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The industry questions whether a casino inside the Saks Fifth Avenue flagship would be a jackpot traffic driver for the business or chip away at the brand's image.

NEW YORK — It’s not such a wild idea, but would a casino inside Saks Fifth Avenue really work?

When Richard Baker, chairman of Saks Fifth Avenue’s owner HBC, proposed creating a casino on the top three floors of the retailer’s flagship, many in the industry were skeptical, some even aghast, seeing it as a poor fit with the luxury department store and beyond its expertise.

Saks Fifth Avenue’s parent, HBC, would have to find a casino developer and operator to partner with, deal with regulatory issues, canvas the opinions of designers, and figure out how a setting for gambling integrates with the store rather than interferes with it.

What would be the impact on Saks Fifth Avenue’s retail sales and the luxury brand’s image? Would it be called the Saks Casino? Could a visitor use their Saks card to buy chips?

A casino on floors nine, 10 and 11 of Saks, as proposed by Baker, would change the tenor of Fifth Avenue — a destination for family shopping, Radio City and the Rockettes Christmas Spectacular, ice skating in Rockefeller Center and for worshippers at St. Patrick’s Cathedral. The church is an influential force in Midtown.

“It’s exactly the kind of bold maneuver that retailers need to be considering,” said Ray Graj, owner/principal at the Graj + Gustavsen branding firm. “The marketplace is moving very quickly, retailers must respond to changing demographics, and people are interested in experiences and experiencing things in bold ways. I would advocate for this, if HBC handles this in a tasteful and discreet way, and frames it out as a pilot experiment, so if the experience is a failure, it doesn’t undermine the whole ship. You don’t have to necessarily brand it as the Saks casino, and if it’s handled in an upper-end, discreet way, it could bring new traffic to the store. The devil is in the details.”

“At first I thought it was a crazy idea, but now I think it’s interesting,” said Ron Frasch, former president of Saks Fifth Avenue who operates a consulting business under his own name. “Compared to other casino operations, this is more of a Monte Carlo-type upscale initiative that could attract a different crowd. My guess is that it would drive traffic and would be good for a luxury marketplace if handled correctly, and treating gambling in a unique way, how they handle access and the entrance, how they keep it quite special, with private gambling rooms for those high rollers.”

Frasch also said a casino inside Saks opens up possibilities for forming new kinds of partnerships with hotels and airlines, providing special rates, to attract a larger luxury audience.

“Luxury is about quality experiences, not just quality products,” Frasch added. “All retailers are looking to engage more in the lives of their customers and figure out how to make the shopping experience more unique. A luxurious casino is definitely a fit with a Saks crowd.”

“It’s ludicrous,” said one former retail chief executive officer. “But I can understand wanting to monetize those upper floors. It makes a lot of sense to try to do that.”

Mark Cohen, director of retail studies and adjunct professor at Columbia Business School, clearly questioned the judgment of adding a casino to the Saks flagship. “Richard Baker is focused on any way he can monetize unproductive space,” Cohen said. “Saks Fifth Avenue has trouble enough retaining its age-old cachet. I hardly think a New York gambling crowd, whether residents or tourists, would be compatible with a so-called luxury department store. New York isn’t Las Vegas or Monte Carlo.”

“I first thought the idea of a casino would bring more traffic to the store,” said veteran retail analyst Walter Loeb. “The store needs more traffic and from what I hear, it’s not getting enough. On the other hand, Saks does attract a certain quality of person that doesn’t necessarily want to gamble. You can’t make Las Vegas out of Saks Fifth Avenue.”

Loeb noted that casinos operate with much longer hours than stores, some 24 hours a day, others opening early in the morning and late into the night, at times when Saks would not normally be open for business. An entrance to the Saks casino would have to be on a side street, rather than upsetting the century-old, landmarked limestone facade on Fifth Avenue. The Saks flagship is situated between 49th and 50th Streets, and Fifth and Madison Avenues.

By having the space already, Saks could put up a casino faster than others needing to build from the ground up. But HBC’s chances of getting the casino license appear slim considering several major players in the real estate and entertainment businesses are also vying for a casino license in the city. They could create splashier marquees, easier access and provide more space by building anew. Three licenses to operate a casino are being offered by New York State to New York City.

Those vying for a license to open a casino in the city include Mets owner Steve Cohen, who wants one near Citi Field in Flushing, Queens; a consortium composed of real estate developer Thor Equities, Saratoga Casino Holdings and The Chickasaw Nation and Legends sports and entertainment firm, together eyeing Coney Island for a casino; Stephen Ross, chairman of The Related Companies, who could build a casino in or around his Hudson Yards complex on Manhattan’s West Side, and real estate firm SL Green Realty, which is eyeing Times Square.

“The whole idea to drive maximum return to the state of New York. A Saks casino may not be able to deliver the lift the state wants,” Frasch suggested.

In Las Vegas, designer shops abound. The desert city is a mecca for vacationers, conventioneers and gamblers. Out-of-towners do tend to open their wallets and shopping is a big part of the fun of being away from home.

One former Saks executive said the retailer should stick to its knitting. “Do what you do better than anyone else. Don’t try to do things you know nothing about it,” the source said. However, Saks would partner with a casino developer/operator.

Several sources said Baker’s plan should be viewed as a real estate play, rather than a strategy directly aimed at driving sales and traffic at Saks and enlivening its retail experience. HBC does want greater productivity out of its flagship real estate, particularly on those upper floors which aren’t as productive as the lower floors. The ninth floor houses women’s swim, lingerie and outerwear; childrenswear including infants, designer labels and shoes, and the L’Avenue at Saks restaurant. The 10th floor houses Saks Works, which is the partnership between Saks and WeWorks, and the 11th floor houses offices for Saks workers. According to Frasch, given the size of the Saks flagship — about 600,000 square feet on 11 levels — “they could easily consolidate lingerie, children’s and the other categories into other floors.”

In the past, Baker has orchestrated some shrewd real estate deals, including selling Zellers properties in Canada to Target, buying Lord & Taylor and selling off L&T’s Fifth Avenue flagship and other L&T locations. HBC has profited in a big way through real estate deals and eliminating debt.

But major casinos on the Las Vegas Strip, like the Bellagio and the Wynn Encore, are splashy and big, filled with amenities like bars, restaurants, and large venues offering leading entertainment acts. Would Saks be able to deliver that level of entertainment given its location and square footage? Floors nine through 11 combined represent under 200,000 square feet. Ross, for example, could create a grander project that could couple a casino with a hotel, theater, dining and shopping, and pull in a greater return for the city and the state. One source suggested converting the former Neiman Marcus store in Hudson Yards into a casino, which has a wide frontage on Tenth Avenue, three levels and more than 200,000 square feet, though reports have centered on converting the former store to office space.

“What I like about the Saks proposal is essentially it would be like a private club, modeled after Annabel’s in London,” said Jerome Barth, former president of the Fifth Avenue Association, and an urban planning consultant. “My understanding of the proposal is that it would be discreet, and not necessarily very noticeable from the street. It wouldn’t rely on dragging in the general public and could focus on a smaller population of wealthy clientele. It would not prey on the poor, and of all the proposals out there, I believe this one is the least bad idea and would have the least impact on the quality of life in the city. The church might feel differently.”

Ferrovial chair’s decision to shift head office to the Netherlands has incensed Madrid

In 1981 Rafael del Pino was dispatched to the deserts of Muammer Gaddafi’s Libya to help Ferrovial, his father’s infrastructure group, build 700km of highways — a test of his mettle in one of the Spanish company’s most difficult markets.

The young engineer passed the test and four decades on he is the company’s chair. But the most hostile environment he faces today is in Spain.

The billionaire’s decision to shift Ferrovial’s head office from Madrid to the Netherlands, designed to pave the way to a share listing in New York, has incensed the Spanish government.

Del Pino, 64, has been accused of trashing Spain, avoiding tax and of ingratitude for abandoning a country whose publicly funded road and rail projects were the foundation of Ferrovial’s prosperity.

Most wounding of all were the words of Socialist prime minister Pedro Sánchez. “There are many businessmen who are committed to their country,” he said. “This is not the case with Del Pino.”

The Ferrovial boss was taken aback by the fierce reaction this month and tried to contact Sánchez, according to one person close to Del Pino, but his attempt was rebuffed.

His surprise suggests political naivety. One senior government official says it was a big mistake to not tell the prime minister the announcement was coming. Del Pino also failed to see that Ferrovial’s move would hit a nerve by highlighting a paradox of the leftwing government, which is wooing overseas investors while alienating some domestic companies with windfall taxes and accusations of greed.

Although Del Pino is under pressure, “he’s an extremely rational person — he tends to be dispassionate”, according to Alberto Terol, an entrepreneur who has known him as a client and fellow member of trade associations. Another person who first met Del Pino in the 1990s describes him as a “cold fish” who is not inclined to get angry.

His 20 per cent stake in Ferrovial is worth €4bn, making him Spain’s third- richest person, but he eschews the spotlight.

What makes him uncomfortable, according to one longtime friend, is how the clash with the government has become so public and personal. “He’s a guy who’s low-profile and allergic to conflict.” But it is a different matter if he is not cast as the protagonist, the friend added, and he is more than willing to drive his company into battle.

His greatest conquest came in 2006 with a hostile bid for BAA, the UK airports operator that owned Heathrow, which Ferrovial eventually acquired for more than £15bn including debt after outmanoeuvring Goldman Sachs in a frenetic auction. “They fight very hard,” said the person who has known him since the 1990s.

Born in Madrid in 1958, Del Pino grew up as his father, Rafael del Pino Moreno, built a business on public works contracts from the regime of dictator Francisco Franco. After studying civil engineering in the Spanish capital he joined the family business in the early 1980s, when his uncle Leopoldo Calvo-Sotelo, a marquess, was the country’s second democratically elected prime minister following the fall of Franco. In 1984 he took two years out for an MBA at MIT’s Sloan school.

Del Pino became chief executive in 1992 and was there for Ferrovial’s successful 1999 bid to manage a Toronto toll highway, a turning point in its international growth. But it was not until he replaced his father as chair in 2000 that he began to modernise the company and expand it decisively beyond its Spanish roots.

An anglophile averse to following the crowd, Del Pino did not join a rush into Latin America by other Spanish businesses. Instead he focused on the UK, Australia, Canada and the US, where another prized contract is its operation of Terminal 1 at New York’s JFK airport.

One appeal of the Anglo-Saxon world has been its “legal security”, which Ferrovial also cited as an advantage in the Netherlands — a slight on Spain that infuriated the government.

One business person recalls being on the wrong end of a “horrible” deal with Del Pino. In 2006 it sold its domestic real estate business to a Spanish consortium for €2.2bn including debt to offset borrowing amassed to buy BAA. The property market was overheating and even before the deal closed one consortium member had last-minute doubts. “But Del Pino has a big ego, and his ego persuaded them to go ahead,” the person said.

Jonathan Amouyal, a partner at hedge fund TCI, one of Ferrovial’s biggest shareholders, said Del Pino “is a visionary . . . very analytical, and someone who knows how to take measured risks. He thinks extremely quickly but doesn’t rush decisions.”

The Dutch ploy did not emerge from nowhere. Ferrovial listed its non-Spanish business in Amsterdam in 2018. A Netherlands-based entity called Rijn Capital has owned part or all of Del Pino’s stake in Ferrovial since 2015. Ferrovial says moving its head office to the country — long criticised for facilitating financial engineering — will be “neutral” for the company’s taxes and is not motivated by anyone’s personal interests.

Del Pino has said nothing publicly about the furore. A few days after it erupted his chief executive appeared in a video message to say Ferrovial would maintain jobs and investment in Spain.

The country now accounts for just 18 per cent of Ferrovial’s revenue and 5,000 of its employees, down from a peak of 35,000. The chief executive said the company hoped its new chapter “will be of great interest to many investors”. The Spanish government did not get a mention.

Energy secretary Jennifer Granholm: ‘make sure we can do this in a way that lifts all’

US energy secretary Jennifer Granholm sought to ease clean energy trade tensions with the EU, saying the Biden administration was seeking to build supply chains with “countries whose values we share”.

The US and EU were in talks about a free trade-style deal around clean technology, she said, which could soothe European anxieties that the US’s $369bn in new subsidies for low-carbon energy would suck capital across the Atlantic.

“That’s one of the discussions that I know the administration is having,” Granholm told the Financial Times in an interview in Houston on Thursday. She added: “We don’t want to see any trade rivalry. And we’re in discussion with our EU counterparts about how to make sure we can do this in a way that lifts all.”

Granholm’s comments came hours after the EU relaxed state aid measures, allowing member states to match subsidies if there is a risk of investment being diverted from the bloc.

The US’s Inflation Reduction Act, passed last year, includes $369bn worth of tax credits, loans and grants designed to stimulate clean technology investment and meet President Joe Biden’s goal of halving US carbon emissions by 2030.

But the scale of subsidies has prompted fears of a new trade war, with President Emmanuel Macron of France warning that the IRA threatened to “fragment the west”.

Europeans have also been alarmed by what they perceive to be an aggressive push by US states to lure investment from the EU, including hefty subsidies for companies moving manufacturing to the country.

Last month, John Podesta, the Biden administration official in charge of implementing the IRA law, said in an interview with the FT that the US would make “no apologies” for prioritising American jobs as it tried to take control of global clean energy supply chains.

On Friday, Biden and Ursula von der Leyen, the European Commission president, are expected to discuss co-operation over the critical mineral supply chain at a White House meeting.

Granholm said the US was seeking to build a “backbone” of manufacturing to reverse decades of deindustrialisation and break dependence on China. But allies would not be excluded.

“We want to ‘friend-shore’ some of that — we want to have a supply chain that is robust with our allies and with countries whose values we share.

“This is another reason why we’re having those discussions with our allies to make sure that we are able to proceed apace and still build up that backbone.”

While the IRA has already brought an influx of projects and spending commitments, some clean tech developers have warned that the effort to eliminate China from supply chains will slow down deployment.

Solar installations in the US in 2022 fell for the first time since 2018 after investigations into tariff-dodging and seizures of products linked to forced labour in China curtailed the supply of modules.

China also dominates processing of lithium that will be needed as the US tries to electrify its transportation system with battery-powered cars. The US may still need to import lithium by 2030, Granholm conceded, “but not from China . . . at least the goal is not to do it”.