Rodeo Drive shopping center sold
Two Rodeo, a well-known Beverly Hills shopping center that houses some of the world’s biggest names in luxury goods, has been bought by Irish investors for $275 million.
Sloane Capital’s purchase of the complex at Rodeo Drive and Wilshire Boulevard demonstrates how choice real estate is still in demand even though the recent credit crunch related to sub-prime home loans is sending jitters through the financial and residential real estate markets.
Tiffany & Co., Lalique and Versace are among the upscale stores along a cobblestone path in the outdoor shopping center, which is meant to evoke a small European street. Few changes for shoppers are expected at the complex, which contains the largest single block of retail space in the famed Rodeo Drive shopping district.
“This is clearly an icon among cosmopolitan trophy properties,” said Pierre Rolin, chairman of Strategic Real Estate Advisors, the London-based representative of the sellers. He identified them only as a European family trust.
Completed in 1990 at the southern entrance to the Rodeo Drive shopping district, Two Rodeo has entered popular culture as a retail shrine that attracts millions of tourists and other visitors annually.
“It’s one of the most-photographed locations in the city,” said Thomas J. Blumenthal, president of the Rodeo Drive Committee merchants group, adding that the center “has always represented what we are all very proud of in Beverly Hills.”
Although Two Rodeo sits high in the retail firmament now, it had rocky times in the past. It was conceived in the late 1980s real estate boom by San Francisco developer Douglas Stitzel, who spared no expense building the two-story complex that includes a piazza and fountains. He imported the cobblestones from Italy.
After the complex was finished and occupied by Christian Dior, Valentino and other swanky stores, Stitzel sold majority ownership to Japanese investors for an estimated $200 million. But a deep and prolonged recession swept Southern California in the early 1990s, with even luxury shopping taking a beating.
Local wags joked that the most successful tenant at Two Rodeo was the operator of the outdoor coffee cart catering to busloads of tourists who couldn’t afford to step inside. Several stores closed and local real estate observers gave the mall’s owners some of the blame, saying that they were too cash-strapped to properly manage the property.
The Japanese partners bailed out in 2000 after the retail market had improved, but they still took a painful loss when they sold Two Rodeo for $131 million to the family trust. More hard times followed with the collapse of the dot-com bubble and the 2001 recession.
At that point, occupancy fell to 60% and rents dropped to about $125 per square foot per year, said Rolin of Strategic Real Estate Advisors, which will continue to serve as asset managers for the new owners. Today, Two Rodeo is fully occupied by 27 retailers, and rents surpass $500 a square foot, Rolin said.
“Our strategy was to reposition and re-tenant” the 130,000-square-foot center, said Rolin, who oversaw an $18-million site upgrade and marketing program.
The new owners “see an opportunity to continue what the prior owners started,” said real estate broker Steve Algermissen of Cushman & Wakefield, who represented the buyers in the transaction.
With retail rents in Beverly Hills rising rapidly over the last two years, investors have been eager to acquire properties, Algermissen said, but few owners on Rodeo Drive have been willing to part with their buildings. Earlier this year, the $40-million sale of the three-story Gucci building there made news in part because its price was more than $3,000 per square foot. Two Rodeo sold for about $2,115 per square foot.
Sloane Capital does not speak to the media, Algermissen said. European publications, however, describe the owners as horse racing tycoons John Magnier and J.P. McManus and property investor Aidan Brooks.
The three friends invest in top-drawer retail properties and also own the Bulgari jewelry store across the street from Two Rodeo. Other holdings include the Rhindlander Mansion in New York, which is home to Ralph Lauren’s flagship store, and the Harry Winston jewelry store buildings in London and New York.
The high-priced purchase in Beverly Hills by European investors also calls to mind the April sale of the former Robinsons-May department store site. London-based Candy & Candy paid Beverly Hills-based New Pacific Realty $500 million for the eight-acre site at Santa Monica and Wilshire boulevards, which is to be turned into a condominium and retail complex. New Pacific had paid $33.5 million for it three years earlier.
Investors “are still willing to make big bets on prime real estate,” said retail consultant Greg Gotthardt of Alvarez & Marsal. And to international players who buy property in the globe’s most glamorous cities, “Beverly Hills is still relatively cheap.”
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