In a surprising move that has sent ripples through the New York real estate market, retail giant Macy’s has sold its department store located at 422 Fulton Street in downtown Brooklyn. This sale, unveiled just as the holiday shopping season kicked into high gear, marks a significant shift for a prime piece of Brooklyn real estate and raises questions about the future of the iconic location.
According to reports, Macy’s finalized the deal last week, offloading the massive 440,000-square-foot property to a syndicate of New York real estate investors. While neither Macy’s nor the investors have publicly disclosed the sale price, insider sources reveal a shockingly low figure: a mere $23 million. This price translates to just over $50 per square foot, a stark contrast to the typical $250 per square foot that retail spaces in downtown Brooklyn have commanded recently, according to Cushman & Wakefield’s Ian Lerner. The significant discount has industry experts and observers questioning Macy’s real estate strategy and the potential undervaluation of their assets.
Shoppers exiting Macy
The decision to sell at such a price point underscores a perspective shift for Macy’s, as one source familiar with the deal noted, “Macy’s would do that because they are not real estate investors… In my view, this is a story about a retailer who knows nothing about their most valuable asset.” This sentiment highlights a growing debate about whether major retailers are fully leveraging the value of their real estate holdings in a rapidly changing market.
Adding another layer of intrigue to the deal, this isn’t the first time Macy’s has transacted on the 422 Fulton Street property. In 2015, Macy’s sold the top four floors of the eight-story building to Tishman Speyer for a staggering $270 million. Tishman Speyer subsequently converted these upper floors into modern office spaces. Macy’s retained the lower, typically more valuable retail floors, and even invested $100 million in renovations. This context makes the recent $23 million sale of the entire property even more perplexing, especially considering the prime downtown Brooklyn location and previous valuation.
The syndicate of investors who acquired the Macy’s 422 Fulton Street property includes Albert Laboz, founder of United American Land; Isaac Chera of Crown Acquisitions; and the Chehebar family of the Jackson Group. Albert Laboz confirmed the purchase but declined to comment on the price. However, a plot twist emerged as insiders revealed that Isaac Chera initially purchased the property directly from Macy’s for $23 million and then immediately “flipped” it to Laboz and the Chehebar family for $36 million, netting a quick $13 million profit. Following this, another investor joined the syndicate, further valuing the property at $80 million, according to sources. The rapid succession of transactions and escalating valuations within a short timeframe further emphasizes the perceived undervaluation in Macy’s initial sale.
Macy
The identity of the additional investor remains undisclosed, and it is unclear whether Chera maintains a stake in the property after the subsequent transactions. Adding to the questions surrounding the deal, sources indicate that Macy’s enlisted Raider Hill Advisors, a real estate firm primarily focused outside of major urban centers like New York City, to market the Brooklyn store. This decision has raised eyebrows, as firms with deeper expertise in the competitive New York City real estate market might have been expected for such a significant property.
Macy’s corporate spokesperson declined to comment on the specifics of the 422 Fulton Street sale. Similarly, both Albert Laboz and Crown Acquisitions refrained from further comments, and Raider Hill did not respond to requests for information. However, Isaac Chehebar of the Jackson Group, while not commenting on the price, stated, “It’s a very good deal and we are very pleased with the acquisition.” He further added, “The Macy’s building is one of the most historic retail buildings in all of Brooklyn and we intend to reinvigorate it and activate the retail to its highest and best use.”
Albert Laboz and Bill Riley attending the debut of CALVIN KLEIN Home Furnishings Line at Soho Mews in New York City, 2nd October 2008
This sale occurs against a backdrop of financial pressures for Macy’s. The company reported a 2.4% decrease in sales in preliminary results last month, signaling a need to bolster its cash reserves. This move aligns with Macy’s broader strategy of closing approximately 150 stores over the next three years as they navigate a challenging retail landscape and shifting consumer shopping habits that increasingly favor online and direct-to-brand purchases. Activist investors like Barington Capital and Thor Equities have also recently taken positions in Macy’s, urging the company to create a separate real estate subsidiary to better leverage its substantial real estate assets, estimated to be worth between $5 billion and $9 billion – exceeding the company’s market capitalization.
Shopper carrying a Macy
The future of the Macy’s 422 Fulton Street location remains uncertain, but early indications suggest a potential transformation into “family-friendly attractions,” with possible tenants including entertainment giants like Netflix, Universal, and Lego. This vision hints at a broader evolution of downtown Brooklyn, moving beyond traditional retail to incorporate diverse entertainment and experiential offerings. The remarkably low sale price of Macy’s 422 Fulton Street Brooklyn NY has sparked considerable discussion about retail real estate valuation, asset management within large retail corporations, and the evolving landscape of downtown Brooklyn.
