Blackstone buying $200M Soho retail portfolio

Blackstone is buying a group of retail buildings in Soho with tenants including Patagonia and celebrity-favorite fashion brand Amiri for about $200 million. It’s the biggest Manhattan retail deal by an investor in more than three years, and another sign that the once-maligned asset class is returning to favor.

The private equity firm is buying the four buildings spread across the neighborhood from Maryland-based ASB Real Estate Investments, which paid $204 million over a span of four years starting in 2012 to acquire the properties with its partners.

Some of the current retail leases are below market rates, and Blackstone is betting it can increase revenue by bringing those spaces up to today’s levels. It marks a significant return to the normal kind of investing that disappeared when the retail bubble burst in 2016, leading to a years-long drought during which retail was a pariah for most investors.

The market eventually corrected, and leasing and rents have slowly and steadily improved in recent years, sparking renewed demand from property investors.

Elena Clarfield, a senior associate at Blackstone Real Estate, said the purchase “illustrates Blackstone’s ability to play offense in today’s market and identify terrific opportunities for our investors in prime locations.” 

The portfolio includes office space above the retail. In fact, a little more than half the square footage is office.

ASB CEO Robert Bellinger said the sale “aligns with ASB’s strategy to sell most of our office investments in favor of concentrating in industrial, apartment and self-storage sectors, which we expect to have stronger risk-adjusted returns.”

He added that the company has sold $870 million in office properties across the country since 2021.

A Newmark team led by Adam Spies and Josh King negotiated the sale. 

The deal is the largest retail purchase made by an investor since late 2021, when Aurora Capital Associates bought a block-long retail condo at the base of the office building 530 Fifth Avenue for $192 million. The seller, Brookfield Property Partners, had paid $295 near the height of the market in 2014.

(Jeff Sutton’s Wharton Properties sold a trio of retail buildings last year for nearly $2 billion to Gucci, Prada and Dyson, but purchases by those kinds of end-users don’t necessarily reflect the demand from investors that drives the market.)

Blackstone is buying 61 Crosby Street and 72-76 Greene Street, which ASB owns with Chicago-based L3 Capital. Also included are the Jean Nouvel-designed 465 Broadway, which ASB owns with Centurion Realty, and 415 West Broadway.

ASB Real Estate, which is a division of ASB Capital Management, bought the properties through its open-ended ASB Allegiance Fund, which invests in core properties. The company last year announced a plan to sell off more than $1 billion worth of real estate. 

As of the end of the third quarter, ASB said it had 24 assets on the market valued at $1.4 billion.

“These prospective sales, which include 13 office and seven urban retail assets, will further help recast Allegiance Fund into a portfolio with an asset base centered around income-producing industrial, apartment, and selfstorage investments located in higher-growth markets with attractive fundamentals,” the company said in a presentation.

The fund has made a return of roughly -15 percent so far this year.

Retail in Soho, meanwhile, is headed in the other direction.

A “flurry of leases” along the Broadway corridor has helped drive down availability, according to a third-quarter report from CBRE.

That stretch of Broadway saw rents increase 35 percent year over year to $679 per square foot.

“Average pricing on the corridor has risen above $600 per square foot to a level not seen since 2017,” the report read.

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