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Macy’s completes Brooklyn store redevelopment transaction

Published 01 February 2016

Macy’s has completed the real estate transaction with Tishman Speyer that will enable the re-creation of its Brooklyn store on Fulton Street.

Macy's continues to own and operate the first four floors and lower level of its existing nine-story Fulton Street retail store, which will be reconfigured and remodeled in a $100 million project that is beginning this spring and will continue over the next three years.

Tishman Speyer has now purchased the remaining portion of the store site, which it will redevelop into approximately 10 floors of distinct, first-class office space. In addition, Tishman Speyer has purchased Macy's Hoyt Street parking facility, which could be used for a future mixed-use development.

As previously announced, Macy's will receive $270 million in cash from Tishman Speyer, of which $100 million will be used to renovate the Brooklyn Macy's store.

"We are looking forward with great anticipation to the implementation phases of this project, which will transform Macy's Brooklyn store and significantly enhance the downtown Brooklyn community, which is emerging as a vibrant center for living, shopping, working and entertainment," said Terry J. Lundgren, chairman and chief executive officer of Macy's, Inc. "Moreover, this collaboration with Tishman Speyer is a great example of how our company can create significant additional value by strategically exploring the potential of our real estate assets while maintaining a robust store presence that is being upgraded to drive future growth."

As a result of the transaction, Macy's is expected to record a gain of approximately $250 million. Approximately $86 million of the gain will be recognized in the fourth quarter of 2015 and the remaining $164 million expected to be booked in fiscal 2016 and fiscal 2017 with specific amounts dependent on the construction schedule. Macy's received $68 million in cash from the sale in the fourth quarter of 2015, with the remaining $202 million in cash to be received in fiscal 2016 and fiscal 2017.

Given this timing change in accounting for the transaction, Macy's management has revised its earnings guidance for the fourth quarter and full-year 2015, which previously has assumed the entire gain would be booked in the fourth quarter of 2015. Earnings per diluted share for the full-year 2015 now are expected in the range of $3.54 to $3.59, excluding expenses related to cost efficiencies announced earlier in January and asset impairment charges associated primarily with spring 2016 store closings. This compares with previous guidance in the range of $3.85 to $3.90. Updated annual guidance calculates to guidance for fourth quarter earnings of $1.85 to $1.90 per diluted share, excluding charges associated with cost efficiencies and store closings. This compares with previous guidance for earnings per diluted share of $2.18 to $2.23 in the fourth quarter.

The company will provide additional details when it reports its fourth quarter 2015 sales and earnings on Feb. 23, 2016.

Macy's, Inc., with corporate offices in Cincinnati and New York, is one of the nation's premier retailers, with fiscal 2014 sales of $28.015 billion. The company operates about 900 stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's, Bloomingdale's, Bloomingdale's Outlet, Macy's Backstage and Bluemercury, as well as the macys.com, bloomingdales.com and bluemercury.com websites. Bloomingdale's in Dubai is operated by Al Tayer Group LLC under a license agreement.

Source: Company Press Release