LVMH Negotiates 66% Rent Reduction at Sephora’s Madison Avenue

Taking advantage of the current retail market where there is ample space availability LVMH was able to negotiate a 66% rent reduction for its store at 520 Madison Avenue that is currently occupied by its Sephora brand. A renegotiation of a 20-year lease resulted in a lowering of the rent to $156 per square foot and an agreement to remain at the location for at least 18 more months, shrinking Sephora’s “annual rent bill to $1 million a year from $3 million for its 6,400 square feet.” Landlord Tishman Speyer was able to “swallow the Sephora markdown” due to the building’s $675 million, 20-year mortgage secured at a fixed interest rate of 4.22% that doesn’t mature until mid-2034. However, news of the deal comes as bond rating agency KBRA downgraded the building’s mortgage, attributing the decision to “materially” falling cash flow in part due to last year’s move out of 70,000 square feet by Citadel, the upcoming 2025 relocation by Davidson Kemper to 9 W 57^th Street creating an additional 70,000-square-foot vacancy, and Carlyle Group, the second-largest tenant at the building with 140,000 square feet, looking to sublease space.

Source:    https://www.crainsnewyork.com/real-estate/sephora-lands-big-rent-reduction-520-madison-ave