That 2013 purchase from Lladro USA Inc. was for the 16,129-square-foot space at 408 North Rodeo Drive, but those plans were thwarted when the owners of the next-door property — 400 North Rodeo Drive, where Chanel had a long-term lease — rejected the idea.
“That opened the door for Chanel to make a record offer so they could control their own destiny,” said Robert Cohen, vice chairman in the Santa Monica office of real estate brokerage and advisory firm RKF, which advises high-profile retailers and landlords in deals.
The hurdle was cleared when this week it was disclosed Chanel paid $152 million for the space next door, totaling 11,500 square feet. It’s a new record for the Southern California region. The real estate sits at the corner of Brighton Way and Rodeo Drive, with neighbors that include Cartier, David Yurman, Roberto Cavalli and Tory Burch.
A Chanel spokesperson declined to comment on the transaction or its future plans for the site. An attorney for one of the sellers did not respond to a request for comment.
The eyebrow-raising price tag is hardly isolated to simply a strong desire by the fashion house to control its presence on the street, Cohen said.
“Rodeo Drive is only three blocks and there’s no room for it to grow,” he said. “You have much greater demand than you have supply and this property happened to sit at the 50-yard line intersection of one of the greatest luxury retail districts in the world. [The price is] not an anomaly. It’s just amazing real estate.”
The street has seen its fair share of record-breaking deal activity that began with LVMH Moët Hennessy Louis Vuitton chief Bernard Arnault’s $85 million purchase in 2012 of a 7,100-square-foot building on Rodeo Drive. It’s currently home to Céline.
Gucci’s tenancy at 347 North Rodeo Drive was the site of a sale in early 2014. The reported buyer, Zara founder Amancio Ortega, paid $100 million for the building.
Ownership on the famous strip of the street is made up of a mix of families — two of which were the reported sellers in Chanel’s most recent deal. There are also plenty of institutional investors.
In the case of family trusts, Cohen said, the real estate is purchased and held long-term, essentially acting as an annuity and which partially explains the steep price.
“The good news here is that Chanel is building one of their biggest flagships on Rodeo Drive,” Cohen said. “It’s a nod to Beverly Hills and the luxury market here in a time when sales are declining. The dollar’s not strong. You’ve got global concerns. You’ve got terrorism. You’ve got e-commerce businesses. The fact that Chanel is investing this much on a street, on a single space, is a positive story.”