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Luxury Handbag Designer Coach Enters into $707 Million Sale, 20-Year Lease Back for 10 Hudson Yards

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Luxury accessories and lifestyle brand purveyor Coach Inc., sold and leased back its global headquarters office condominium portion of 10 Hudson Yards in New York City.

The company received a purchase price of $707 million (net of $77 million due to Hudson Yards’ developers) before transaction costs of $26 million, resulting in a gain of about $30 million to be amortized over 20 years.

Coach is currently executing a turnaround plan to boost sales including various cost-cutting measures. Previously, Coach announced plans to close 70 North American stores or about one-fifth of its retail locations, and renovate its remaining stores.

In April of this year, the retailer announced it would cut more than 300 jobs, or 2% of its global workforce. The decision to sell its Hudson Yards office condominium and lease it back is expected to free up additional cash for other corporate needs.

Coach entered into a joint venture agreement with the Related Cos. in April 2013 to develop the office tower. Coach’s commitment helped the joint venture secure financing for 10 Hudson, the first tower completed in Related Cos’. and Oxford Properties Group’s mixed-use Hudson Yards development on Manhattan’s west side.

Allianz Real Estate, based in Munich, Germany, acquired Coach’s 44% stake along with its investments partners. A limited partnership that includes Allianz, Related, Oxford and institutional investors advised by J.P. Morgan Asset Management, now owns the property.

The $707 million price tag for the 44% Coach stake would value the full building at around $1.6 billion. Securitization of the financing now backing 10 Hudson Yards is being handled by Goldman Sachs.

Coach Lease

Coach entered into a 20-year lease for its headquarters space in the new office tower. The lease consists of the entire 9th through 23rd floors comprising 694,000 square feet, with rights to expand to additional floors. The company is currently in the process of occupying the new space.

“We are very pleased to monetize our investment in Hudson Yards, where we were the first company to commit to the project and will be the largest tenant in the new building,” said Victor Luis, CEO of Coach. “We are bringing both our brands – Coach and Stuart Weitzman – together under one roof, in a modern work space, very much reflective of the Coach values and sensibility.”

10 Hudson Yards is 94% leased with a weighted average lease term of nearly 17 years. In addition to Coach, the building’s tenant roster includes L’Oreal USA, SAP and Boston Consulting Group. In total, 74% of the leases are to investment-grade tenants.

For more information see CoStar Sale Comp ID: 3665176

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