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Gucci owner Kering has bought a retail block on Milan’s top shopping street from Blackstone for €1.3bn, as intense demand from luxury groups helps high-end retail properties defy the wider downturn in dealmaking.
The sale of Via Monte Napoleone 8, a building that houses Saint Laurent and Prada stores as well as the LVMH-owned Cafe Cova, marks the largest ever single asset sale by Blackstone in Europe.
It is also the latest in a series of large real estate purchases by luxury fashion houses seeking to lock down flagship locations in key global cities.
The race to control these sites has made luxury retail properties one of the niches where large deals are still being done, at a time when high borrowing costs and uncertainty over the wider market have depressed global real estate deal volumes by more than half and made big ticket sales a rarity.
Kering said on Thursday that the investment was part of a “selective real estate strategy, aimed at securing key highly desirable locations for its houses”.
The luxury group in January announced the $963mn purchase of a building at the corner of Fifth Avenue and 57th Street in New York, adding to a portfolio of flagship assets in other cities including Paris and Tokyo.
Blackstone bought the Milan property as part of its 2021 acquisition of Reale Compagnia Italiana, a private Italian firm that also owned offices, hotels and residential properties in the city.
The US firm, which is the world’s largest owner of commercial real estate, paid about €1.1bn for the whole portfolio. It has managed the property with its partner Kryalos, an Italian real estate firm.
James Seppala, head of European real estate at Blackstone, said the deal “demonstrates exceptional investor demand for high quality real estate in the strongest markets”.
All the luxury groups are “really running for getting the best locations . . . It will become even more a game for big, big boys, because you need to have firepower in order to buy. It’s going to continue . . . and make the difference even more clear between those that can and those that cannot compete,” said a banker in Milan.
Blackstone has also recently moved to add to its own luxury retail holdings. It is in talks to buy a £230mn property on London’s New Bond Street.
Kering recently issued a profit warning, a rarity in the luxury sector, saying it expected sales at Gucci — which accounts for half of group sales and two-thirds of earnings — to decline 20 per cent in the first quarter led by weakening demand in China, its key market.
Gucci is in the midst of a turnaround under the leadership of new designer Sabato de Sarno after several years of declining sales, which have weighed on Kering’s performance compared with rivals such as LVMH and Hermès, but that has yet to bear fruit.