10/17/2012

Fifth Avenue Retail Condo Fetches Top Dollar

A Swiss luxury-goods company has purchased a prime retail condominium at the St. Regis New York hotel on Fifth Avenue for $375 million ó triple what the block of space traded for three years ago.

The price paid for the 24,800-square-foot condo translates into an eye-popping $15,100/sf. High-end retailer Richemont bought the space from a partnership led by Crown Acquisitions, Feil Organization and Goldman Properties, all of New York. The group didnít use a broker. The agreement had been in the works since early summer.

The condo, which faces Fifth Avenue at East 55th Street, is fully occupied by multiple luxury retailers, including jeweler De Beers and clothiers Botteg Veneta and Pucci. Richemont presumably intends to open one of its stores at the site when space becomes available. The length of the existing leases couldnít be learned.

The average asking rent for street-level space on Upper Fifth Avenue, between 50th and 59th Streets, was $2,750/sf as of this spring, up 22% from a year earlier, according to the Real Estate Board of New York. By comparison, asking rents for similar space on Madison Avenue between East 57th and East 72nd Street averaged $1,203/sf.

The condoís value is boosted by its location at the base of the luxury St. Regis, the brandís flagship. The structure, at 2 East 55th Street, was built in 1904 and is designated as a city landmark.

The sale, which closed in the past two weeks, is a home run for the Crown group. It acquired the condo for $117 million in November 2009 from Starwood Hotels & Resorts of Stamford, Conn. At the time, Starwood was seeking to raise cash and reduce debt to ride out the market crash. It continues to own the hotel.

Market pros werenít surprised that Richemont made a play for the space, because high-end retailers have lately become more aggressive buyers in prime shopping corridors such as Fifth Avenue.

The deal is among the largest for a retail condominium on Fifth Avenue. Last year, Inditex of Spain paid $324 million, or $8,300/sf, for 39,000 sf of street-level space in the office building at 666 Fifth Avenue. Zara, a high-end clothing retailer operated by Inditex, now has a store there.

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