The Real Deal New York

Manhattan House looks to cash in on selling retail space

March 11, 2008 10:59AM
By David Jones

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The owner of the Manhattan House is pursuing a $100 million sale of the building’s retail, office and parking space, a move that observers say could bring several major apparel retailers to the Upper East Side apartment complex, including Brooks Brothers Inc.
 
Jeremiah O’Connor, owner of O’Connor Capital Partners, has hired Eastdil Secured to find a buyer for the space, which includes 25,000 square feet of retail, 7,350 square feet of office space as well as a 225-car garage. O’Connor is converting the 200 East 66th Street complex into condominiums.

Manhattan House, which takes up an entire block from Second to Third Avenues, already includes a mix of service-oriented stores and apparel chains, including Club Monaco and a new entry from Canadian athletic-wear maker Lululemon Athletica.

“We’ve had a number of national tenants that have come to look at this space,” said Gary Trock, senior vice president of the retail group at CB Richard Ellis, which is marketing the Manhattan House space.

Along with Brooks Brothers, another potential tenant is White House Black Market, which sells clothing and accessories only in shades of black and white.
 
Trock declined to comment on any specific tenants, but said that Manhattan House has some vacant retail spaces and other leases that are coming up for renewal. He said some retailers are being moved around within the Manhattan House complex to open up potential space for others.
 
Asking rents range from $200 a square foot on Second Avenue to $350 a square foot on Third Avenue.

Brokers said the value of the Manhattan House properties would depend on when the existing leases roll over and what type of retailers a new owner could bring into the complex.
 
“There are a lot of tenants in the apparel business that do not have a store up here yet that need to be there,” said Ariel Schuster, senior vice president at Robert K. Futterman & Associates.

In 2007, Schuster negotiated a 20-year lease to put the 14,000 square foot flagship store for women’s retailer Coldwater Creek at 1172 Third Avenue, which is two blocks north of Manhattan House.
 
Analysts say that a number of European investors have been trolling the area looking for retail deals, including more than one Spanish firm.
 
Eastdil representatives would not comment beyond confirming that the properties were up for sale. O’Connor Capital Partners also declined comment.

Club Monaco representatives declined to comment, and Lululemon Athletica officials were not immediately available for comment.

Brooks Brothers has an Upper West Side location at 1934 Broadway. A Brooks Brothers spokesperson said the retailer was always looking for new locations in Manhattan, but did not have any comment on Manhattan House.
Representatives from White House Black Market, which operates a store at 136 Fifth Avenue in the Flatiron district, were not immediately available for comment.
 
Analysts said the sale of the Manhattan House’s commercial space has not been affected by any problems related to the building’s condo conversion, detailed in this month’s issue of The Real Deal. O’Connor, while settling a prolonged legal battle with former development partner Richard Kalikow, has faced off against a group of tenants opposed to the conversion. The teants claim that they have been harassed into abandoning their apartments.
 
O’Connor in February posted a new update on condominium sales in the building’s lobby, showing that 39 of the building’s 583 units had been sold, with only four of them going to residents. The Manhattan House faces a June 1 deadline to sell 15 percent of its apartments, under the terms of its financing from Nordbank, which wants to see progress before it puts more money into the conversion.
 
Prudential Douglas Elliman, which is marketing the property, previously stated that it had more than 50 units under contract. Prudential officials were not immediately available for comment.

On Thursday, Futterman’s Schuster completed a similar deal to the one that O’Connor is pursuing, with a sale of 14,000 square feet of retail space for $4 million at the Maison East Condominium at 1438 Third Avenue. Tenants at that space include Surefoot and Boom Gym.
 

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