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Falcon Real Estate Completes $275 Million Sale of Two Rodeo Drive

Falcon Real Estate has recently completed the $275 million sale of Two Rodeo Drive in Beverly Hills, California on behalf of one of its clients. This luxury shopping mall, located at the world-famous corner of Rodeo Drive and Wilshire Boulevard, was constructed in 1989 and designed to look like a small European village. The design included a cobblestone street that runs through the upper level of the middle of the property. Consisting of three levels of retail space totaling 129,497 square feet and four levels of below grade valet parking, the property was 98% leased at the time of sale. Two Rodeo Drive is occupied by exclusive, high-end retailers including Tiffany, Versace, Gucci and Lalique.

Two Rodeo Drive was acquired by Falcon Real Estate on behalf of its client in 2000 at a purchase price of $143 million. The property was undercapitalized by the previous ownership. Occupancy was at 83% and the retail spaces were outdated and inadequate for premier retailers. Falcon implemented a detailed re-positioning of the property, which included focused leasing, marketing and merchandizing strategies and adding smaller boutique-like spaces to the property. These efforts resulted in a fully leased property with successful long-term lease renewals with the two anchor tenants, Tiffany and Versace, and new leases to exclusive retailers such as Gucci, Jimmy Choo, Breguet, Lalique and Rene Caovilla.

At $275 million, the selling price of Two Rodeo Drive represented a capitalization rate of about 4% and a price per square foot of $2,124. After paying off the existing mortgage on the property, the client realized a significant capital gain on the sale.

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August 2007