Saks Fifth Avenue owner developing luxury hotel, apartments in former department stores
Saks Fifth Avenue is contemplating extending its brand to hotels and luxury apartments as it looks beyond a bleak retail landscape for growth, The Post has learned.
On the heels of the blockbuster announcement that Saks’ parent HBC inked a $2.65 billion deal to acquire rival Neiman Marcus, HBC is developing a hotel and 56 private residences in Beverly Hills and posh townhomes in Westfield, N.J. in the parking lot of a long-shuttered Lord & Taylor department store.
As retail sales sputter this year on top of a long decline in department store sales, which pushed Saks and Neimans to finally strike a deal after more than a decade of on-and-off again merger talks, HBC is leaning into real estate deals to drive growth.
“The days are over when you can put up a mall with a food court that serves chicken fingers and fast food and expect it to be an exciting destination,” Gerald Storch, a former CEO of HBC told The Post. “The department store is struggling to make ends meet. Any new retail development needs residential, office and retail.”
In Beverly Hills, HBC is applying for permits from the city to build dozens of luxury residences on Wilshire Blvd. and a hotel, replete with a private club, spa and restaurant along a two-block stretch – real estate that HBC owns – that currently includes parking lots and its new Saks women’s store.
The Saks store relocated in February just a few doors down the street into the former Barney’s building.
“The apartments will be magnificent with balconies that look towards Century City and the Beverly Hills community,” Guy Leibler, president of HBC Development told The Post.
“We believe our customers will live in the apartments and will want hotel services and be members of the club and spa.”
The hotel will be developed in the former Saks store – now empty – that dates back to 1938.
HBC announced the project two years ago, but its plans are taking shape and providing the playbook for future projects, top brass said.
“We are working with the community to get approvals right now,” Richard Baker, executive chairman and chief executive of HBC told The Post. “Why couldn’t [Saks or Neiman Marcus] extend into hospitality and residential similar to what Georgio Armani has done.”
The Italian designer operates Armani hotels in Milan and Dubai and nearly two dozen Armani-branded restaurants, including on Fifth Avenue. The upscale hotel chain, Ritz-Carleton, is running a cruise line business since 2022, Storch pointed out.
“It’s certainly possible that it could be a Saks hotel, but we have also had inquiries from the finest hotels in the world,” Leibler added, declining to identify the brands.
The Neiman Marcus brand could be plastered on hotels and restaurants as well, Baker said. Together, Saks and Neimans have a real estate portfolio worth $7 billion, according to a press release announcing their merger, which is pending approval.
Toronto-based HBC bought the nearly two century-old Lord & Taylor chain in 2006 for $1.2 billion and sold the brand in 2019, but kept the real estate. It’s already sold or repurposed 12 of the nearly two dozen L&T buildings, which have yielded HBC approximately $2 billion, according to Baker.
The largest of those transactions was the iconic Fifth Avenue flagship store, which HBC along with other investors sold to Amazon for $1.15 billion on March 12, 2020, just one day before the pandemic shut down the Big Apple.
Other Lord & Taylor buildings have been transformed into Saks Off Fifth stores including the 2022 conversion of the Stamford, Ct. store and the Eastchester, NY store, which is sharing about half the building with White Plains hospital, which leased about 75,000 square feet from HBC, Leibler said.
“There is life for vacant department store buildings,” Baker said. “Over time we wound down the Lord & Taylor business in a thoughtful and productive way while monetizing the very valuable real estate portfolio.”
Finding new uses for these big box spaces is not easy and it can take years to redevelop them, real estate experts say.
“It’s the physical configuration of these boxes that makes it challenging,” a real estate expert said who has worked with some of the largest retailers on unloading their underperforming stores. “It’s very expensive to take one of those buildings and break it up.”
These bi-and tri-level stores “weren’t built to be redeveloped,” the source added, which is why it’s taken years to find buyers or renters to takeover scores of empty Sears stores across the country. The bankrupt retailer was owned by Eddie Lampert the billionaire hedge fund who is blamed for running the iconic department store into the ground.
Today, the real estate investment trust Lampert formed in 2015 to sell its assets — Seritage — still lists some 24 stores that are available, according to a Real Deal report. Seritage, in April, disclosed that it “has experienced and continues to experience a challenging market [that] continue(s) to apply downward pricing pressure on all of our assets.”
It’s the rare exception that another big box retailer moves into a former Sears store, experts say, pointing to a Target store that opened last year at the Cross County Shopping Center in Yonkers. More often than not, Sears stores are located in struggling malls which makes redevelopment more challenging.
In Westfield, N.J., the town approved a plan for HBC to redevelop 14 acres on both sides of the train station in the Union County township. The site includes a defunct Lord & Taylor store and multiple parking lots that will be converted into public spaces and townhomes or so-called mid-rise apartment buildings.
HBC is following a similar playbook for its Wilshire project, which will include a pedestrian plaza surrounded by retail.
“We will join the residential, hotel and retail with this attractive a pedestrian plaza where there could be a coffee bar, bakery or small retail shops that could could find their way into Saks Fifth Avenue,” Leibler said.
