In buying Daffy's (for an undisclosed price), Aurora is reportedly looking to sublease the chain's 19 locations, including a 28,000 square foot Times Square store and a 54,000 square foot space on 125 East 57th Street.

Newmark Grubb Knight Frank's Jeffrey Roseman said Aurora could find value in Daffy's real estate.

"Vornado did it years ago with Alexander's Department Stores," Mr. Roseman told Real Estate Weekly. Alexander's closed in 1992 and its Lexington Avenue storefront was demolished in 1999. In its stead now stands The Bloomberg Tower on 731 Lexington Avenue.

“I still think that was probably one of the greatest real estate transactions of my time," Mr. Roseman added.

Aurora is involved in a joint retail development in 301-303 West 125th Street that recently leased space to DSW, a discount shoe retailer.

Daffy's financial woes forced it to ask buyers to "go on vacation" and to cancel its orders, while also looking for a buyer for the $150 million chain.

Last month, the retailer announced that it would be closing its stores and laying off 1,300 of its employees.

drosen@observer.com