Brookfield taking big loss on Fifth Ave retail condo

Investor selling 530 Fifth Avenue for $190M, 36% less than it traded for in 2014

New York /
Sep.September 07, 2021 02:30 PM
Brookfield's Bruce Flatt, Aurora Capital Associates' Bobby Cayre and 530 Fifth Avenue (Google Maps)

Brookfield’s Bruce Flatt, Aurora Capital Associates’ Bobby Cayre and 530 Fifth Avenue (Google Maps)

A great retail reset is underway as owners of pricey shopping properties unload them at a loss.

In the latest sign of the sector’s decline from its once-dizzying heights, Brookfield Property Partners is selling its block-long retail condo at 530 Fifth Avenue for around $190 million — roughly a third less than the $295 million it paid for the property near the height of the market in 2014.

Brookfield is in contract to sell the property — whose tenants include Duane Reade, Chase Bank and the discount retailer Five Below — to a partnership between Aurora Capital Associates and hedge funder Edmond M. Safra, sources familiar with the pending sale told The Real Deal.

It’s the biggest retail trade of its kind in Manhattan since the start of the pandemic, and the latest to show the decline in property values driven by competition from online shopping and an overheated rental market, both of which have made it easier for tenants to eschew expensive brick and mortar locations.

Last week, Vornado Realty Trust announced it had reached agreements to sell five struggling retail properties for $184.5 million — about half the collective $366 million the properties commanded when the REIT acquired them between 2004 and 2006.

Investors in shopping malls, meanwhile, have seen their equity diluted. Bankrupt mall owner CBL & Associates won court approval in mid-August for a reorganization plan that hands 89 percent of the company over to its bondholders. On Friday, a bankruptcy judge approved a reorganization plan for Washington Prime Group that gives part ownership to the mall landlord’s lead creditor.

A spokesperson for Brookfield declined to comment. Representatives for Aurora and Edmond M. Safra, the hedge funder nephew of the late billionaire Brazilian banking magnate Edmond J. Safra, could not immediately be reached.

Spanning nearly 60,000 square feet with 200 feet of frontage along Fifth Avenue, the retail condo is 100 percent leased, according to marketing materials from a Cushman & Wakefield team led by Adam Spies, Kevin Donner and Marcella Fasulo that brokered the sale.

Footwear retailer Ugg last year signed a lease for an estimated ground-floor rent of $635 per square foot, and tenants including Five Below, Duane Reade and Chase Bank are paying below-market rents.

The predecessor to Brookfield’s mall division, General Growth Properties, acquired the retail condo on the lower half of Fifth Avenue’s shopping corridor in 2014 in partnership with Thor Equities, which later saw its stake diminished. Brookfield owned a roughly 34 percent stake in GGP at the time of the 530 Fifth Avenue purchase, and acquired the remaining 66 percent stake for nearly $15 billion four years later, in 2018.

At the time the retail was half vacant, and then-GGP president Sandeep Mathrani boasted on an earnings call that there was a high level of demand for big box tenants seeking large spaces south of St. Patrick’s Cathedral, where tenancy switched from high-end luxury shops to more fast fashion.

“As a matter-of-fact, many retailers have been bullish on their earnings calls, to actually say they want flagship locations on Fifth Avenue,” he said in June of that year. “That’s a very bold statement, understanding the cost of real estate, and also speaks to the high amount of demand that’s available for space.”

But retail asking rents on lower Fifth Avenue between 42nd and 49th streets have declined 55 percent since their height in 2016 to $615 per square foot this spring, according to the Real Estate Board of New York.

In April, Brookfield Asset Management announced plans to take Brookfield Property Partners private.





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