Case Study

Ross Stores, Inc.


Savills Executes Real Estate Strategy that Supports Ross Stores’ Expansion


Ross Stores, Inc. (“Ross”), a Savills client for over 25 years, had outgrown their 200,000 square-foot lease at 1372 Broadway. Ross’ New York buying office and subsidiary dd’s Discounts were experiencing substantial growth in New York. The buying offices housed on the larger base floors and dd’s on the tower floors were considered ideal floorplate sizes by the user groups.

Starwood Capital Group purchased the leasehold interest in 1372 Broadway through the Starwood Capital Fund IX with long-term asset retention plans. Starwood’s asset repositioning strategy consisted of tenant diversification and a tenant occupancy limit of 35% of the total building office space. Fully 90% of the building was comprised of retail industry tenants including Walmart, LF USA (Li & Fung) and Ross.

Ross retained Savills to advise the company on growth opportunities and was ideally looking to strategically expand within their existing building. Without subleasing from the building’s other tenants, there was no room for Ross to expand its buying office and dd’s operations or create space for Ross Dress for Less, which was an essential element of the company’s continued expansion plans. Furthermore, the Ross leadership directive was that all facets of the company remain together in one building.


During this time period, two large tenants of 1372 Broadway announced plans to vacate over 200,000 feet of space. Savills immediately explored the opportunity of subletting the newly vacated space, despite the challenge of subleasing at the current high market rent while addressing Starwood’s asset repositioning and leasing strategy.

In addition to the immediate expansion needs, Ross’ current premises were second-generation and in need of substantial renovations. Furthermore, 1372 Broadway required modernization to the lobby, elevators, security systems, facade, boiler and building systems.

Given the increase in market rents and Ross’ inability to expand within the building due to the landlord occupancy limits, Savills prepared an in-depth state-of-the-market sensitivity report specific to the Penn Station and Garment District submarkets, in addition to other areas. The team then built detailed financial models that evaluated multiple headquarters lease-versus-buy scenarios, including partial and complete relocation options and purchase options of 1372 Broadway and comparable properties. Savills recommended to Ross the engagement of both building system specialty consultants and third-party appraisers to determine the market value of the sandwich leasehold interest.


Despite the number of substantial challenges, Savills executed a solution that addressed Ross' business objectives. The firm executed a series of subleases for Ross for an additional 200,000 square feet with Starwood acting as sub-sublessor, and under the condition that Starwood would sell Ross the leasehold interest as an off-market sale. Ross finalized the purchase of Starwood’s interest comprising 572,000 square feet for $222 million, at the same time executing the subleases with Starwood.

After gaining total control of the asset, Ross was able to complete its strategic real estate plan, providing for long-term employee growth and expansion. By purchasing an office building for self-use, Ross will increase its ability to strategically plan its space requirements in the future. Ross implemented a substantial capital improvement program for its New York buying office and dd’s to include a complete building modernization program for its New York headquarters. Savills long-term relationship with Ross enabled the two groups to work in tandem to support Ross’ business goals for its New York headquarters and overcome seemingly insurmountable challenges.