Fortress Investment Group Buys Tiffany's Building on Worth Ave

Fortress Investment Group, the New York City-based investment management firm that was recently acquired by Softbank, has drawn attention once again with its latest business dealings. In a deal that is making a splash down in southern Florida, the company recently completed an acquisition of the iconic Worth Avenue building in Palm Beach that has long been home to Tiffany & Co. The property, which sold for $20 million, will continue to retain its current tenants, but plans are in the works to add upscale, class A office space to the second floor in the future.

If it feels like you have seen Fortress Investment Group in the news recently, you aren’t mistaken. Indeed, the global investment manager, which was founded in 1998, has been making many big moves lately. From being acquired by Softbank, a multinational Japanese holding conglomerate that also happens to be the biggest tech investor in the world, to playing an instrumental role in the development of privately funded commuter rail systems in Florida and, in the near future, southern California, Fortress has been very busy —and that is unlikely to change anytime soon.

The $20-million deal has generated a lot of buzz down in Palm Beach, where locals have wondered for some time exactly what was happening with the property in question. Located at 259 Worth Avenue, which is at the corner of Worth and Hibiscus and directly across from the Chanel store, the building is one of the most recognizable on a thoroughfare that is only rivaled in terms of retail grandeur by places like Beverly Hills’ Rodeo Drive and Chicago’s Magnificent Mile. It comes as no surprise, then, that news that it was up for sale piqued the interest of locals and people across the country and world alike.

As for its role in the deal, Fortress Investment Group, which was co-founded by Randal Nardone, Wes Edens and Rob Kauffman in 1998, managed and provided the funding through one of its many affiliates. A joint venture between Kean Development Co. out of Cold Spring Harbor, NY, and Hyde Retail Partners of southern Florida, the sale of 259 Worth Avenue was largely managed by Fortress’s credit real estate division. In a statement, John C. Kean, the president and CEO of Kean Development Co., expressed his satisfaction. “We are absolutely delighted to retain such a world-class address and classic building,” he said.

The building in question was built in 1950, and it includes 16,374 square feet of space across its two stories. With its sale price of $20 million, the per-square-foot price of the deal turned out to be $1,221. Surprisingly, the property ended up selling for a lot less than was originally anticipated. It was first put up for sale in late 2016 by Tampa-based Franklin Street, a commercial brokerage firm. At the time, local newspapers and media outlets like the Palm Beach Post were estimating that it could fetch upwards of $40 million, which would have resulted in a per-square-foot price of around $2,442.

When news of the sale of the property first became public, the only information that was available came from the paperwork that was filed with local jurisdictions. For a while, therefore, people were not sure about who exactly had made the purchase. Local papers published information regarding the transaction, noting that the deed listed the buyer as a Delaware limited liability company with the name of FRO II 259 Worth Owner LLC. Naturally, this did not reveal very much about who was actually involved, and Fortress’s name did not emerge for a while.

One thing that was never a mystery was who owned the building prior to this recent sale. It has been owned for several decades by Madden Family Associates Ltd., a company that manages the wealth of a local family. The Madden family officially transferred ownership of the property back in 2011. It was transferred to the entity that was listed in the records regarding the sale of the property, but it is unclear as to why this was done. The building is itself an iconic location on one of the most recognizable retail shopping streets in the world, so it holds and will continue to hold significant value.

There is little doubt that the transaction was a complex one. Both sides of the sale were handled by Greg Matus, a senior vice president of investment sales at Franklin Street. As Matus noted in an official statement from Franklin Street regarding the deal, “This was a rare opportunity for the investor to acquire a premier asset on one of the most famous retail streets in the world.” Given that the property sold for around half the amount that was originally being thrown around back in 2016, it is safe to say that the investors will do quite well.

“This was a rare opportunity for the investor to acquire a premier asset on one of the most famous retail streets in the world.”

Although the building at 259 Worth Avenue was built in 1950, a building of some sort has been located on the corner of Worth and Hibiscus since at least the 1930s. In earlier years, Cartier, the upscale jeweler, had a location in the building. For many years, the Frances Brewster boutique operated out of the building, and a few other tenants have come and gone through the years. Today, however, there are only two: Tiffany & Co. and M Fine Arts Galerie, which only opened in January 2018.

Tiffany & Co., which has leased space in the building since 1991, operates out of the second floor. Fortress Investment Group and other involved parties hope to create five-star office space on the second floor as well, which they expect to generate solid returns for investors. The iconic company will continue to operate out of the space that it has leased for years, which totals 11,081 square feet. Therefore, several thousand additional square feet of space remain available—and that is where the class A office space is expected to be developed.

Although perhaps not quite as famous as iconic retail thoroughfares like Rodeo Drive and Michigan Avenue in Chicago, Worth Avenue has been the place to shop, see and be seen by the wealthy and elite since the 1920s. Little changes along the road as space is so hard to come by that tenants don’t tend to budge very often. However, the election of Donald Trump as president of the U.S. has had an impact on the area as his Mar-a-Lago resort is located just 1.5 miles away from the famous shopping avenue.

Many are wondering if Fortress’s involvement in the purchase of the Tiffany building has anything to do with its involvement of the All Aboard Florida passenger train line that is being developed by Brightline, a company that it acquired some time ago. The global investment management firm, which was publicly traded until its acquisition by Softbank, managed around $41.4 billion in assets as of June 2018. It has been instrumental in the development of the line, which opened its first leg, West Palm Beach to Fort Lauderdale, in January 2018 and its second leg, West Palm Beach to Miami, in May. The firm has been snapping up real estate around planned train stations in these communities, so it makes sense that it is involved in the acquisition of 259 Worth Avenue.

Naturally, this isn’t the last that we will hear from Fortress Investment Group. In fact, its Brightline venture is looking to build a passenger rail line from Southern California to Las Vegas. The company is also looking into similar lines between Saint Louis and Chicago; Houston and Dallas; and Atlanta and Charlotte. It will be interesting to see how its development of the Tiffany building dovetails with its other ventures around southern Florida, the country and the world.

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