The Promote: Fifth Ave Space Race, Blackstone.ai & Branded Tower Blitz

Anything Gucci can do, Louis can do better 👜 . It hasn’t even been a week since Jeff Sutton closed a megadeal with Gucci parent Kering on Fifth Avenue and there’s already talk of another huge transaction on the world’s priciest retail stretch: LVMH is angling to buy 745 Fifth, the building that houses Bergdorf. 

Luxury brands’ desire to own a piece of Fifth has hit fever pitch. We’ll see how this shakes out in the long run, but the clear immediate winners are New York’s retail real estate titans, who fought off lenders and deep-pocketed opportunists to hold on to their properties through the pandemic. Consider that Sutton’s dealmaking over the past month, first with Prada at 720 and 724 Fifth and then with Kering at 715-717 Fifth, reaped him ≅ $1.8B, or nearly $6,000 per square foot.

We’ll see if 745’s owner, the von Finck family, can command similar psf numbers. When patriarch August von Finck Jr. died in 2021, the family hastened its pace of asset sales. (Succession among real estate dynasties is a messy, messy business 💔 , as New York players can attest to.)

LVMH, one of several bidders at 745, has been gobbling up top-tier retail estate globally, with $2.7B in buys last year per Bloomberg. There’s been chatter in the fashion world over the past couple years about LVMH making a play to buy the Bergdorf brand. And no word yet on whether Neiman Marcus Group (parent to Bergdorf) will submit its own bid for 745, or be content to potentially have one of its main rivals as its new landlord 🤷‍♀️ 

In God we trust. Everyone else: bring data (centers)

Blackstone made a big bet on data centers, and wants you to know that it’s going very well. It cooperated with Bloomberg on a deep dive into its QTS business, a company it took private in a $10 billion deal in ‘21 and now sees as its entrée into the Gen AI boom. Blackstone’s Jon Gray said QTS “is a lens into a very important part of the economy that has a lot of momentum.” (He didn’t use the company catchphrase “secular tailwinds,” but its presence was felt)

With Blackstone’s backing, QTS has gone full-tilt: Its development pipeline is at $15 billion, up from $1B at the time of the acquisition. It’s become the biggest North American provider of leased data center capacity (the lingo used in this business is megawatts under contract), and there’s more money where that came from. As Bloomberg put it: "At QTS, executives have told colleagues that if they make the case for more cash from Blackstone, they will all but get it." 

Easy to see why. The demand for data center space has catapulted, and with it pricing: in just 3Y, monthly rates have gone from $70-$80/kilowatt into the $100s, even kissing $150 in prime markets. Private equity has come rushing in: $43 billion in deals went down between ‘21-’23, more than 5x the activity in the previous 3Y window, per Dealogic.

Recent biggies:

• Silver Lake/DigitalBridge pumped $6.4B into Vantage

• Brookfield dropped $800M on bankrupt Cyxtera 💀 ‘s assets

• Meta is building an $800M data center in southern Indiana

Double trouble

Having Elie Schwartz and Robert Rivani in one botched deal is like having Sharon Stone and Salma Hayek in the same film- it's too much heat 💃 for anyone to handle. This time, it’s Elie Schwartz’s embattled firm Nightingale playing the part of the aggrieved, saying it’s entitled to keep a $2 million deposit on the property. Rivani, for his part, cited “material misrepresentations” by Nightingale and Schwartz as his reason for bailing on the acquisition.

BONUS: If you’re late to the absolutely bonkers Nightingale story, I’ve got you covered in the thread below. 👇️ 

Branded condo blitz

I’ve been increasingly thinking of Miami and Dubai as soul sisters when it comes to real estate development: pro-business, growth-obsessed, and shamelessly pro-bling. When the Surfside condo colla bingmarket in ‘22, Damac, one of Dubai's biggest developers, swooped in as the stalking 🐎 bidder, with plans for a Cavalli-branded condo modeled on the one he’s built in Dubai. And now another local developer, Binghatti, is kicking off a $1B project in the emirate, in partnership with Mercedes- the first phase of the 150-unit project, where prices start at $2.7M, is reportedly already sold out. Binghatti’s other luxury development partners include Bugatti (prices at that project went north of $2,500 a foot), and, amazingly, Jacob the Jeweler.

“There is clear wealth migration coming to Dubai and an increase in the population, which provides room for organic growth in the market,” principal Muhammad Binghatti told Bloomberg. Something tells me Miami’s branded-condo czar Gil Dezer is watching.

Dept. of Red Tape

Santa Monica, among the most NIMBY places on earth, is about to impose buyout minimums on a rent-controlled tenancy. Seems ripe for gaming…

One more… "Increasing the capacity" is quite the euphemism for the horror proposed here. (Excerpt from Chris Elmendorf’s take in the Atlantic)

Meanwhile, elsewhere: PE tries to reward the rank-and-file

NYT reports on a KKR-backed spin on employee-equity plans 🧧 within portfolio cos: “Mr. Stavros started experimenting with KKR’s industrial-sector firms around 2011, and he has rolled out employee equity plans at more than 30 portfolio companies. Eight of those companies have been sold, and Mr. Stavros said they earned higher returns than the average across KKR’s portfolio over a similar time frame. They have driven impressive results for employees, resulting in emotional, professionally produced videos of the announcements.” One case: 800 employees received an avg. payout of $175K when KKR sold the firm for $3B. 

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