Chanel Pays $151M for Rodeo Storefront

LOS ANGELES—Luxury retailer Chanel has purchased its Rodeo Drive storefront for $152 million from Rodeo-Brighton Limited Partnership. Chanel exercised its right of first refusal to purchase the building after another investor submitted an unsolicited offer. The final sales price is a record for the submarket of $13,217 per square foot for the 11,500-sqaure-foot property.

"We got an offer at $160 million from a third party, and we were then obligated to send that offer to Chanel, and they had the opportunity to match the offer," Scott Kalt, a partner at Elkins Kalt, tells GlobeSt.com. "We knew that they really wanted the property so there was a high likelihood that they were going to exercise the right of first refusal, and they did. We got to $152 million because that same lease provision said that if they matched the offer they would get a credit against the purchase price against the amount of any improvements that they have spent at the location." Kalt represented the seller in the transaction along with his Jeff Reuben and lawyer Ron Goldie. Greenberg Glusker's Dennis Ellman served as Chanel's legal represnetation.

Chanel had actually invested more that its $8 million price reduction into the property; however, the lease terms said that the credit could never exceed 5% of the total purchase price. The complicated transaction took a total of 18 months and involved two families that owned the property. The original offer is from an unnamed institutional investor, which Kalt says that the particular buyer didn't necessarily have certainty of close. As a result, Kalt says that he isn't sure if they would have been able to get this same price if the team had brought the property to market.

Although the property is located in a prime retail market, the seller thought that the current market conditions made it a great time to sell. "It is a red-hot market and this property is located in one of the most premier locations in the country," says Kalt. "It is just a tremendous opportunity to sell at this price. At the end of the day, the decision was made to redeploy this capital someplace else, and to do that through a 1031 tax deferred transaction, so we won't be paying any taxes."

The last record in the market was made in 2013 when a 7,100 square foot building on the street traded for $85 million or $11,971 per square foot.