By Ilaina Jonas
NEW YORK (Reuters) - General Growth Properties Inc
Bids for the 27-story office and retail building at 650 Madison Avenue, one of the toniest shopping and office districts in Manhattan, could exceed $1.3 billion, the sources said.
Other bidders include Vornado Realty Trust
Eastdil Secured is brokering the sale of the building, which is owned by private equity firm Carlyle Group LP
General Growth, Carlyle and Brookfield declined comment. Vornado and Eastdil did not respond to requests for comment.
General Growth's interest in the building, which has not been previously reported, surprised industry executives. The company has long focused on operating malls and buying the New York building would mean a foray into what is known in the industry as urban street-level retail real estate.
Unlike malls whose popularity grew with the rise of U.S. suburbs as destinations that people typically drive to for shopping, the New York building has space for a handful of stores in a shopping and office district in the middle of the city.
The building is around the corner from the famous Fifth Avenue Apple store, known for its glass cube entrance. The current retail tenants include home goods store Crate & Barrel and Italian designer shoemaker Tod's. Ralph Lauren Corp
General Growth CEO Sandeep Mathrani, who used to run a similar business at Vornado, said at a conference two years ago that he was thinking about adding such urban properties to General Growth's portfolio of more than 120 U.S. malls.
A real estate industry executive said the strategy makes sense because high-end retailers tend to have stand-alone stores in major cities such as New York and Chicago, as well as in top malls. As an operator of both types of locations, General Growth would have more leverage in negotiating leases and attracting tenants.
Joanne Podell, a Manhattan retail real estate broker and vice chair at Cushman & Wakefield, called General Growth's bid "a smart move."
"It's a prime space," Podell said. "This is a great way to establish themselves as serious players. The future for retail is in urban markets."
The retail aspect also makes the building more expensive. Google Inc's
In comparison, about 20 percent of the 600,472 square-foot office building is retail space.
Average asking annual rent for retail space along Madison Avenue from 57th to 72nd streets was $1,509 per square foot in the first quarter, according to CBRE Inc. Asking rents for office space in the neighborhood was $102.92 per square foot.
Canada's Brookfield Asset Management Inc
(Reporting by Ilaina Jonas; Editing by Paritosh Bansal and Andre Grenon)