Sutton’s Place: The Behind-the-Scenes Negotiations That Led to Jeff Sutton’s Blockbuster 1552 Broadway Acquisition
By Daniel Geiger July 24, 2012 7:00 am
reprintsMr. Sutton’s Past
1552 Broadway was hardly Mr. Sutton’s first foray into high-wire real estate investments. In 2008, he purchased the retail component at the Soho building 599 Broadway for a hefty price. Mr. Sutton ended up reconfiguring the building, which has frontage on both Mercer Street and the much more valuable Broadway retail corridor. By knocking down walls and moving other impediments that had segregated the building’s retail space into a double-sided layout, he connected all the space to Broadway and the much higher rents that thoroughfare commands. Mr. Sutton eventually leased the space to American Eagle Outfitters in a deal valued at a whopping $120 million over several years, according to reports.
“He rented them Mercer Street space at Broadway rents,” one source familiar with that deal told The Commercial Observer last week.
But Mr. Sutton also understood the Times Square market, an area of the city that has seen rapid rental increases in recent years as it has evolved into a larger-than-life tourist attraction that brings loads of foot traffic and high store sales—and also into a central hub for media and entertainment conglomerates that retailers have seen as an increasingly attractive stage for branding.
“Rents have increased in Times Square by about 20 percent over the last year, which is very impressive—I don’t think there’s anywhere else in the city where you’re seeing those kinds of year-over-year gains,”said Mr. Smith. “Ground floor space in the bow tie comes with an asking price probably on average of between $2,000 to $2,500 a foot. You’re talking about space that five years ago was $500 a foot.”
Mr. Sutton was one of the first investors to grasp the new dimensions of income unique to the Times Square market that would push rents—and building values—mercilessly upward.
“It has to do with branding and eyeballs,” said Richard Hodos, a top retail dealmaker at CBRE (CBRE). “It has to do with the ability to sell advertising on signs to help subsidize the rent. Jeff Sutton in particular makes a compelling case as to how a brand, with the right signage, can make the overall economics more affordable.”
