Macy’s has agreed to sell off part of its Downtown Brooklyn building at 422 Fulton Street to Tishman Speyer for $170 million, the companies announced today, as the retailer announced a lackluster sales performance this quarter.
Tishman Speyer, which will control the fifth floor and up, is planning to repurpose the building into 10 floors of Class-A office space, the company said in the release. The company also bought the Macy’s parking garage on Hoyt Street, which has the potential for a mixed-use development.
The deal is slated to close this fall, and is expected to boost Macy’s revenue for the fourth quarter up to about $250 million.
“We believe this partnership will produce a transformative mixed-use development in one of the nation’s foremost destinations for today’s creative workers and new economy companies,” Tishman Speyer’s Co-Chief Executive Officers Jerry and Rob Speyer said in prepared remarks.
Macy’s will trim down its retail space by 68,000 square feet to 310,000 square feet, the company said in a press release, or the fifth through eighth floors. It will run from the basement to the fourth floor of the nine-story building. The store will remain open during the renovation, a Macy’s spokeswoman said, and the company will retain its current 490 employees.
The company is planning a full renovation of its space in the building, for which Tishman Speyer is kicking in an additional $100 million over a three-year period. In order to keep up with the fashionable look of the development-heavy Downtown Brooklyn, the company is planning to raise the ground floor’s ceiling heights and create specific rooms for its subsidiary brands. Windows on the store’s higher floors will be uncovered to let in more light, and the ground-floor windows are getting replaced.
Macy’s is also putting in a Starbucks that will sit on the Fulton Street side of the corner building, which will be accessible even after the store closes for the night.
Both renovations are expected to begin next spring, with some sections finishing up by 2018.
While it’s a big shot in the arm for the retailer staying in Downtown Brooklyn, it’s getting rid of some of its office space in the bustling neighborhood. Macy’s is planning to consolidate its photo studios from several locations in the area to Long Island City. The company just signed a 150,000-square-foot lease for the whole third floor at The Factory, a 90-year-old warehouse originally built for the company officially at 30-30 47th Avenue.
Macy’s announced amid all of its real estate moves that it performed below expectations in the quarter ending Aug. 1. The company made $217 million in profits, which comes out to $0.64 per share, a drop from the expected $257 million, or $0.76 per share. The weak second-quarter performance was blamed on a stronger dollar that detracted tourist spending as well as port strikes on the West Coast. All said and done, Macy’s revenue dropped 26 percent in the second quarter when compared to last year when profits were at $292 million.