Macy's (M), Tishman Speyer Enter Real Estate Purchase-and-Sale Agreement in Brooklyn

Macy's (NYSE: M) and Tishman Speyer announced they have signed a real estate purchase and sale agreement that will enable a re-creation of Macy’s Brooklyn store and further enliven one of New York City’s most dynamic, transit-rich neighborhoods.

Under the agreement, Macy’s will continue to own and operate the first four floors and lower level of its existing nine-story Fulton Street retail store, which will be reconfigured and remodeled. Tishman Speyer will purchase the portion of the site that Macy’s will not retain, which it will develop into approximately ten floors of distinct, first-class office space with appeal to a wide range of diverse companies. In addition, Tishman Speyer has agreed to purchase Macy’s Hoyt Street parking facility, which could be used for a future mixed-use development.

Macy’s will receive $170 million in cash from Tishman Speyer for its Brooklyn real estate assets and will receive an additional $100 million over the next three years that will be used as a contribution toward renovation of the Brooklyn Macy’s store.

“Brooklyn has emerged as one of the most dynamic, diverse and vibrant communities in America. This is a place we know well and have served with a highly successful downtown store on Fulton Street since 1865. In recent years, it has become clear that our Fulton Street store requires major improvements in order to serve the Brooklyn of today, as well as future generations of customers. We invested the time and resources necessary to fully study and understand the opportunity for making a major positive impact on Brooklyn and selecting the most capable partner in the project. We are now moving forward with a bold and exciting project with Tishman Speyer, one of the world’s most experienced and visionary developers,” said Terry J. Lundgren, Macy’s, Inc. chairman and chief executive officer.

“As developer, owner and operator of such New York City icons as Rockefeller Center and the Chrysler Building, we are thrilled at the opportunity to partner with Macy’s for our first-ever project in Brooklyn,” said Tishman Speyer Co-CEOs Jerry Speyer and Rob Speyer. “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.”

Macy’s store, currently occupying 378,000 square feet of selling space on eight floors will be re-created into a more efficient store occupying 310,000 square feet on five floors (levels one through four, as well as the basement). A portion of the interior of the building will be re-constructed to level the floor elevations. New elevators and escalators will be installed. From top-to-bottom, the interior of the store will be entirely remodeled. Key architectural elements of the exterior of the building will be preserved. The Macy’s store will remain open and operating through the remodeling process.

In tandem with the redevelopment of Macy’s store, Tishman Speyer will create architecturally-distinct, headquarters-quality office space featuring 16-foot ceilings, ample outdoor spaces and easy access to 10 separate New York City subway lines, all of which will appeal to a wide range of traditional companies and new economy firms. Work is expected to begin on both the retail and office portions of the Fulton Street property in the spring of 2016, with all elements expected to be completed by the fall of 2018.

Macy’s downtown Brooklyn store, built in 1865 as Abraham and Straus, has grown and developed with the community around it.

Over the next three years, Macy’s is reinventing the Brooklyn store to create a fashion hub serving neighborhoods from Dumbo to Manhattan Beach. The renewed store will fuse Macy’s traditions with Brooklyn’s local flavor to create a modern environment of cutting-edge style and hip, urban attitude. Highlights include:

• The main floor will feature high ceilings and dramatic rooms to house Macy’s signature businesses in cosmetics, fragrances, shoes, handbags and accessories.
• Each floor will be leveled to create larger footprints and offer an expanded assortment of new fashion brands, including Macy’s renowned private brands.
• Windows on the upper-levels will be uncovered to allow for more natural light.
• Street-level entrances and display windows will be refreshed.
• Restroom facilities will be upgraded.
• A Starbucks with after-hours access from Fulton Street.

The Macy’s store’s workforce of about 490 associates will remain in place. The Macy’s photo studio that has operated on the upper floors of the downtown building is being relocated to refurbished space in a leased building in Long Island City.

The real estate transaction is expected to be completed in the fourth quarter. As a result, Macy’s, Inc. is expected to record a gain of approximately $250 million in its fiscal fourth quarter of 2015.

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