Macy’s Floats $235 Million Investment to Sweeten NYC Tower Plan
(Bloomberg) -- Macy’s Inc. is proposing a $235 million investment in the area surrounding its Herald Square headquarters in Manhattan as it works to gain approvals from city officials to build an office tower atop its flagship store.
The development project would upgrade the Herald Square plaza into a more pedestrian-friendly space and create new entrances for the transit hub underground, including elevator access. Macy’s said its renewal plans, including the tower, are expected to generate $269 million in annual tax revenue for the city and $4.29 billion in economic output each year. The store would stay open throughout the process.
“We’re ready to put this in front of the community,” Chief Executive Officer Jeff Gennette said in an interview. “It was something that we explored really over the last four years.”
Macy’s has been in talks with the city regarding plans to separately build a tower at its New York flagship, the largest department store in the U.S. The store has been located in Herald Square for more than 100 years and occupies nearly a full city block.
The state, meanwhile, has proposed building 10 new buildings as part of its plan to redevelop the area around Penn Station, a block west of Macy’s. The Hudson Yards development, which has had success drawing tech and finance tenants, is also nearby.
Gennette signaled to investors in 2019 that Macy’s was looking for ways to “unlock additional real estate value” at the location. Preliminary renderings show a 700 to 950-foot skyscraper with a sky lobby and 1.5 million square feet of office space.
Just weeks after presenting the plan to investors in February 2020, Macy’s temporarily closed all its locations, including Herald Square, due to the Covid-19 pandemic. The retailer has been dealing with the economic fallout ever since, furloughing workers and cutting corporate staff. Net sales for the fiscal year ended Jan. 30 fell almost 30% compared with the prior year. But sales have started to recover, with the company posting a better-than-expected holiday quarter.
In February, the company forecast net sales of between $19.75 billion and $20.75 billion this year -- above 2020 levels but well short of pre-pandemic expectations. Shares have risen almost 60% this year.
Getting the necessary permits for rezoning in Manhattan is a process that can take months, if not years. Before approving changes, the city may ask for concessions like transit upgrades, which many other developers have agreed to in order to get their projects off the ground.
In 2017, the city approved rezoning for taller buildings in the Midtown East area in exchange for improvements to public spaces. JPMorgan Chase & Co. had to contribute more than $40 million to a fund for public-space upgrades as part of its redevelopment for a new headquarters there. It later agreed to fund further transit upgrades at Grand Central Terminal, after the city pressed the bank to shoulder more costs of its growth.
Howard Hughes Corp., whose chairman is hedge fund manager Bill Ackman, is proposing a new mixed-use development in the South Street Seaport District and has offered to enhance public spaces in the area and invest in the South Street Seaport Museum to sweeten the deal.
The Macy’s proposal is now set to go through the city’s Uniform Land Use Review Procedure, a public review process that involves the city council, local leaders and the community board.
“This is the right time for us to do it,” said Gennette.
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