Istithmar considers Barneys sale

The Dubai-based investment firm is entertaining bids for the iconic New York store after buying it for $942m in 2007, according to reports. A sale would likely mean a substantial loss for Istithmar.

Dubai-backed investment firm Istithmar World is fielding calls from potential buyers for the US department store chain Barneys less than two years after purchasing the luxury retailer, according to reports.

Istithmar purchased Barneys New York, the chain’s official name, for $942.3 million in August 2007 after a bidding war with Japanese retailer Fast Retailing. The price was more than double the $294.3 million Jones Apparel paid for the chain in 2004.

A sale of Barneys, which includes the famous New York City store on Madison Avenue as well as 39 other locations, would reportedly fetch between $300 million and $400 million at present. The global economic downturn has hit the luxury goods market hard as consumers tighten their purse strings. Furthermore, Barneys chief executive Howard Socol resigned last summer which was a blow to the company.

Istithmar is not the only private equity firm to back away from a struggling luxury goods investment. NRDC Equity Partners, the private equity real estate firm that owns the famed US department store Lord & Taylor, recently “parted ways” with upscale fashion designer Peter Som. NRDC bought a majority stake in the fashion designers’ company in 2007 for a reported $10 million.

Istithmar World is divided into four separately managed divisions: private equity arm Istithmar World Capital, aviation unit Istithmar Aviation, venture division Istithmar Ventures, and real estate group Istithmar World Real Estate. The firm is owned by Dubai World, which in turn is owned by the Dubai government.

Among Istithmar World Real Estate's recent transactions are the purchases of office buildings 450 Lexington Avenue, in New York, and the 340,000-square-foot Adelphi building in London. Established in 2003 with an initial investment pool of $2 billion, Istithmar World now has roughly $12 billion in assets under management.