LUXURY RETAILERS ARE BUYING OUT THEIR LANDLORDS | Kanebridge News
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LUXURY RETAILERS ARE BUYING OUT THEIR LANDLORDS

By KATE KING
Mon, Feb 19, 2024 4:40pmGrey Clock 3 min

Luxury retailers, flush with cash, are spending big on real estate in the world’s most expensive and exclusive shopping corridors.

In New York City, Prada recently agreed to buy the building that houses its Fifth Avenue store as well as the building next door for more than $800 million. Gucci’s parent company, Kering, is also paying nearly $1 billion for a 115,000-square-foot retail space a few blocks south.

Luxury behemoth LVMH Moët Hennessy Louis Vuitton , meanwhile, is in discussions to purchase the Fifth Avenue retail space occupied by Bergdorf Goodman’s men’s store, according to a person familiar with the matter.

This activity follows a flurry of purchases in Europe, where high-end retailers have snapped up real estate on high streets including Avenue Montaigne in Paris and London’s New Bond Street in recent years.

Luxury’s real-estate shopping spree shows that retailers are using their considerable cash to free themselves from the control of landlords and plant their flags on streets where they want a long-term presence.

“The rents that the luxury retailers were paying on Fifth and in other prime locations were simply astronomical,” said Eric Menkes , co-chair of leasing for the New York-based law firm Adler & Stachenfeld. “There comes a point in time when these retailers looked in the mirror and said, ‘Why am I making my landlord rich?’”

Retail rents on upper Fifth Avenue haven’t surpassed pre pandemic levels, but they averaged $2,000 a square foot over the past year, making the corridor the most expensive retail destination in the world, according to real-estate firm Cushman & Wakefield.

High-end retailers renewing their leases are often subject to the biggest rent increases, because they don’t want to leave well-known, successful addresses and pay for expensive build-outs at new stores.

“You don’t want to give up that location,” Menkes said. “And your landlord knows that.”

While the most recent eye-catching deals have been signed in New York and Europe, luxury companies are also buying buildings elsewhere. The French fashion house Chanel paid $63 million for a building on Post Street in San Francisco in 2021, the same year LVMH bought a hotel in Beverly Hills.

Chanel selectively acquires real estate “to protect its long-term presence in key cities around the world, and secure prime locations for luxury retail,” a spokesperson said.

While real-estate purchases so far appear concentrated in the most exclusive shopping corridors, luxury retailers are also signing leases in new markets and for bigger footprints to accommodate their swelling collections as well as new offerings such as restaurants and bars.

A surge in shopping for luxury goods powered the world’s largest luxury retailers to record profits in recent years. Sales growth has since slowed, but LVMH, which owns 75 brands including Dior and Hennessy, still reported nearly $94 billion in sales in 2023, beating analysts’ forecasts and sending the company’s stock price soaring in European trading .

“The premium luxury groups have so much cash on their balance sheet,” said Eric Le Goff , vice chairman and head of luxury for the brokerage Retail by Mona. For companies not contemplating acquisitions, “why not deploy the cash into real estate where you know you’re going to be there, hopefully for the next 100 years?”

In addition to cash, well-performing retailers have the option of floating corporate bonds to pay for their real-estate purchases at a lower rate than the traditional real-estate investor could get for a bank mortgage, according to Will Silverman , a managing director at Eastdil Secured, a real-estate investment-banking firm.

“The spread between where they can borrow and where a traditional real-estate investor can borrow, might be several percentage points apart,” Silverman said. That spread has never been wider in memory, he added.

This dynamic could mean luxury retailers are competing mainly against each other for real estate at the most desirable locations.

Luxury companies tend to cluster, so once one deal is signed, “usually that causes others to all jump in and want to be in the market, which then causes demand to increase and prices to rise,” said Andrew Goldberg , vice chairman at real-estate brokerage CBRE.



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Tonino Lamborghini Unveils New Luxury Residences in Ras Al Khaimah

Tonino Lamborghini recently revealed a new luxury project comprising 241 units in Ras Al Khaimah, developed in partnership with Arista Developments.

Tue, May 21, 2024 2 min

Named the Tonino Lamborghini Residences, this project promises a fresh take on luxury living with its iconic design, cutting-edge amenities, and stunning sea views.

Set on Al Marjan Island, the development is adding 241 high-end units to the area’s real estate offerings, all reflecting the sleek, Italian elegance associated with the Lamborghini name.

These residences are designed to impress, featuring modern architecture that harmonizes with the scenic surroundings and interiors marked by meticulous craftsmanship and top-quality finishes.

Living in this one of the project’s units means access to a range of upscale amenities: a state-of-the-art fitness center, multiple swimming pools, beautifully landscaped gardens, and dedicated areas for children’s play. The complex also offers a business center with a conference room, an outdoor BBQ area, and a chic café, catering to all aspects of high-end living.

Arch. Abdulla Al Abdouli, Chief Executive Officer, Marjan, expressed excitement about the introduction of Tonino Lamborghini Residences to Al Marjan Island, noting the project’s blend of sustainable construction and smart home technologies. This integration, he mentioned, guarantees a luxurious lifestyle equipped with the finest modern amenities, reflecting the exquisite Italian craftsmanship. He is confident that this new venture with Arista Developments will significantly boost the allure of Al Marjan Island as a top lifestyle destination in Ras Al Khaimah for both investors and residents.

Tonino Lamborghini, President of the Tonino Lamborghini brand, said: “We are delighted to be among the pioneers in this remarkable new destination in one of the seven emirates of the UAE. Our heartfelt gratitude and recognition go to H.H. Sheikh Saud bin Saqr Al Qasimi, Supreme Council Member and Ruler of Ras Al Khaimah, for his visionary leadership and foresight, and for embracing innovative strategies to revitalize a region full of potential.”

Mr. Arthur Chu, Chairman of Arista Developments, highlighted the project’s ambition to capture the essence of the Tonino Lamborghini brand in every aspect of its design. He described the development of a prestigious residential tower on Al Marjan Island that will reflect the lifestyle and beauty synonymous with Lamborghini. From the sharp, well-defined lines of the exterior to the elegantly designed interior common areas, every detail is crafted to showcase the brand’s distinctive elegance and sophistication. Chu emphasized that the interior designs, personally crafted by Tonino Lamborghini, aim to fully immerse residents in the Italian brand’s luxurious identity.

The variety in housing options is vast, ranging from one and two-bedroom apartments to duplexes, sea view villas, signature villas, and exclusive penthouses.

The collaboration between Tonino Lamborghini and Arista Developments blends iconic Italian style with expert real estate craftsmanship. This venture marks Lamborghini’s first introduction to Ras Al Khaimah and represents a commitment to setting new standards in luxury and modern living.

 

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