Ask anybody in the Big Apple about the king of men’s clothing retailers and most likely the name “Barney’s New York” will come up during the course of conversation. And for New Yorkers, both men and women alike, the iconic and cutting edge fashion house has always been an integral part of the distinguished clothing scene in this town for close to a century.
Now, however, Barney’s future in its flagship Manhattan location at 660 Madison Avenue, (surrounded by the finest names in haute couture) is in question. Back in December, it was reported that the retail giant was at loggerheads with its landlord over a possible rent increase. As such, Barney’s fate will be determined by an arbitrator, whose services have been solicited in attempts to resolving the monetary issues between the two sides.
Barney’s current lease is set to expire in 2019 and the property’s owner, Ashkenazy Acquisition is asking for an increase in rent. For months now, the two sides have been immersed in intense negotiations as they grapple to see resolution of precisely what constitutes fair market rent at the property. At present, Barneys pays $20 million per year to rent the nine-story building at Madison Avenue and East 61st Street.
Ashkenazy Acquisition is a New York City-based firm that invests in retail and office real estate and asserts that it has a portfolio of over 100 buildings. At its helm is Ben Ashkenazy, the chief executive, chairman, and founder of the company. In addition to having 660 Madison in its portfolio it also has other retail condominiums in shopping districts throughout Manhattan. Ben’s father, Izzy Ashkenazy, is a businessman also involved in real estate.
Ashkenazy Acquisition also owns 656 Sixth Avenue, an erstwhile church that housed the Limelight nightclub in Manhattan. The firm is known for investing in iconic real estate, including Boston’s Faneuil Hall, New York City’s Plaza Hotel, the Marriott East Side, Barney’s New York, Bay Harbor Mall in Lawrence, the Toms River Center in New Jersey and Washington, DC’s Union Station.
The issue that arises is who will be the big loser in this deal if this imbroglio cannot be worked out? Veteran Manhattan realtors have speculated that if Barney’s should decide to decamp from their flagship location in Manhattan, then it could translate in to a major blow for the Ashkenazy company.
Here’s why: For the last few years reports have emerged indicating that retail rents in Manhattan have seen a significant decrease in price as many retailers have opted to relocate elsewhere and landlords have taken a hit. As the Manhattan market continues to adapt to current retail challenges, it was reported that in the third quarter of 2017, rents declined in 12 of the 16 main retail corridors tracked by CBRE, with the overall average asking rent falling 13.4% year-over-year. In tandem, the number of direct available ground floor spaces declined for the second consecutive quarter, dropping 2.5%, from 202 to 197 spaces. Despite the decline, availability remains high relative to 12 months ago.
There is no doubt that the Ashkenazy Acquisition Company still has a mortgage to pay on 660 Madison Avenue. In June of 2001, it was reported that Ben Ashkenazy paid $135 million to buy the Barneys New York store on Madison Avenue. It was also reported that his company purchased the freestanding Chicago and Beverly Hills stores for an additional $55 million from the Japan-based Isetan Corp. At the time, the New York Post reported that Ashkenazy obtained $135 million in financing from CDC Mortgage Corp. while the rest was provided in equity from “family and friends.”
In August of 2014, it was reported that Ashkenazy Acquisitions was in contract to buy the original Barney’s building at the corner of Seventh Avenue at West 17th Street. Ashkenazy paid the Rubin Museum of Art $60 million for the 45,000-square-foot space. The museum, which bought the building at 115 Seventh Ave., along with the adjoining 138-154 W. 17th St., for $20 million from Barney’s founders, decided that selling the property was in its best interest, according to a NYP report in 2014.
For Ashkenazy, it may be quite difficult to find a tenant for the tony location at the price he is asking if Barney’s New York should bolt. If one considers the current state of the retail and commercial rent market in midtown Manhattan as well as the upper East Side and upper West Side, finding a stable tenant might be next to impossible. He may find himself with problems coming up with his mortgage.
For Barney’s New York, it has been reported that the Madison Avenue store accounts for a third of the chain’s revenue, so being forced to move will certainly come as a heavy blow, despite their formidable online presence.
The Jewish Voice placed several phone calls to Barney’s corporate headquarters in Manhattan for comment on the matter but they have yet to return the calls.
By: Robert Miraglia