Macy’s just staged a fire sale to kick off the holidays – only this time the discount was on a chunk of real estate in downtown Brooklyn, The Post has learned.
As reported by The Post, the retail giant last week sold its department store at 422 Fulton St. to a syndicate of New York real estate investors who publicly confirmed the deal — although they declined to discuss the price. Macy’s also declined to comment last week.
Sources with knowledge of the situation, however, say the investors paid Macy’s just $23 million to secure the 440,000-square-foot property — after one investor told The Post it could be converted into “family-friendly attractions” with possible tenants including Netflix, Universal and Lego.
That equates to just over $50 a square foot — a small fraction of the $250 a square foot level where retail space in downtown Brooklyn has recently been trading, according to Cushman & Wakefield’s Ian Lerner.
“Macy’s would do that because they are not real estate investors,” one source briefed on the situation told The Post. “In my view, this is a story about a retailer who knows nothing about their most valuable asset.”
Indeed, the price of last week’s deal also falls sorely short of the rate that Macy’s — which had replaced defunct department store Abraham & Straus at the Fulton Street location in 1995 — bagged when it sold the top four floors of the eight-story property in 2015 to Tishman Speyer for $270 million.
Tishman Speyer converted the upper floors into office space. Macy’s, meanwhile, kept the lower floors — typically more valuable — and later sunk $100 million into renovations.
Albert Laboz, founder of United American Land, confirmed to The Post last week that he teamed up with Isaac Chera of Crown Acquisitions and the Jackson Group’s Chehebar family to purchase the Macy’s property while declining to comment on the price.
In an added plot twist that insiders said demonstrated Macy’s blunder, insiders say it was Chera who directly bought the property from Macy’s for $23 million — and then immediately flipped it to Laboz and the Chehebar family for $36 million — pocketing an immediate profit of $13 million.
The syndicate then brought in another investor, whose identity is not known, but whose share valued the property at $80 million, according to the source. It’s not clear whether Chera has retained a stake in the property, a source said.
According to one insider, Macy’s — headed by CEO Tony Spring — tapped Raider Hill Advisors, a real estate firm that typically focuses on properties outside the New York City area, to market the Brooklyn store.
A Macy’s spokesperson declined to comment. Laboz declined to comment further. Crown Acquisitions also did not return calls seeking comment. Raider Hill didn’t respond to requests for comment.
On Monday, Jackson Group’s Isaac Chehebar also declined to comment specifically on the purchase price. However, Chehebar told The Post: “It’s a very good deal and we are very pleased with the acquisition.”
“The Macy’s building is one of the most historic retail buildings in all of Brooklyn and we intend to reinvigorate it and activate the retail to its highest and best use,” Chehebar said.
The transaction, which Laboz said closed on Wednesday, was earlier reported by The Real Deal, which didn’t report on the price.
The deal comes as Macy’s business is slowing — its sales were down 2.4% according to preliminary results released last month — and its casting around for extra cash, sources with knowledge of the transaction said.
On Monday, activist investor Barington Capital and real estate investor Thor Equities took an undisclosed position in Macy’s and asked the company to create a separate real estate subsidiary to “optimize” the company’s real estate assets, according to a press release. The activists believe Macy’s real estate is worth between $5 billion and $9 billion — above the company’s $4.6 billion market cap.
Earlier this year, activist investors Arkhouse Management and Brigade Capital tried to acquire Macy’s for $6.9 billion and to take the company private. Macy’s rejected the offer and ended talks with the activist investors in July.
Earlier this year, Macy’s said it would close 150 stores or about 30% of its portfolio amid a challenging environment for department stores.
The sector has been shrinking for more than two decades as consumers change their shopping habits, buying directly from some of the brands the stores carry or increasingly shop online.
Padding its coffers especially at this time of year when its warehouses and stores are bloated with merchandise for the holidays, makes sense observed one industry expert.
“They have peak levels of inventory, which is likely creating a cash crunch right now,” the source said.
Macy’s has sold 25 locations this year, according to the source. But the company has kept largely mum about these transactions.
In response to The Post’s query last week about the Fulton Street deal a spokesperson said, “We intend to close approximately 150 Macy’s stores while further investing in our 350 go-forward fleet over the next three years. A final decision on specific locations has yet to be made.”
Steve Cuozzo contributed reporting.
