Fortress Investment Group, Tiffanys

Fortress Investment Group Pays $20M for Tiffany’s Building in Palm Beach

Real Estate

Iconic Tiffany’s Building on Palm Beach’s Worth Avenue Acquired By Fortress Investment Group

When it comes to luxury retail shopping, few districts in the world offer the prestige and glamour that abounds along Worth Avenue in Palm Beach, Florida. Instantly recognizable as one of the premier shopping thoroughfares in the world, Worth Avenue has long been home to illustrious establishments like Cartier, Versace and Tiffany & Co. With the acquisition of the building where the latter has been located since the early 1990s, however, Fortress Investment Group has shaken things up in the local real estate market. Never fear, though—Tiffany & Co. isn’t going anywhere.

News of the sale of the property, which is located at 259 Worth Avenue, raised a lot of eyebrows in this posh southern Florida enclave. The building, which was built in 1950, was purchased in a joint venture between Kean Development Co., which has an office in Palm Beach but is headquartered in Cold Spring Harbor, New York, and Hyde Retail Partners, a firm that is headed by retail real estate specialist and CEO Paisley Boney IV. In an official statement concerning the deal, John C. Kean, the president and CEO of Kean Development, stated:

“We are absolutely delighted to retain such a world-class address and classic building.”

Kean wasn’t exaggerating in describing the property in such a way. A building of some sort has been located at the site, which is situated at the corner of Worth Avenue and Hibiscus Avenue, since the 1930s. The current structure was constructed in 1950, but Tiffany & Co. didn’t come along for a while. For many years, Cartier, the luxury jeweler, leased space in the building. Locals also recall that the Frances Brewster boutique operated from that location for many years. Featuring nearly 16,400 square feet of space, the building is a prime piece of real estate that is likely to generate considerable profits for the investors who have purchased it.

How does Fortress Investment Group enter into all of this? Although the deal involved a joint venture between two development firms, the funds that made it possible were managed by one of the global investment firm’s affiliates. It makes sense that Fortress would be involved in some way, actually, because the company deals not only in credit but in real estate, private equity and other types of capital investments. As of June 2018, Fortress Investment Group had a total of $41.4 billion in assets from more than 1,750 institutional and private investors under management. The acquisition of the Tiffany’s building on Worth Avenue is merely the latest in the company’s ongoing quest to develop prime real estate in southern Florida and in other areas around the country.

Anyone who stays up to date regarding the goings on of Fortress Investment Group should recall that the company recently made headlines with its Brightline passenger train line, which it is working to develop between Los Angeles and Las Vegas. That line is poised to be the second of its kind for Brightline, which opened the first two legs of its southern Florida line, All Aboard Florida, earlier in 2018. One of the train stations for that line will be located in West Palm Beach, so it makes sense that Fortress is also buying real estate along Worth Avenue.

Although it makes sense for Fortress to invest in real estate that surrounds the upcoming train station, it may make a little less sense that it acquired the building at 259 Worth Avenue. However, it starts to sound more logical when the prestige of this shopping thoroughfare is taken into account. Since the 1920s, Worth Avenue has been one of the premier luxury retail destinations in the country. That continues to hold true to this day, and Fortress Investment Group likely hopes that its $20-million acquisition will generate solid profits for its investors.

To truly grasp how iconic the Worth Avenue shopping area is, consider this: In its 29th Main Streets Across the World report, Cushman & Wakefield listed Worth Avenue among its top 10 most expensive retail districts in the Western Hemisphere. Indeed, the glitzy avenue was named along with iconic areas like Rodeo Drive in Beverly Hills, Miami’s Lincoln Road and Chicago’s Michigan Avenue. Sprawling over three blocks next to the Atlantic Ocean in Palm Beach, Worth Avenue is home to more than 250 luxury retailers.

Given that the building in which it resides has now changed hands, it’s natural to wonder what will become of Tiffany & Co. However, the iconic jeweler will remain at the location, which makes sense considering how much the company has invested in the site through the years. Indeed, a few decades ago, Tiffany & Co. poured vast sums of money into renovating and enhancing the site. This is one of the reasons that many expected the property to sell for a lot more once it officially hit the market.

For decades, the building at 259 Worth Avenue was owned by the Madden family, a wealthy local family. Officially, it was owned by Madden Family Associated Ltd. Standing two stories tall and offering 16,374 square feet of space, it was first marketed for sale in late 2016. At the time, local news organizations, including The Palm Beach Post, expected that it would fetch as much as $40 million—a sum which would have translated into around $2,442 per square foot. For a variety of reasons, however, the property was overvalued. At the actual sale price of $20 million, the property was valued at around $1,221 per square foot, which is still an astronomical amount for retail space.

While Fortress Investment Group, which was founded in 1998 by Randal Nardone, Rob Kauffman and Wes Edens, managed the funding for the sale, both sides of the deal were managed by Greg Matus, a senior vice president of investment sales for Franklin Street. The Tampa-based commercial brokerage firm issued a statement when the sale closed. In it, Matus stated, “Very few properties ever change hands on Worth Avenue. This was a rare opportunity for the investor to acquire a premier asset on one of the most famous retail streets in the world.”

This is only the latest in a long string of major developments for Fortress Investment Group, which has been experiencing a truly amazing year. After being acquired by Softbank, the Japanese conglomerate that is also the biggest technology investor in the world, the company lost its publicly traded status. However, it continues to operate as an independent business, and one of that business’s ventures lately has revolved around bringing private rail passenger service to various parts of the U.S.

Fortress owns All Aboard Florida, which started private train passenger service in southern Florida earlier in 2018. The company’s Brightline service may eventually stretch from Tampa all the way down to Miami. For now, though, two legs have opened for business. The first, from West Palm Beach to Fort Lauderdale, opened in January. The second, from West Palm Beach to Miami, opened in May. Stations are being developed in the three cities, and Fortress has been busy scooping up prime real estate around those areas for future investment purposes.

It could very well be that Fortress views its acquisition of the Tiffany’s building in Palm Beach as a natural extension of its development activities with Brightline, which is also poised to begin passenger rail service between Southern California and Las Vegas. That project, which is currently in the works, may eventually be joined by others that will connect other major metro areas around the country. So far, some of the ideas that have been floated include a line from St. Louis to Chicago, one from Houston to Dallas and another from Atlanta to Charlotte. Of course, those plans are largely contingent on the success of the southern Florida line and the Vegas-to-LA line.

Read more at: Vegas Or Bust: Brightline To Build Rail Line Connecting SoCal To Las Vegas

Leave a Reply