retail includes Uniqlo's Manhattan
(Save the date: RealShare New York comes to the Grand Hyatt, New York, NY, October 9.)
NEW YORK CITY-Vornado Realty Trust kept the Fourth of July celebration rolling into Thursday, setting off a fireworks display of big-ticket acquisitions and dispositions. The REIT is paying $707 million for the 666 Fifth Ave. retail space currently controlled by a partnership of the Kushner Cos., Crown Acquisitions and the Carlyle Group, while selling all but one of its remaining Mart segment properties for a total of $228 million. Separately, Vornado said late Thursday that it’s also selling a Washington, DC office building and buying a retail property in Miami Beach.
The 114,000 square feet of 666 Fifth retail, leased to Uniqlo, Hollister and Swatch, expands on Vornado’s existing 2.2-million-square-foot portfolio of Manhattan street retail. The office tower’s retail space also includes the 38,750-square-foot former NBA store, which Spanish retailer Inditex bought in March 2011 for a record-setting $324 million. The Inditex space was not part of Thursday’s acquisition by Vornado, which the REIT expects to close in the fourth quarter.
Taken together, the Vornado purchase and the Inditex space value 666 Fifth’s retail component at more than $1 billion. That’s nearly double the $525 million that Crown and Carlyle paid for a controlling stake in the retail condo four years ago. This past December, Vornado took a 49.5% stake in the office portion of the 41-story 666 Fifth, entering a joint venture with Kushner to recapitalize the property.
Bloomberg quoted Crown principal Haim Chera as saying that Vornado made a pre-emptive offer on the 666 Fifth retail space shortly before it was due to be marketed by CBRE. A CBRE spokesman tells GlobeSt.com the firm has no comment. Vornado plans to finance its purchase of the retail condominium with property-level debt and proceeds from asset sales.
On Thursday, Vornado said it had agreed to sell the Washington Design Center, the Boston Design Center, the L.A. Mart and the Canadian Trade Shows. The sales of the L.A. and Canadian assets have already closed, and Vornado expects the other two showroom properties to close in the current quarter.
The Washington Design Center is trading to the same buyer as the adjacent Washington Office Center in a portfolio sale that values the office property, located at 409 Third St. S.W., at $200 million. Vornado did not disclose the buyer.
This past January, Vornado sold 350 West Mart Center, a 1.2-million-square-foot Chicago office property in its Mart segment, to Shorenstein Properties for $228 million. The REIT continues to own the 3.5-million-square-foot Chicago Merchandise Mart, which like the other Mart segment properties was acquired in 1998 as part of a portfolio.
A Vornado fund on Thursday acquired the 167,000-square-foot 1100 Lincoln Rd., the western anchor of the Lincoln Road shopping district in Miami Beach, for $132 million. The acquisition by Vornado Capital Partners LP was financed in part a $66-million new mortgage on the property, which is anchored by Regal Cinemas, Anthropologie and Banana Republic. It’s currently 97% leased.
Retail fundamentals have continued improving generally, with research firm Reis reporting on Friday that net absorption improved by 2.06 million square feet during the second quarter. Vacancy rates have ticked down by a percentage point for each of the past three quarters; they stood at 10.8% at the end of Q2, according to Reis data.