Located on-half block from Union Square, the building sits next to a Chanel store and a Saks Fifth Avenue Men's Store, and across the street from where tenant improvements are underway for a Prada store. Other retailers in the immediate vicinity include Escada, Burberry, Gucci, Tiffany & Co. and Armani, and Cartier and De Beers also are planning to open stores in the area.
Festival Companies President Mark Schurgin tells GlobeSt.com he plans to use the departure of the building's current primary tenant, Ann Taylor, as an opportunity to bring in another world-class brand. Schurgin says his company is in talks with several high-end retailers to backfill the 26,000-sf, four-level space. The other tenants in the building are Bredebro, Denmark-based shoemaker Ecco and Boucheron, a high-end jeweler based in Paris.
The blended rate for similar multi-floor spaces in the heart of the Union Square shopping district is approximately $10 per sf per month. Schurgin says he hopes to have a new tenant open for business in the space by the 2008 holiday shopping season.
Festival acquired the asset on behalf of its inaugural fund, Festival Retail Fund 1 LP., which launched in January and plans to acquire $800 million worth of properties by the end of 2009 using 75% leverage. The plan is to liquidate the fund over the ensuing five years as opportunities arise to meet the fund's goal of a "mid-to-high teens" IRR. The equity for the fund is being provided by Goldman Sachs.
To date, the fund has acquired or committed equity to acquire $200 million of properties. The Ann Taylor building is its first acquisition in the Union Square area. The fund also has acquired two properties in Beverly Hills, two in Maui and one in the East Bay.
The fund's inaugural acquisition was the 13,500-sf Gucci Building on Rodeo Drive in Beverly Hills for $40 million. Gucci has been the building's sole occupant for nearly 20 years. In March, the fund acquired the 56,000-sf Garin Ranch Retail Center in the East Bay city of Brentwood, CA. The development includes three pads that are entitled for 45,000 sf of additional retail and office development. Festival paid $22 million for the property with plans to add value by developing the pads over the next 18 to 24 months.
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