The owner of Gucci Kering is buying a building on the largest shopping street in Milan from Blackstone for 1.3 billion euros, reports the Financial Times, quoted by profit.bg.
It was the biggest property deal in Europe in two years, with demand for commercial buildings by companies in the luxury sector helping the luxury real estate segment defy the broader downturn, the paper said.
The building bought by Kering is at Via Monte Napoleone 8. It houses Kering’s Saint Laurent store, as well as Prada and the LVMH-owned Cafe Cova.
The deal also marks Blackstone’s largest single sale in Europe and is another buyer from the luxury fashion house sector, which is seeking to position itself in prime locations in key cities around the world.
The race for control of these locations makes luxury commercial buildings one of the niches where big deals are still being made, at a time when high borrowing costs and uncertainty in the broader market have dampened global real estate sales volumes.
In January, Kering announced it was buying a $963 million building at the corner of Fifth Avenue and 56th Street in New York, adding to its portfolio of real estate assets in other cities, including Paris and Tokyo.
Kering and its larger rival LVMH were the buyers in three of the five biggest property deals in Europe last year, according to MSCI.
LVMH tops the list, buying a building on the Champs-Élysées in Paris for nearly €1 billion from investment company Brookfield. In December, Prada agreed to buy the New York building that houses its main store for $425 million, the FT said.
The Milan deal is the largest single property sale in Europe since March 2022, MSCI said.
Shopping street Via Monte Napoleone maintains the second-highest rents in the world after New York’s Fifth Avenue, according to consultants Cushman & Wakefield.
Blackstone is buying the Milan property as part of its 2021 acquisition of Reale Compagnia Italiana, a private Italian company that also owns offices, hotels and residential properties in the city.
The American company, which is the largest owner of commercial properties in the world, paid about 1.1 billion euros for the entire portfolio. She manages the property with her partner Kryalos, an Italian real estate company.
James Seppala, head of European real estate at Blackstone, said the deal “demonstrates exceptional investor demand for high-quality real estate in the strongest markets.”
Meanwhile, Blackstone is in talks to buy a £230m property on London’s New Bond Street, the FT also reported.
Kering recently said it expected Gucci’s sales – which account for half of the group’s sales and two-thirds of revenue – to fall 20% in the first quarter, driven by weaker demand in China, its key market.
Gucci’s efforts to transform its business under new designer Sabato de Sarno, as well as new management after several years of declining sales, have yet to bear fruit.
However, the group was left with 2 billion euros of free cash flow from operations last year and is looking at buying key real estate assets as part of its long-term strategy.
“We have dedicated a large part of 2023 to investments in stores and real estate with the aim of strengthening the exclusive image of our brands,” Kering Deputy CEO Jean-Marc Dupleis said earlier this year.
“We will continue these investments and this will have a short-term impact on our bottom line, but will fuel the long-term development of our brands.”
Source: profit.bg
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