FEDERATED PULLS AHEAD IN RACE FOR I. MAGNUM SITE
Byline: Sharon Edelson, with contributions from Rich Wilner
NEW YORK — Federated Department Stores appears to have gained the upper hand in the fight for the vacant I. Magnin building on San Francisco’s Union Square.
The eight-story I. Magnin flagship, at Geary and Stockton Streets, was closed by Federated in January, as a result of its merger with R.H. Macy & Co.
All along, Macy’s claimed that it had a 60-day option on the I. Magnin lease, which expired on Feb. 17. The RREEF Funds, the building’s owner, said Macy’s rejected the lease during its bankruptcy. According to court papers, Federated rejected the lease on Feb. 17. However, a Federated spokeswoman said the company negotiated a six month extension.
“The point of the extension is to give us time to make a decision,” she said. “The developer will continue to try to find other alternatives. At the end of the six months, we will have the opportunity to renegotiate another extension.”
Federated is considering moving its Macy’s West offices to the upper floors of the Magnin building and turning the lower levels into retail space that could be leased to another party, the spokeswoman said. Federated has considered moving its Macy’s men’s store from its current location at Stockton and O’Farrell Streets — across from its main store on Union Square — into the vacant I. Magnin building.
“We have several options we are considering,” the Federated spokeswoman said.
Barneys New York, which was said to be one of the leading candidates to take over the space, seems to be having second thoughts.
“The I. Magnin space is a nice space, but I’m not married to it,” said Gene Pressman, co-chairman and co-chief executive officer of Barneys New York. “There are other areas that seem to be developing nicely, for example, Grant Avenue, where Agnes b. opened a store.”
Sources said Barneys has lined up a financial partner for San Francisco other than Isetan Co., the giant Japanese retailer that backed Barneys’ branches in Japan and helped it open on Madison Avenue. It is “a very substantial, national real estate investment company that owns property throughout the country,” said a source close to Barneys. Pressman declined to comment.
“Macy’s was willing to step up right now,” said Ken Brownell, a broker with Blatteis Realty Co. “The other people like Barneys were not ready. Macy’s is concerned about having Barneys next to them. Barneys hasn’t dropped out, but they’ve been put in a position where they have to sit back and see what Macy’s is going to do.”
Considered one of the most desirable pieces of San Francisco real estate, the building’s lower floors could fetch about $300 per square foot.
“RREEF’s plan even prior to Macy’s bankruptcy was to sell the building,” said one San Francisco real estate broker. “They probably quickened that pace because there is a tremendous amount of work that needs to be done and that is not something RREEF wants to undertake.” — Fairchild News Service