For the Baby Boomers who remember record sizes of 33, 45 and 78 and names of retailers such as Sam Goody, Tower Records, HMV and Coconuts, this summer will be momentous: It marks the end of the mega-music retailer in New York City.
In June, two of the original 23 large music chain stores of Virgin Megastore will close in Manhattan. Even though the Virgin store at 1540 Broadway in Times Square generated $55 million in 2008 with $6 million in profit, and the sister store in Union Square had sales of $40 million, earning a few million dollars in profit, Related Companies and Vornado Realty Trust, which own the Virgin Entertainment Company, have decided to close those stores and seek retailers who will pay significantly higher rents for them.
The retailer has announced that the chain’s San Francisco store will close by the end of next month. The three last remaining mega-stores are located in Orlando, Hollywood, Calif. and Denver, and will close and be liquidated before the end of the summer.
As opposed to filing for bankruptcy due to losses from retail operations, Virgin remained a leader in retailing. Over the past decade, the U.S. has lost a number of music merchandising retailers including Los Angeles-based Tower Records and United Kingdom-based HMV and W. H. Smith.
The retail space at 1540 Broadway is owned by Vornado Realty Trust, who purchased the retail condominium, garage and signage in 2006 for approximately $260 million from a joint venture of German-based real estate investment company the Paramount Group and Principal Insurance Company.
According to sources, approximately 100,000 square feet of the retail, presently occupied by Virgin, has been leased to Forever 21, a retail clothing chain, for approximately $20 million a year. Industry leaders believe that the previous rent for the store was approximately $5.4 million a year. The lease is one of the most expensive retail details ever done in the city, topping Gucci’s rent in the Trump Tower for approximately $16.5 million and last year’s former Brooks Brothers lease at 666 Fifth Avenue for approximately $15 million a year.
Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” and “Building New York” on CUNY TV and on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.