WORLD PROPERTY CHANNEL ®

(BEVERLY HILLS, CA) -- Recession?  Depression?  Fire-sale prices?  Not on Rodeo Drive in Beverly Hills, CA, one of the most expensive shopping streets in the world.

Now a record commercial real estate deal has closed there.

The 13-year-old, three-story, gated, 11,333-square foot net-leased, Class A  Hugo Boss building has been sold for $28 million.

The sales price represents a cap rate of 4.7 percent and  $2,471 per square foot.

Both are records in the current market and one of the highest per-square-foot prices paid for commercial real estate since the recession began 21 months ago, according to David Feldman, sales manager of the Atlanta office of Marcus & Millichap. Feldman represented the seller, Lladro Realty Inc.

Justin White, regional manager of Marcus & Millichap's West Los Angeles office, also participated in the transaction.

Allied Golden LLC, a Hong Kong-based corporation, paid top dollar, and all cash for its first Southern California investment, says Feldman.

Clothing retailer Hugo Boss rents the building at 414 N. Rodeo Drive  from owner Lladro Inc., a porcelain figurine maker. Hugo Boss will continue as a tenant under the new ownership.

"This property is located on world-renowned Rodeo Drive in the heart of the Golden Triangle," explains Feldman.

"Surrounded by other luxury retailers, the vacancy rate in this submarket remains extremely low.

"The sale indicates that investors are still interested in Class A assets occupied by strong credit tenants in prime locations.

"Over the long-term, the new ownership will capitalize on this property's irreplaceable location in one of the most sought-after retail markets in the world."

The building has secured underground parking. In 2006, Lladro invested more than $3 million in tenant improvements to the property.

The Hugo Boss store is surrounded by other high-end luxury retailers including Cartier, Gucci, Ralph Lauren, Chanel, Luis Vuitton, Giorgio Armani, and Tiffany & Co., "thus attracting some of the most affluent shoppers in the world to the submarket," says Feldman.

He adds, "for several years, Hugo Boss has ranked among the global market leaders in superior fashions, and has been progressively extending this position."

Today the fashion company generates sales of approximately 1.6 billion EUR ($2.1 billion USD) with a workforce of more than 9,500.

Further indicators of the company's strength are the high number (over 1,250) of Hugo Boss Stores operating worldwide, says Feldman. There are currently more than 1,250 stories spanning the globe.

Rodeo Drive has such cachet that many high-profile retailers want to be there even if their rents are too high in some cases for them to turn a profit at that location, says Feldman

"Rodeo Drive stores are billboards for these companies," he says.

Lladro  paid about $14.8 million for both 408 and 414 N. Rodeo Drive in 1994, another year when the property market was depressed, Feldman notes.

Lladro will continue to occupy the building it still owns at 408 N. Rodeo Drive.

Retail properties on the prime three blocks of Rodeo Drive are almost all occupied and the street has  not suffered from the vacancies being experienced on another high-end retail street, Madison Avenue in Manhattan, according to industry sources.

There are four empty stores on Rodeo out of about 60 spaces. Many retailers on Rodeo Drive signed long-term leases before the recession began. That was a factor in holding down vacancies, industry sources point out.

Rents run from $27 to $45 a square foot each month on the 400 block of Rodeo Drive. The 300 block demands rents of about $45 to $50 a square foot.

According to Beverly Hills city real estate records, when commercial real estate was still near its peak in 2007, the Max Mara building in the 300 block sold for $4,000 a square foot.

Also that year, the Gucci building sold for $3,000 a square foot and 2 Rodeo Drive, a shopping center just north of Wilshire Boulevard, sold for $2,200 a square foot.

The all-cash sale of the Hugo Boss building has perplexed most industry sources, particularly when potential buyers of commercial property across the country are still having difficulty finding loans and available lenders.

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