Coach Inks 20-Year Hudson Yards Lease, Even While Liquidating Real Estate Investment

Coach may have liquidated its investment in 10 Hudson Yards real estate, but there’s no mistaking the retailer’s commitment to the new project. | YANNIC RACK

BY ALEX ELLEFSON | The stock in Hudson Yards is soaring faster than developers can build the towers there.

Coach Inc., the first tenant in the recently completed 10 Hudson Yards, sold off its $503 million stake in the building for $707 million, the company announced this week. Coach simultaneously signed a 20-year lease on almost half of the 1.8-million-square-foot tower.

“We are very pleased to monetize our investment in Hudson Yards, where we were the first company to commit to the project and will be the largest tenant in the new building,” Victor Luis, CEO of Coach, Inc., said in a statement.

Allianz Real Estate, the New York-based arm of Europe’s largest insurance company, scooped up Coach’s shares in the 52-story tower — as well as those owned by the Kuwait Investment Authority — to acquire a 44 percent stake in the property.

“This opportunity reflects the goal of our US team to pursue high-quality, long-term investments with best-in-class partners,” Christoph Donner, CEO for Allianz Real Estate of America, said in a statement announcing the sale.

Allianz now owns the building alongside Related Companies and Oxford Properties Group, developers of Hudson Yards, as well as a group of investors advised by J.P. Morgan Asset Management.

Coach has been marketing its shares in 10 Hudson Yards for almost a year, Bloomberg News reported in November. Related CEO Jeff Blau told the outlet that it was “always part of the original plan” for one of the investors to sell off its interest in the property in order to capture the gain on its investment.

In announcing Allianz’s buy-in at 10 Hudson Yards, Blau said the deal demonstrated the “momentum at Hudson Yards is undeniable.”

Even without the rest of the neighborhood completed, 10 Hudson Yards has already established the new “city within a city” on the the West Side skyline. | COURTESY: EARTHCAM

“Hudson Yards is transforming Manhattan’s West Side and creating an entirely new, vibrant neighborhood,” he said. “The recapitalization of 10 Hudson Yards showcases the global appeal of Hudson Yards and is further evidence of the value we have created through our mixed-use strategy focused on best-in-class architecture and planning and meticulous execution.”

Allianz is the latest investor enticed by the sprawling project — envisioned as a “city within a city” on Manhattan’s West Side. Less than a week before Allianz committed to 10 Hudson Yards, the developers announced they scored a $1.2 billion loan to support construction of the 1,260-foot-high tower at 35 Hudson Yards.

The financing came from the Children’s Investment Fund (TCI), which already sunk $1.3 billion into 15 Hudson Yards last year. In total, the project closed out 2015 with $5 billion in construction financing.

Although 10 Hudson Yards is the only building to wrap up construction, the developers have already inked commercial leases to fill up most of its other properties. Additionally, 285 condos at 15 Hudson Yards and 137 condos at 35 Hudson Yards are expected to hit the market this fall.

When the project is completed, it will occupy 17 million square feet of commercial and residential space — including 100 shops and restaurants, 14 acres of public space, a 750-seat school, a luxury hotel, and approximately 4,000 residences.