The Real Deal New York

Nordstrom going private unlikely to impact deal at Gary Barnett’s tower

Retailer has contributed at least $249M of $426M in costs toward 7-story flagship store at 217 West 57th St.
By Chava Gourarie | June 12, 2017 07:30AM

Gary Barnett and Central Park Tower at 217 West 57th Street

The Nordstrom heirs may spend $10 billion to buy back 100 percent of shares in the company that bears their name, and take the 116-year old company private, the company announced last week.

But such a move would be unlikely to influence the retailers’ plan to open its first Manhattan location, a seven-story flagship store at the base of Extell Development’s TRData LogoTINY Central Park Tower, analysts told The Real Deal.

Gary Barnett’s 95-story Tower On West 57th Street is under construction, and the exterior of the first seven floors has been completed. As of April 2017, Nordstrom has contributed $249 million out of the total $426 million investment in the property, and will cover the costs of the interior buildout. The anticipated opening date for the Nordstrom store has been pushed from 2018 to 2019, and Extell is still searching for a $900 million construction loan.

As buyouts are highly leveraged, Nordstrom will be looking for sources of cash to lower their borrowing costs, if they were to go through with it, according to Richard Kestenbaum, a partner at private investment firm Triangle Capital. “If they can get out of that $400 million, then it’s a source of cash by virtue of not having to put it in the capital expenditure column,” he said.

“I don’t think they’d be incentivized to walk away from it,” an analyst familiar with Extell said of Nordstrom’s commitment.

Retailers are facing a tough market, and while flagship stores are their own breed, even they are not immune. Ralph Lauren announced in April it’s closing its Fifth Avenue store, Hudson’s Bay Company has considered switching things up at its $655 Million Fifth Avenue Lord & Taylor flagship by stacking apartments and office space above it, and Macy’s, which plans to close more than 65 stores, may put a public park on its 34th Street flagship location to attract more visitors.

Nordstrom has thus far escaped the fate of its struggling retail peers, but that doesn’t mean it’s in the clear. While the retailer posted better-than-expected returns in the first quarter, same-store sales, a figure that excludes sales from new stores, fell by .8 percent. In the wake of the May 11 report, share price dropped and rose only with news of the potential buyout.

A spokesperson for Nordstrom declined to comment.

Earlier this month, the New York State Attorney General’s office approved Extell’s $4 billion offering plan at 217 West 57th Street. That places the average unit price at just under $22.5 million, twice as much as the average sales price for an apartment in the top 10 percent of the market, according to appraisal firm Miller Samuel. It’s New York’s first-ever $4 billion condo.

(To view financing transactions from Extell Development, click here)