Fifth Avenue Retail Goes for $324M

NEW YORK CITY-In what is reportedly the highest price per square foot ever paid for Manhattan retail, Spanish retail group Inditex has bought the former NBA store at 666 Fifth Ave. for $324 million. The 38,750-square-foot deal comes out to $8,361 per square foot; the previous record-holder was a 6,000-square-foot retail condominium at 713 Madison Ave. that traded for $48 million, or $8,000 per square foot, in July 2008, according to Real Capital Analytics.

Inditex says in a release that it plans to convert the 666 Fifth retail space into a flagship store for its Zara fashion apparel brand. Currently there are seven Zara locations in Manhattan, including three along Fifth Avenue, part of a total of nearly 1,500 worldwide.

“This deal proves that prime retail real estate remains in strong demand from investors and operators alike,” says John D. Lyons, New York City-based CEO of Savills LLC, in a statement. Savills represented Inditex in the acquisition from the owners of the 666 Fifth retail component, a joint venture of Crown Acquisitions and the Carlyle Group that bought a controlling interest in the retail from the Kushner Cos. for $525 million in July 2008.

The Inditex buy represents the second nine-figure retail deal at 666 Fifth in less than a year. In April 2010, GlobeSt.com reported that Japanese apparel retailer Uniqlo signed a lease for an 89,340-square-foot flagship store there in a deal worth more than $300 million over 15 years.

Borja Sierra, CEO for Savills Europe, says in a release that “There is no better retail in Manhattan and our client has reinforced this through their acquisition. Rather than committing to a $300-million long-term lease commitment, our client has clearly endorsed the Fifth Avenue shopping district by demonstrating it is prepared to maintain long-term ownership on the street.” Sierra led the transaction on behalf of Savills.

As part of the transaction, Savills worked with Crown and Carlyle to negotiate the early termination of the NBA lease, the release states. This enabled Inditex to move forward with plans for a new flagship Zara store.

When the Uniqlo deal was announced last spring, Crown CEO Stanley Chera commented that the lease gave the Japanese clothing brand visibility along of the world's most recession-proof retail corridors. “Retailers who make the commitment to Fifth Avenue uniformly experience their highest gross sales in those stores,” Chera said in a statement last year. “Yes, the rents are high, but the returns are great in terms of revenue and exposure to more than 40 million tourists and other shoppers each year.” At a NAIOP New York City panel discussion last month, I heard Crown COO Brittany Bragg commenting that the Uniqlo lease was “driven by their belief that they’re going to do the sales.”

A little more than a week after the Uniqlo lease was announced, GlobeSt.com reported that Crown and Carlyle had hired Doug Harmon, senior managing director of Eastdil Secured, to market the retail portion of 666 Fifth. According to the Wall Street Journal, the retail component’s owners were seeking between $600 million and $700 million, a markup of between 14% and 33% over what they had paid in ’08. However, the Wall Street Journal reported on Saturday that Crown and Carlyle had subsequently chosen a different path, and had refinanced the unsold portion of the 666 Fifth retail with a $300-million loan from Morgan Stanley.