DKNY’s Midtown Headquarters On The Market For $65 Million, Investor Doubts Swirl

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Fashion label DKNY has put its 150,000-square-foot Midtown headquarters on the market for $65 million. A partnership led by Sitt Asset Management owns the property at 240 West 40th Street, between Seventh and Eighth Avenues. Sitt enlisted Jones Lang LaSalle to handle the sale. Richard Baxter, Scott Latham and Glenn Tolchin will lead the JLL (JLL) team.

DKNY fully occupies the 12-story building in a lease that expires in 2016. Those details could either encourage investors or steer them away from the property, reports Crain’s. Given the lackluster leasing market, there’s a fair chance that the company–a subsidiary of international luxury goods behemoth LVMH–will exit the buiding when the lease is up, leaving 240 West 40th Street with full vacancy.

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240 West 40th Street (Courtesy of CoStar Group Inc.)

While the 23-year-old clothing and accessories line is headquartered on 40th Street, its parents company, DKNY International,  claims several floors in nearby 550 Seventh Avenue, a 250,000-square-foot building. That leads prospective buyers and others following the deal to believe that the organization might want to consolidate space at the larger location. (Strengthening that theory: DKNY renewed its 40th Street lease for a brief five years in 2011.)

“If a buyer wanted to reposition the property to, say, a hotel, to be able to empty the whole building would be considered a positive,” Robert Knakal, chairman of the brokerage firm Massey Knakal Realty Services, who is not involved in the deal, told Crain’s. And if vacancies presented the opportunity to roll old leases, a new owner could collect increased rents.

However, sprawling vacancies have recently given investors pause. This month, a deal for the investment firm Jamestown to purchase 90 Fifth Avenue sank after Forbes missed three rent payments at the building.