The Real Deal New York

Equity One’s retail property strategy pays off

REIT acquired fee interest at 161 West 16th Street for $55 million in 2011

February 26, 2016 02:10PM

From left: Chaim Katzman and 161 West 16th Street

From left: Chaim Katzman and 161 West 16th Street

When Equity One, a real estate investment trust, expanded from shopping centers to high-end retailers after the recession, it became one of the first big buyers in the urban real estate market after the downturn.

It seized opportunities, best exemplified by 161 West 16th Street. In 2011, the REIT bought the fee interest in the retail condominium at the building, which was the original Barneys New York flagship store, for $55 million in 2011.

Its post-recession strategy was to acquire retail properties in affluent urban centers, upgrade them and then attract high-end tenants that could pay higher rents, like Barneys.

“When everyone was selling, we were buying,” Chaim Katzman, Equity One’s founder and chairman, told the Wall Street Journal. “We had a contrarian approach, and we looked at it long term.”

Five years ago, discount clothing chain Loehmann’s was located at 161 West 16th Street. Equity executives anticipated waiting out the remaining years that Loehmann’s had on its lease, but the retailer filed for bankruptcy protection in 2013. This allowed Equity One, which has offices in New York and North Miami Beach, to close a lease deal with Barneys for about 20 years.

Patrick Smith, vice chairman at JLL, called Equity One buying the multilevel property in Chelsea a “gutsy move.”

The firm also purchased other properties, including as One’s Broadway Plaza shopping center in the Bronx.

Equity One, a U.S. subsidiary of Israel-based real-estate firm Gazit-Globe, wasn’t overleveraged, and had cash on hand from properties it sold from 2006 to 2008, Katzman told the Journal.

The REIT is continuing the upgrade to attract high-end tenant strategy is a “smart approach,” Adelaide Polsinelli, senior managing director at Eastern Consolidated, told the Journal. Rather than buying at today’s high prices, the firms get the returns they want without overpaying, she said. [WSJ]Dusica Sue Malesevic

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