Masters of Madison Avenue’s destiny

The Friedland family could play an important role in the future of the glitzy, albeit struggling, shopping strip

Oct.October 28, 2009 09:33 PM


Daun Paris
One of the most important names in Madison Avenue retail is not lit up in glitzy letters above a swanky boutique.

But among those who know Madison Avenue’s “Gold Coast,” from 57th Street to 72nd Street — and have watched the strip suffer an uncharacteristic glut of vacancies — the low-profile Friedland family holds the informal title as the masters of Madison’s destiny.

Madison Avenue has suffered the steepest rent drops of any major Manhattan retail district — the average asking rent plunged 41 percent, to $770 per square foot, in the third quarter of 2009 from the fourth quarter of 2008, according to CB Richard Ellis.

If that isn’t bad enough, numerous sources said asking rents on Madison Avenue have actually plummeted even lower than the CBRE report indicated, to as low as $500 per square foot, while vacancies remain stubbornly high. One broker counted 11 availabilities, both publicly and quietly marketed spaces, just between 66th and 68th streets.

Now, as the avenue’s leasing limps back to health, the Friedlands are expected to play an outsize role in its future development, tenant mix and rent levels.

“They are a big player on the street,” said Faith Hope Consolo, chairman of retail leasing and sales at Prudential Douglas Elliman. “Are they difficult to deal with? They are very selective and cautious. They make sure to get not only the best tenants, but the best security, the best signatures and the best-looking stores.”

As developers and investors, the family’s reach covers some 43 Manhattan properties, including retail, office and multifamily apartment buildings they represent or own, according to research compiled by CoStar Group for The Real Deal.

The Friedlands own at least 30 buildings outright, either through their company, Friedland Properties, or through direct holdings by one or both of the founding brothers, Lawrence and Melvin. Their properties span all corners of Manhattan, from 250 Church Street in Lower Manhattan to 3821 Broadway in Washington Heights. In 2001, they paid what was said to be a record-breaking price of $22.55 million, or more than $4,300 a square foot, for the retail space at 777 Madison Avenue at 66th Street, home to the jeweler Judith Ripka.

William Friedland, a vice president at the company, said most of Friedland Properties’ retail spaces are fully leased, and pointed to two recent Madison Avenue deals as signs of a leasing uptick: local clothier Jackie Rogers at 787 Madison and candle maker Diptique at 971 Madison.

The Friedlands control a glittering cluster of storefronts in the heart of the Gold Coast, with half a dozen properties on the east side of Madison Avenue between 66th and 67th streets alone; the company has their offices at 750 Madison Avenue, above luxury shoe retailer Roger Vivier.

They have also battled opposition to reshape the avenue’s low-rise character by developing a 14-story condo tower at 746 Madison out of an assemblage of former retail stores.

This dominance has allowed them to command some of the highest rents in the area while conceding little to tenants, even in this market, where tenants wield the upper hand.

“They have shaped Madison by holding the market and demanding high rents, which they were able to get,” said Joanne Podell, an executive vice president at Cushman & Wakefield.

The Friedlands are trying to maintain top-dollar rents even during an extended economic slump that’s altering how consumers shop and how retailers regard the once-hot notion of splashy Madison Avenue “branding” temples that might not ever make money, sources said. The former home to the luxury brand Bulgari at 807 Madison Avenue offers a case in point: The site has lacked a long-term tenant for 28 months, and now has an asking rent of $750 a square foot for the ground floor, according to one source.

In a rare interview, Lawrence’s son William Friedland, a vice president at the family firm, said long-term and temporary tenants are interested in 807 at “reasonable market rents.” He declined to disclose a number or confirm the family’s holdings, saying only that rents are off 20 to 25 percent from the peak.

“What we will see in the next couple of months are new commitments by jewelry stores that aren’t on the Avenue now,” said Friedland. “That is something you wouldn’t expect in these times.”

Any potential tenants can expect hardball dealmaking tactics. Consolo recalls struggling to set up a meeting with “Mel and Larry” about eight years ago, until the late developer Stanley Stahl intervened. After he made the call, Consolo had to hustle over to the Friedlands’ office a few hours later with her client, who brought a checkbook and signed the deal that day — on the Friedlands’ terms.

“A negotiation [with them] is quite one-sided, it really is,” said Consolo. “‘Can I get more rent-free time?’ ‘No.’

“‘Can I lower the escalation?’ ‘No.’

“They hold all the cards.”

William is known for a keen understanding of the luxury market and a more accessible approach than his father and uncle — while continuing the hard-line dealmaking tradition.

“He certainly is tough, [but] I do think it’s intelligent tough negotiation, which I can’t say of every owner I deal with,” said Andrew Mandell, partner at Ripco Real Estate.

Still, many observers say the new retail reality in the Great Recession may finally loosen the Friedland’s legendary Madison Avenue clout.

“A lot of landlords are flexible, and you’re starting to see more free rent and tenant improvement dollars, reducing asking rents — they’re saying, ‘just bring me an offer,’” said Amira Yunis, principal in the national retail group at Newmark Knight Frank.


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