Nordstrom Inc. is discovering the difficulties of securing a flagship in Manhattan.
According to real estate sources, the Seattle-based retailer's plan to open a store on the former Drake Hotel site, on the northwest corner of Park Avenue and 56th Street, has hit snags, although it's not a dead issue.
"The evolving saga of the Drake Hotel site is still in flux," said a source close to the upscale specialty chain.
Last fall, Nordstrom signed a nonbinding letter of intent to move into the former hotel, which is being redeveloped by Macklowe Partners. However, last week Macklowe was served with a notice of default after talks faltered with Deutsche Bank and other debtors on refinancing seven skyscrapers in New York City. The financially troubled Macklowe now runs the risk of losing some properties.
Before Macklowe's financial problems came to a head, the developer tried to purchase the building at 48 East 57th Street housing Jacob & Co., the jeweler, and Rubann hair colorists, but was rebuffed. "Mr. Macklowe offered to buy our building. Absolutely, we are not selling," said a woman at Jacob & Co., who identified herself as the controller but declined to provide her name. Jacob Arabov plead guilty last year to falsifying records and lying to a federal agent in a drug probe, raising questions about the future of his company.
The parcel is a critical piece in the redevelopment since it would give Nordstrom an entrance on 57th Street, which is filled with the kind of designer retailers the chain wants to be near, including Prada, Burberry and Dior. Without that 57th Street access, Nordstrom is likely to take a pass on the site, even though there would still be entrances on Park Avenue and 56th Street where there is less of a fashion crowd.
On Wednesday Nordstrom declined to comment on the Drake Hotel situation.
However, it is understood the company is hanging in and waiting to see how things play out. While Nordstrom considers the former Drake attractive, "there are many mitigating factors that are completely out of the retailer's control," said the source close to the retailer.
"The deal has gone south," added another real estate source.Despite the hiccups, Nordstrom remains eager to open a flagship in Manhattan, which would be the retailer's first store in the city. Nordstrom is seeking approximately 200,000 square feet in an upscale area with lots of public transportation nearby.
The company continues to search Manhattan, but it's hard to imagine any available sites as good as the Drake. "The Drake Hotel could be the only viable site for Nordstrom in New York that's big enough and in the right location," said Robert Futterman of Robert K. Futterman & Associates LLC. "I could see why they would persevere and stay involved and I don't see that many alternatives."
The letter of intent underscored how serious Nordstrom is about the location. The letter gets the wheels of development in motion by giving a builder a basis for getting financing, and gets the retailer going on design plans and deeper due diligence.
Other sites the company has examined and apparently ruled out include locations around Columbus Circle and Penn Station and the 34th Street area, specifically the Hotel Pennsylvania on Seventh Avenue, just south of Macy's, which will be redeveloped by Vornado Realty. While the Herald Square vicinity has enormous pedestrian traffic, there's a mass appeal and hardly the upscale cachet that Nordstrom usually seeks in site selection.
Nordstrom also has examined lower Manhattan and the financial district, which lacks sufficient weekend traffic to support a department store but is booming with residential construction. Nordstrom also has eyed Madison Avenue in the 50s; 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. The developer has air rights to build up and is considering condominiums and retail space for the mix. The plans could change if another developer took over the property.
In May, Nordstrom hired the Madison Retail Group, a retail real estate consulting and brokerage firm, to expedite the search for a Manhattan location."It may be back to square one for Nordstrom," said one real estate broker on Wednesday.
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