Nordstrom Inc. has signed a nonbinding letter of intent on the former Drake Hotel, bringing the Seattle-based retailer a step closer to securing a Manhattan location, according to real estate sources.
The hotel is situated on the northwest corner of Park Avenue and 56th Street and is being redeveloped by its owner, Macklowe Partners.
"This is not a binding agreement," cautioned one source. "They are still a long way from any deal being finalized. Nordstrom is looking at a bunch of different options with various developers."
Still, the source added the letter of intent "sets forth parameters to put together a lease deal or a purchase deal."
It could not be learned whether Nordstrom has signed another letter of intent on a different Manhattan site, but its move appears to make the Drake the leading location in the quest.
One retail source indicated the letter underscores that Nordstrom is seriously interested in the location and that negotiations with Macklowe have been positive. "The letter of intent gives a developer a basis for getting financing, and for a bank, it takes away some of the risk," the source said. It also opens the door to further due diligence on the site.
Nordstrom declined to comment Wednesday. Officials at Macklowe could not be reached for comment.
The Park Avenue location holds plenty of potential. Given its size, the site could provide Nordstrom with the desired 200,000 square feet to make a big and powerful statement.
However, the company could consider sites of different sizes, depending on the layout, the footprint of each level, ceiling heights and other physical factors. Aside from the space concerns, Nordstrom requires a location that attracts an upscale audience, has heavy pedestrian traffic all week and lots of public transportation nearby. Any Manhattan deal also would be complicated by costs and potential issues with certain brands and designers pursued by Nordstrom, but that already sell at Bergdorf Goodman, Bloomingdale's or Saks Fifth Avenue. However, the volume potential and exposure for Nordstrom could more than offset those issues.
The Drake Hotel redevelopment is L-shaped, which would enable Nordstrom to have three entrances — on Park Avenue, 56th Street and 57th Street, a mecca for the fashion crowd seeking designer labels. Barneys New York, on Madison Avenue between 60th and 61st Streets, has a similar L-shaped configuration.One drawback is that there isn't much of a retail scene on that stretch of Park Avenue. There's a Mercedes-Benz dealership on the southwest corner, a Staples on the southeast corner and a T. Anthony on the northeast corner. But the avenue has an upscale reputation and 57th Street is filled with the kind of designer retailers that Nordstrom would want to be located near in order to attract traffic.
While keeping mum about locations, Nordstrom has acknowledged it is eager to plant its first store in Manhattan. It already surrounds the city with stores in New Jersey, Westchester and Long Island.
The company has examined buildings around Columbus Circle; Penn Station and the 34th Street area, specifically the Pennsylvania Hotel; lower Manhattan; Madison Avenue in the 50s, and Trump Tower, as well as the Lord & Taylor flagship, which has decided to remain on Fifth Avenue; 200 Fifth Avenue in the FlatIron area; an office building on the southwest corner of 58th Street and Madison Avenue, and the corner of 42nd Street at Sixth Avenue.
Macklowe bought the 80-year-old Drake from Host Marriott in 2006 for a price estimated at around $440 million. Macklowe has air rights to build up and is considering condominiums and retail space for the mix.
In May, Nordstrom hired the Madison Retail Group, a retail real estate consulting and brokerage firm, to expedite the search for a Manhattan location. A site tailor-made for an upscale department store is difficult to come by in Manhattan, though Nordstrom could try to assemble a few buildings to create suitable space, if the Drake site doesn't work out.
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