NEW YORK — Inditex Group, parent of fast-fashion retailer Zara, has acquired a 38,800-square-foot retail property at 666 Fifth Avenue for $324 million.
The space, between 52nd and 53rd streets, was formerly the NBA Store and is part of the building’s 90,000-square-foot retail condo that includes a Hollister flagship and a Uniqlo flagship due to open this fall. Uniqlo set a retail record in Manhattan last year when it agreed to pay $300 million over the course of a 15-year lease, or about $20 million per year, surpassing Gucci’s $16.5 million in annual rent at Trump Tower.
Inditex said it will use the space to open “one of the most emblematic Zara flagships worldwide.” The Spanish behemoth is clearly smitten with the location and the building, which it called “one of the most symbolic in the Big Apple.” It’s also one of the priciest, commanding some of the highest rents in the city. The NBA Store closed last month after balking at the landlord’s rent increase to more than $2,000 a square foot.
The building was sold in 2007 for $1.8 billion, the largest single-building sale in the city’s history. Global private equity firm the Carlyle Group and Crown Acquisitions in 2008 bought a controlling interest in the retail portion of 666 Fifth Avenue for $525 million. Other tenants besides the NBA Store were Brooks Brothers and Hickey Freeman, which both departed in 2009.
Robert G. Stuckey, head of Carlyle’s U.S. real estate team, said the group decided to sell the space to Inditex because “we found common ground on the pricing. When space is fully functioning, that block may be the highest-grossing retail block in the city. Uniqlo will have 80 cash registers.”
Zara operates seven stores in Manhattan. Inditex may decide to close the Zara unit at Fifth Avenue and 54th Street when the new flagship opens just two blocks south. Inditex could replace that Zara with one of its other concepts, such as Pull & Bear, Massimo Dutti, Bershka or Stradivarius, according to one observer who has worked with Inditex in the past.
While Inditex said its expansion strategy “remains focused on store growth on a leasehold basis,” the company has been making investments in real estate. “This has been a strategy in certain U.S. markets that are important to them, where they can secure a position in the market and use their cash,” said a retail expert who requested anonymity, noting that Inditex has invested in real estate in San Francisco and Chicago and owns property on Lexington Avenue here.