this summer after Brookfield let the company out of its lease, the Brookfield spokesman said. A representative for Little Muenster didn’t immediately respond to a request for comment.

This summer, the third—and largest—Fuku opened at 110 Wall Street, serving a wider menu with salad and bowls.

The two Downtown Fuku’s won’t cannibalize each other, the brand’s broker said.

“It really just made sense,” Levy said in a statement. “Augmenting the already successful food hall at Brookfield Place with a brand equally as popular as Fuku is a win-win for everyone. In terms of locations, every Fuku has a unique twist and 110 Wall Street and Brookfield are really in two distinctly different markets with a different customer base. Hey, now Fuku has views of both rivers!”

The menu at Hudson Eats Fuku will be similar to the one on Wall Street, changing with the seasons, a spokeswoman for Chang said.

“Fuku was started with a menu of only three food menu items, but we’ve learned that our guests want options for every day of the week—not just spicy fried chicken sandwiches,” Chang stated. “As the concept continues to expand, I’m excited to have [Abrams] on board to lead the culinary team and bring new ideas and flavors to Fuku.”

Chang’s brands are proliferating the city. Last month, he signed a lease for a 4,000-square-foot Momofuku Noodle Bar on the third floor of the Time Warner Center.


Source: commercial

What’s Old Is New: Old Navy Signs 18,500-SF Deal at East 86th Street Development

Old Navy is heading to the base of an upcoming 18-story condominium on East 86th Street and Lexington Avenue, Commercial Observer has learned, its first Upper East Side location.

The lower-priced clothing brand of Gap Inc. has signed a 15-year lease for 18,500 square feet on the ground and second floors (5,600 square feet of it at grade) at 147 East 86th Street, developers Ceruzzi Properties and Kuafu Properties announced. The developers declined to provide the asking rent.

The news comes a month after Gap Inc. announced that it would focus more on its Old Navy and Athleta brands. Over the next three years the company plans to shutter 200 Gap and Banana Republic locations, while adding 270 Old Navy and Athleta shops, as CO previously reported.

The East 86th Street Old Navy will be part of a $415 million 229,751-square-foot development, which will include 61 condominium units and 30,000 square feet of retail space. Residential amenities including a resident lounge, a children’s playroom, a teen room, a fitness center and a rooftop terrace.

Demolition for the project—which includes widening the sidewalk along East 86th Street in front of the property—is slated to commence within the next couple of weeks with completion set for early 2019.

“We are very pleased to have achieved this major milestone, and look forward to the commencement of new building construction,” Ceruzzi Managing Director Art Hooper said in a prepared statement. (Hooper is quoted since company head Louis Ceruzzi died suddenly in August.)

Ripco Real Estate’s Andrew Mandell, who represented the owners in the deal, said: “Old Navy recognized that the corner of 86th Street and Lexington Avenue is the epicenter of the regional market that exists on the Upper East Side. It’s also the densest from a population standpoint on Manhattan.”

Site acquisition started on Dec. 23, 2013 when the developers got a $33.1 million 99-year ground-lease from the heirs of Sol Goldman at 147 East 86th Street, as CO previously reported. The group then bought 151 East 86th Street from Town Sports International Holdings, the owner and operator of gym chain New York Sports Clubs, for $85.5 million on Sept. 12, 2014, property records show. That deal included New York Sports Clubs returning to the building at 151 East 86th Street, but the developers later bought out Town Sports. In March 2015 the developers purchased 19,315 square feet of development rights from 1283-1291 Lexington Avenue for $12.4 million plus 6,535 square feet of footprint rights for $1.6 million.

This April, Ceruzzi and Kuafu secured a $290 million construction loan from The Children’s Investment Fund for the project, as CO reported at the time.

RKF’s Ariel Schuster and Justin Fantasia worked on behalf of the tenant. Schuster declined to comment on the deal.


Source: commercial

‘Twilight’ and ‘Hunger Games’-Themed Attraction Headed for Times Square

Movie studio Lionsgate Entertainment is partnering with Spanish amusement company Parques Reunidos to develop a $30 million attraction in Times Square that highlights several popular films and TV series, including Hunger Games and Twilight.

The 45,000-square-foot Lionsgate Entertainment City will offer 13 exhibits that use virtual reality and other technology to “immerse guests in their favorite Lionsgate film and television stories,” according to a press release from Parques. Exhibits themed around Mad Men, Divergent and Now You See Me are also in the works. The flagship project is the first of several Lionsgate-themed attractions planned throughout the U.S. and Europe. It’s expected to open in 2019.

The Madrid-based leisure park operator signed a 15-year lease for three floors of retail at 11 Times Square, at the corner of West 42nd Street and Eighth Avenue. The New York Post, which broke the news of the deal, pegged the asking rent at $7 million a year.

SJP Properties owns the 1.1-million-square-foot building with PGIM and Norges Bank. E-Trade inked a 31,000-square-foot lease at the 40-story tower earlier this year, Commercial Observer reported, and other major tenants include law firm Proskauer Rose, Microsoft and Bank of America.

RKF’s Robert K. Futterman, Joshua Strauss and Scott Zinovoy represented both sides in the transaction. Spokespeople for RKF did not return a request for comment.


Source: commercial