From Barneys to Billion-Dollar Bids: Ben Ashkenazy Real Estate Reign Draws LVMH and Chanel

From Barneys to Billion-Dollar Bids: Ben Ashkenazy Real Estate Reign Draws LVMH and Chanel

 

The saga of 660 Madison Avenue, once home to Barneys New York, reflects the evolving luxury market. After Barneys’ 2019 liquidation, LVMH considered it for a Cheval Blanc hotel but backed out due to design constraints.

The saga of 660 Madison Avenue, the erstwhile flagship of Barneys New York, encapsulates the dynamic shifts within the luxury retail and real estate sectors. Following the liquidation of Barneys in 2019, LVMH showed interest in acquiring the 275,000-square-foot property, eyeing it as a potential site for its first Manhattan Cheval Blanc hotel. The plan, however, was shelved due to the building’s limitations in offering sufficient rooms with views of Central Park. Amidst these developments, rumors surfaced about Chanel’s $1 billion verbal bid for the same space, contingent upon a series of transactions in the Upper East Side, though Chanel later clarified that no offer had been formally made.

Ownership of the Barneys building lies with a consortium that includes Ben Ashkenazy and the Brazilian Safra family, highlighting the property’s emblematic status in the luxury market’s evolution. This evolution has seen significant consolidation, profit generation, and preparation for potential market downturns. The changing rules of fashion retail since Barneys’ closure make the notion of another department store filling its shoes increasingly unlikely, with speculation instead turning towards the possibility of a megabrand megastore, despite the financial hurdles such an endeavor would entail.

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At its core, the luxury industry’s essence revolves around real estate, where location and price critically influence profitability. The steep climb in retail rents within prime Manhattan locales—exemplified by Dolce & Gabbana’s $12 million annual expenditure for a space once occupied by Hermès—underscores a broader trend. In global metropolitan centers like Manhattan, Paris, and Los Angeles’s Rodeo Drive, the prohibitive costs of renting are pushing luxury brands towards property acquisition as a more viable strategy.

LVMH’s real estate interests have broadened beyond 660 Madison Avenue, with the luxury conglomerate setting its sights on 745 Fifth Avenue and a collection of properties on 57th Street. This includes potential acquisitions near its Tiffany building, enhancing its strategic footprint in the area. The notion of real estate as a source of generational passive income is exemplified by the Wertheimer family’s potential interest in 660 Madison, mirroring the Goodman family’s benefit from owning 754 Fifth Avenue.

This trend towards real estate investment is not isolated to LVMH, as evidenced by Kering and Prada Group’s significant acquisitions on Fifth Avenue, alongside interest in the Jarmulowsky Bank Building. Such moves are part of a broader “market colonization via real estate,” where luxury brands secure their dominance not just through products but through strategic property ownership.

The strategic pursuit of prime real estate is a testament to the vision of luxury leaders like Bernard Arnault, who see long-term value in owning property in the world’s most prestigious locations. This strategy prioritizes investment in cities renowned for their enduring appeal to the luxury market, such as Paris, London, New York, and Los Angeles, focusing on exceptional buildings in safe and stable areas.

Despite a setback in LVMH’s plans to establish a Cheval Blanc hotel on Rodeo Drive, the company’s ongoing ownership of the site represents a steadfast commitment to real estate investment as a key diversification strategy. The slow build-up of a property portfolio, akin to a real estate investment trust, is seen as a prudent approach to weathering market fluctuations.

The uncertain future of the Chanel deal at 660 Madison Avenue illustrates the complex interplay of events that shape real estate transactions in the luxury sector. This uncertainty, however, is part of a larger shift in the industry’s approach to the U.S. market. Gone are the days of licensing and third-party operations; today, luxury brands are increasingly inclined to own their retail spaces outright, marking a new era of autonomy and strategic investment in the fabric of luxury retail.

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