The noble but neglected Scribner Building on Fifth Avenue has renewed the lease for its last remaining tenant at a higher rent, marking the first good news in many years for the landmarked property where F. Scott Fitzgerald and Ernest Hemingway used to meet their publisher.
Apparel retailer Club Monaco agreed to extend its lease through 2031 at a price of $208 per square foot, according to court records, a substantial increase from its previous rent of $125 per square foot. Officials at real-estate services firm JLL say more good news is to come.
“We’re just now starting to show the building,” said property manager Carolyn Austin. “It’s been through some things.”
Located at 597 Fifth Ave. on the corner of East 48th Street, the former headquarters and bookstore for publisher Charles Scribner has lost nearly all its tenants since 2020. The 12-story, 67,000 square foot building’s exterior and interior are both landmarked and the upper-floor spaces are small.
Landlord Thor Equities “effectively abandoned” the building, a receiver said in a court document, adding Club Monaco officials seeking to negotiate a lease extension last year “were unable to reach a responsible party willing and able to negotiate one.” Austin said maintenance staffers took care of the 111-year-old building without pay.
Neither Thor Equities, which is led by Joe Sitt, nor legal representatives responded to a request for comment. A spokesperson for Thor told The Real Deal in January that it had written off the Scribner Building “years ago.” Investors in the defaulted $105 million mortgage for the building and neighboring 3 E. 48th St. face a 72% loss, KBRA estimated in a report last month. The bank Wilmington Trust, trustee for the security that holds the mortgage, sued last year to seize custody of the buildings.
The building’s court-appointed receiver, Hope Plasha, didn’t return a call.
Although the new Club Monaco lease provides much-needed stability for the Scribner Building, its rent illustrates the dramatic decline in fortunes for some of Fifth Avenue’s handsome but older retail spaces. Skims, the apparel company founded by Kim Karsdashian, has agreed to lease space at 647 Fifth Ave. at a rent 75% below the $770 per square foot paid by the previous tenant, Donatella Versace. An appraiser last year valued 597 Fifth at $980 per square foot, or 40% below the price paid by Thor Equities to buy 597 Fifth from a Kuwaiti investor in 2011.
“The numbers show Fifth Avenue doesn’t have the same cache as it used to,” said Roy Chun, senior managing director at KBRA.
It’s a different story only eight blocks north, where the Paris-based parent of Gucci in January paid $963 million for 717 Fifth Ave., more than triple the estimated value of the 115,000 square-foot space at the corner of East 56th Street. Prada paid nearly $400 million for 720 Fifth Ave. late last year.
New management was installed at the Scribner Building last year when JLL replaced CBRE, which declined to comment.
Pop-up retailers have expressed some interest in short-term deals, Plasha said in court documents, and potentially longer-term tenants demanded months of free rent and an inducement payment to sign a lease. Plasha said the strongest offer came from Club Monaco, which first leased space in late 2019 and agreed to forego free rent but negotiated a $2 million inducement payment in return for agreeing to the seven-year extension. It also agreed to let the landlord terminate the lease in 2028 for a $500,000 fee if the market rebounds.
Club Monaco is owned by California-based private equity firm Regent, whose portfolio includes Rate My Professors, Supercuts, and Wonderbra. Regent didn’t respond to a request for comment.
The limestone Scribner Building was built in 1913 and designed by the brother-in-law to renowned publisher Charles Scribner, Ernest Flagg, who created a vaulted triple-level store on the ground floor that the New York Times described as the Grand Central Terminal for book retailing. The offices for the publisher were upstairs. The bookstore space was sold in 1984 to Duane Reade and has been occupied since by a series of retailers, including Benetton, Sephora, Lululemon, and Club Monaco. (It doesn’t appear to have ever been used as a drugstore.)
The building needs more than $1 million worth of repairs to its sprinkler systems, according to court records. The facade and sidewalk elevator also need work but Austin said none of the repairs are especially difficult.
“The building’s bones are good,” she said.
She worries that other buildings without Scribner’s pedigree might not be so lucky in the months and years ahead. With tenants harder to find and with interest rates staying elevated, the economics aren’t attractive to fix up handsome older Manhattan commercial buildings. She fears the buildings will deteriorate while landlords duke it out with lenders in courtrooms or boardrooms.
“I think there will be a lot of foreclosures, a lot of buildings in receivership,” she said. “At least, that’s what I hear.”
Aaron Elstein , 2024-05-07 11:48:08
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