Hedge fund mogul Richard Perry will need to channel his inner Don Draper for this pitch.
As Barneys majority owner courts investors to buy a minority stake in the luxury retailer, he’ll face some tough questions about the Madison Avenue and Beverly Hills leases.
Those stores are facing a tripling of their rent by early 2019, when their renewal options come due — and Barneys can’t afford to lose them, sources said.
The West Coast flagship on Wilshire Boulevard and its New York counterpart, at 650 Madison Ave., account for two-thirds, or about $400 million, of the 25-store chain’s revenues.
“This is a ticking time bomb for Barneys,” said a former senior store executive with direct knowledge of the company’s real estate.
The Madison Avenue store’s rent could soar from $20 million to as high as $60 million, based on current rents in the neighborhood of $1,500 per square foot.
The Beverly Hills store is facing a similar steep jump from $5 million to $14.5 million, said the source.
Perry is showing no interest in pumping more money into the 93-year-old business, which is facing double -digit sales declines, and is looking for outside money.
But this “rent disaster about to bite them in two years” will surely scare off more than a few investors, said the former Barneys exec. Barneys did not respond to a request for comment.