Any takers for Borders’ Manhattan spaces?

Interest is high in Columbus Circle and Herald Square locations, bookstore chain's broker says
By Peter Kiefer | July 20, 2011 06:31PM

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From left: James Avallone of DJM Realty, Benjamin Fox of Massey Knakal, Gary Alterman of RKF, Borders at 2 Penn Plaza and the Borders at 10 Columbus Circle (Columbus Circle credit: Westside Rag)

Earlier this week official word came down that Borders Group would be
closing its remaining 300 retail outlets, two of which are prized retail
spaces in Manhattan, so it should come as no surprise that suitors for
the soon-to-be available spaces at Columbus Circle and Herald Square
are swooning.

“I can’t say anything in detail but yes, there is lots of interest,” said
James Avallone, senior managing director of Melville, N.Y.-based DJM
Realty, which was hired to handle the liquidation and lease transfers of Borders’ 399
remaining real estate holdings
in the United States.

In February, Borders announced the first wave of closures that affected
200 stores nationwide
. A number of other Manhattan Borders
outlets were involved in that first wave of closures including a store at
100 Broadway in Lower Manhattan which is reportedly close to signing
a new tenant.

Borders’ two
remaining Manhattan spaces are located at 10 Columbus Circle in the
Time Warner Center and 2 Penn Plaza on the corner of 33rd Street and
Seventh Avenue where they hold 26,000 square feet and 24,000 square
feet, respectively. The now-defunct leases were expected to run through
2019 with landlord’s Related at the Time Warner Center and Vornado at
2 Penn Plaza.

According to Avallone, DJM Realty is in the process of marketing the two
spaces and expects them to be available and ready for new tenants by
the middle of September.

But, Andy Graiser, DJM’s co-president and CEO, said in the next few
weeks they would begin to solicit proposals from retailers and landlords
for all of the company’s holdings and would then hold two auctions
in late August and another in late September. Graiser said whether a
store would be included in the auction would depend on the amount of
interest in the lease and the bids they receive. Those leases that are not
sold would be returned to the landlords with very limited liability by
the state. While the Manhattan stores could be part of the auction, since
they are pretty sought after, an outside deal is also likely.

“We always have the ability to pull stores off the auction and do the sale
but we don’t know if that will happen. If you can get a very good price it
may be that the debtor decides that that is the best way to go,” Graiser
said.

Interest in the Columbus Circle and Penn South stores is bound to be
varied. While the stores are nearly identical in square footage, their
similarities pretty much end there.

“They are very different from each other. The Columbus Circle space is
in a high-end retail mall which should be fairly easy to get rented. All the
tenants in Columbus Circle are very successful and it is one of the only
malls in New York that is doing business and doing well and Columbus
Circle is a major transportation hub, which has major office buildings
and hotels there. I am sure that Related will get it leased and if it takes
time it will only be because they want to get the right tenant in there,”
said Gary Alterman, executive vice president at Robert K. Futterman &
Associates.

As for 2 Penn Plaza, Alterman notes that while that area also has lots of
foot traffic due to Madison Square Garden it is a very different location
with respect to the space at the Time Warner Center.

“Again it is critical Vornado gets the right tenant that goes with the
property. All of 34th Street over the last 10 years has been continuously
cleaning up and getting better by going with national retailers so I am
sure they will get someone that fits in with 2 Penn Plaza,” he said.

Benjamin Fox, executive vice president of retail
leasing Massey Knakal Realty Services, said he could see a large apparel
user at the 2 Penn Plaza space but noted that the space in Time Warner
Center was an entirely different story.

“You have an ownership group that is very particular as to who it will
allow occupy that space and I can guarantee you it will not be a discount
retailer,” he said. “I could see a gussied-up CVS.”