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WWD | For Rent on Fifth Avenue: Plaza Hotel Developers Woo Luxury Retailers

10.26.06

By, Sharon Edelson

NEW YORK — The mythical sprite Eloise would be rather curious about the makeover going on at the Plaza Hotel — which could mean that Bergdorf Goodman and Barneys New York end up with a competitor in their midst.

Elad Properties, which purchased the Plaza in 2004 for $675 million, is painstakingly restoring the sections of the hotel with landmark designation to their former 1907 glory. A key element of the $350 million mixed-use renovation, which includes luxury residences, hotel rooms and hotel condominiums, is the retail component. The plan is to turn the Plaza into the ultimate shopping-cum-entertainment experience for the well-heeled, a high-end Disney-esque world, where the Palm Court is a refined Crystal Palace, the Oak Room is a Liberty Tree Tavern with white-gloved waiters serving aged sirloins, and luxury retailers hawk fashion, jewelry, accessories, cosmetics, antiques and gourmet victuals in 160,000 square feet of space spread over six levels.

Elad president Miki Naftali said several letters of intent have been signed, but declined to name tenants until the leases are completed. Retail and restaurant tenants are expected to begin opening in the third quarter of 2007, and a grand opening is scheduled for October 2007.

The retail configuration lends itself to several scenarios. “There’s been a lot of interest from department and specialty stores,” said Robert K. Futterman, chairman of the firm that bears his name, and exclusive retail leasing agent for the project. “A department store or specialty store like Harrods or Harvey Nichols is a possibility for the lower level or a portion of the ground floor.” That space is 53,000 square feet.

Andrew Hinkley, vice president of retail development for Elad, estimated that about 25 percent of the 64 retail spaces would be leased to luxury firms with stores in the vicinity.

“There is certainly a smaller branding opportunity at the Plaza for stores already on Fifth Avenue or Madison Avenue or both,” Futterman said. “Louis Vuitton, Prada, Gucci and [brands owned by Compagnie Financière] Richemont are all logical candidates.”

Retail space at the Plaza does not come cheap. Elad is asking $500 to $1,000 per square foot for the Grand Concourse. “We’ve entertained offers north of $1,000 per square foot on the main floor,” said Hinkley. The rates are comparable to those in the area.

The company is projecting $1,500 per square foot in sales as a starting point.

Leasing retail space at the Plaza is not without challenges. Some of the hotel’s public rooms, where stores will be located, don’t have the frontage and large windows retailers are accustomed to and the structure cannot be changed under landmark rulings.

Naftali was a target of the ire of both preservationists and the New York Hotel Trades Council, a union that represented the Plaza’s 900 workers, who opposed turning most of the hotel into residences and shops. After Mayor Michael Bloomberg intervened in April 2005, Elad agreed to retain more hotel rooms than he first proposed and said he would leave the Grand Ballroom, Palm Court and Oak Bar intact.

“It was politics,” he said. “It was an election year. Together with the union and the mayor, we created a win-win situation. We went through a long process with Landmarks. This is the only hotel in North America with some interior spaces landmarked. Elad supported landmark designation.”

Futterman contended luxury firms would be drawn to the Plaza for the very reason parts of it are landmarked — the historical, not to mention nostalgic, significance.

The Edwardian Room, whose walls have been stripped down to the original golden brown, looks like an elegant salon where there are plenty of intimate seating areas for a salesperson to show a $100,000 bauble to a customer. The room will have 3,800 square feet on the ground floor and another 1,100 square feet on a mezzanine.

“The Edwardian Room will be one store,” Hinkley said. “We’ve shown it to three of the best clothiers in the world and one of the best jewelers. This would be a new concept for all of them.”

In the Palm Court, which will remain a restaurant, Elad is re-creating a 1,200-square-foot glass dome using black-and-white photos of the original and shards of colored glass found in the demolition. According to Naftali, a former owner, Conrad Hilton, took down the interior skylight or laylight in the mid-Forties and installed a dropped ceiling.

From the Palm Court there will be a clear vista to the Terrace Room, with gilted archways, baroque chandeliers and leather ceiling that recall the design excesses of the days when Ivana Trump ran the hotel. “The Palm Court will be like a piazza in Italy,” Hinkley said. “Imagine with the restoration how many people will come here to experience the Palm Court.”

The Terrace Room has 5,000 square feet of retail space on graduated floors and a 1,400-square-foot mezzanine, and is being reserved for “a single operator or multiple categories such as jewelry and watches,” Futterman said. “We’re looking at a very high-end jeweler or several jewelers.”

There’s also a retail atrium with an entrance from 58th Street, which could be used for a handbag, shoe and accessories boutique. One level below the atrium will be the Grand Concourse. Elad’s renderings depict a specialty store with a coffee/espresso bar against one wall, beauty and accessories departments and apparel shown around the periphery of the floor. About 10,000 square feet will become a food hall.

If a single tenant can’t be found, Hinkley said, “We’d build a retail collection like a department store.” A comparison with Fred Segal with its leased spaces was not disputed. “It will look like Barneys New York or Saks Fifth Avenue,” he said.

The 6,000-square-foot Lower Concourse will be devoted to a fitness center with a swimming pool; the mezzanine will house a hair salon, antiques shop and antique book seller. The Grand Ballroom on the first floor will be pressed into service once again for boldface nuptials.

Meeting rooms will be on the second floor along with a 7,700-square-foot spa operated by a company based in a French chateau. “They also have a vineyard and we’ll be showcasing the wines,” Hinkley said.

Elad believes the stores at the Plaza will have a built-in client base in the 182 residences — the company said 70 percent have been sold, at $1.3 million to more than $29 million — and the 282-room hotel. “We’re repositioning the hotel as a six-diamond property” where a standard suite will cost $800 to $1,000 a night, Naftali said. There will also be 152 hotel condominium residences.

Across the street from the Plaza, a retail phenomenon is unfolding in the form of the Apple Computer store, which is drawing heavy traffic. Hinkley said Apple “can only help” to lease the Plaza. Futterman added that a new retail corridor could be forged along Central Park West, from the Shops at Time Warner Center to the Plaza and Apple store. But that’s a way off. Asked when the next major property on Central Park West could be converted to retail, Futterman said he wouldn’t hazard a guess.

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