Stephen Green & Jeff Sutton Buy Out 650 Fifth Avenue Tenant Juicy Couture For $51 Million

New York commercial real estate company SL Green Realty is a major publicly listed real estate investment trust (REIT), founded in 1997 as the public successor corporation to SL Green Properties which had earlier been set up, in 1980, as a private company by Stephen Green.

SL Green recently acquired a 49 year leasehold interest in the retail portion of the major, 36 floor, commercial office building 650 Fifth Avenue, acting in partnership with another major real estate group in New York Jeff Suttons Wharton Properties. The financial terms of the leasehold acquisition have not it seems been disclosed.

The deal was transacted with an official Monitor, Judge Kathleen A. Roberts, appointed by a federal court to re-organize the property after it had been confiscated by the US government for being secretly owned by Iranian bank Bank Melli, in violation of sanctions on Iran.

The new deal with Green covers the basement, ground floor, second and third floor retail spaces totaling about 32,000 square feet of leasable space. Current tenants include clothing retailer Juicy Couture, Godiva chocolate and Devon & Blakely. Juicy Couture holds about 18,000 square feet of the space, including the ground floor store-frontage.

In its early years of operation SL Green had traditionally operated by buying up Class B office buildings around town, investing in them to improve their lobbies, facades and other amenities and then to raise the rents closer to Class A levels whenever leasing expiries offered the opportunity for re-merchandising the space. As the firm got larger it made greater investments in Class A buildings to begin with, but has never lost its eye for reorganizing a rent roll to enhance its yield.

And that is what is happening here with the announcement yesterday that SL Green has just bought out the lease of the mid priced clothing retailer Juicy Couture for US$51 million. Its flagship store there is now expected to close early in 2014, and presumably will move to another less expensive location.

The lease was purchased from Juicy Coutures owner Fifth & Pacific Company, formerly Liz Claiborne. The buy-back will now allow SL Green to eventually re-merchandise the whole retail component of 650 Fifth Avenue to better fit the upscale image of the neighbourhood, and of course obtain much higher rents as well.

Accordingly, in addition to the 18,000 square feet currently occupied by Juicy Couture, it seems according to a report in the New York Post, that another 11,000 of the remaining space may also become available to a new tenant if SL Green should then buy out the other existing tenants out too. This would then allow a much larger, 29,000 square foot store to be created, or almost 90% of the total. This should make a very attractive leasing proposition for a new prime tenant as a result. SL Greens partner in the deal, Jeff Suttons Wharton Properties, are expert at negotiating with the highest ranking tenants that one would expect to come to such a location.

SL Green and Sutton already control 717 Fifth Avenue nearby, which features the Giorgio Armani and Dolce & Gabbana flagships in addition to 720 Fifth Avenue, home to Abercrombie & Fitch, and 724 Fifth Avenue, Pradas flagship store who we learned in a separate announcement just a few days ago have recently extended their lease all the way to 2028.

SL Green President, Andrew Mathias, said, Situated in the heart of Fifth Avenues prime retail corridor at 52nd Street, 650 Fifth Avenue is a perfect fit for our expanding retail investment portfolio in partnership with Jeff Sutton. Our retail investments have proven to be a profitable complement to our core office and structured finance businesses and we will continue to seek new opportunities in New York Citys best retail locations.

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