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666 Fifth Ave. Office Tower

Big deals are no strangers to Manhattan's design-conscious Fifth Avenue but the recent retail leasing contract signed by Japan's richest man, Tadashi Yanai, caught the attention of even the most blasé industry watchers.

Bloomberg reports Yanai's Fast Retailing Co. leased 89,000 square feet for its Uniglo apparel line at the 41-story, 1.5-million-square-foot 666 Fifth Avenue tower, previously known as the Tishman Building when it opened in 1995 at 666 Fifth Avenue.

Fast Retailing will be paying the building's three landlord partners $300 million over 15 years. That equates to $224.71 per square foot, or $20 million rent per year.

Bloomberg calls it the highest aggregate rent amount paid to lease retail space in New York City.

The tenant paying the previous highest rent was Gucci Group NV. Gucci previously leased 45,000 square feet at Trump Tower, three blocks north of the 666 Fifth Avenue tower.  Gucci's annual rent of $16.5 million equates to about $367 per square foot.

The landlord partners at 666 Fifth Avenue are Carlyle Group, Crown Acquisitions and Kushner Cos. In 2008, they paid Brooks Brothers Inc. $47 million to vacate the 89,000 square feet now leased by Uniglow.

666 Fifth Ave. Map

The Brooks lease at the time still had eight years before it ran out, according to Haim Chera, a principal at Crown Acquisitions, one of the building's landlord partners.

"People thought we were crazy," Chera tells Bloomberg. "But we thought (the space) was under market (in rent value)."

C. Bradley Mendelson of Cushman & Wakefield negotiated the deal for the landlords.

"Uniglo identified this location as being the one that they were willing to make the biggest bet on," says Mendelson. "They're one of the biggest retailers in the world.   They're just small in the U.S."

Fast Retailing opened 16 stores each in South Korea and China in the first half of this year. It has 791 outlets in Japan and expects to have 4,000 Uniqlo stores worldwide by 2020, it said last year.

Uniglo's only other U.S. outlet is in Manhattan's Soho neighborhood, where it has been for five years. Fast Retailing entered the Russian market earlier in 2010 and plans to open its largest store in Shanghai next month.

Bloomberg reports the Lease shows Fifth Avenue's appeal even after U.S. consumer purchases fell for two straight years, the first such decline since the 1930s.

Jeffrey Roseman

The stretch of Fifth Avenue Uniglow will occupy lies between Central Park and Rockefeller Center, a strip including Tiffany & Co.'s flagship location and Apple Inc.'s "Cube," both positioned to capture a mix of wealthy New Yorkers and tourists. The 666 Fifth Avenue location is near 53rd Street.

The corridor holds the greatest potential of any Manhattan shopping district, according to Sandeep Mathrani, executive vice president of the retail property division at New York-based Vornado Realty Trust.

Apple's Cube has estimated annual sales of more than $350 million, the most of any Apple store, according to Jeffrey Roseman, executive vice president of real estate broker Newmark Knight Frank, Bloomberg reports. It's the only Apple location open 24 hours a day, seven days a week.

Designer Tommy Hilfiger opened a Fifth Avenue shop last year during New York's Fashion Week, a time when the world's top designers are in town showing their latest creations.

Faith Hope Consolo

"It's just another reinforcement that retailers have to have a Fifth Avenue presence," Faith Hope Consolo, chairman of retail leasing, marketing and sales for Manhattan- based Prudential Douglas Elliman Real Estate, tells Bloomberg.

"Fifth is going to be their face to the world."

Fast Retailing's Yanai has introduced products such as the company's HeatTech thermal clothes under the Uniqlo brand. He did that as falling wages pushed consumers out of department stores in search of bargains, according to Bloomberg.

The $300 million lease will have little effect on earnings for the fiscal year ending in August, Fast Retailing said in a prepared statement.

"We're very excited to have Uniglo as a tenant," Jared Kushner, principal of New York-based Kushner Cos., an owner in the building, tells Bloomberg.

Jared Kushner

"This further validates our investment thesis that the retail block between 52nd and 53rd streets on Fifth Avenue has the potential to be the best retail block in the world," Kushner says.

His company transferred its debt on the 1.5 million square- foot tower that will house the Uniglo store to a special servicer last month after vacancies increased and rental income dropped.

Kushner paid $1.8 billion for the tower in 2007, at the time the highest price ever for a single U.S. building, according to Bloomberg. The company sold a 49 percent stake in the retail space to a Carlyle-Crown partnership for $525 million.

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