Forget the Warehouse Sale; Barneys’s last sale of the season is coming up. And it’s a doozy.
On Thursday, the retailer’s original home at Seventh Avenue and 17th Street will be auctioned off in federal bankruptcy court at the Custom House. Like Barneys itself, the auction is open to the public but accessible only to the wealthy: Qualified bidders must bring a certified check for $2.3 million. That’s 10 percent of the $23 million floor that Aetna, which holds the building’s defaulted mortgage, reportedly has set. (Aetna refused to comment.)
On July 22, Argent Ventures signed a contract for that amount – including a $550,000 “break-up” fee in case of a “higher better” bid. Argent has pulled out, but Andrew Penson, its managing director, says the firm will attend the auction.
According to Marvin Bloom, of Keen Realty Consultants, who is overseeing the auction, nearly 200 parties have inquired about the property. The Witkoff Group’s Steven Witkoff says he’s “looking very hard at the site.” David Goldstein, of Julien J. Studley, will bid on behalf of an unnamed university. Bruce Eichner, of Continuum, is considering the site. And sources at Vornado report that the secretive real-estate-investment trust will also bid. “The problem,” says Witkoff, “is there’s a whole gamut of potential uses for the site, and we haven’t figured out which is the best one.”
Right: potential. It’s actually a warren of five-to-seven-story buildings totaling 109,000 square feet of space. At $23 million, that comes to $200 per square foot – inconceivable only a year ago. “For the right scheme of lofts,” says Ron Cohen, of Insignia-ESG, “$500 per foot is now possible. But $200 is tops for raw space.” Still, some are still guessing the property could fetch a heady $30 million.
Furthermore, the Planning Commission – in a compromise to preserve west Chelsea – will be “upzoning” the area east of Eighth, allowing a new owner to expand the building’s floor space up to 25 percent.
But can such a big purchase turn a profit? “At $200 a foot starting,” says Leslie Himmel, a partner at Himmel and Meringoff Properties, “unless you can put a big- box retailer in there or do residential conversion, I don’t really think you can make it work.” “Redevelopment is a fairly costly endeavor,” warns Robert Skolnick, Jack Parker Corporation’s vice president, “and I’m just not sure there’s enough square footage to make it work out.”
Worse, perhaps, is the much-discussed possibility that the current real-estate market will soon sour, as it did in 1987 (though, as Julien Studley notes, “this cycle is different from others. In 1987, offices and apartment buildings were in oversupply, and the banks were loaning improvidently”).
But even storm clouds on the horizon may not darken the prospects for such a prized property in such an overblown market. For as anyone who’s ever gone on a shopping spree at the 61st Street store – and awakened the next day with a headache and a sore credit card – can attest, a dazzlingly high price can sometimes overwhelm a shopper’s better judgment.