Jones Apparel Group said it had agreed to sell Barneys New York, the luxury department store chain, for $825 million to a Dubai-based private equity firm while considering other offers for the chain or entire company.

Under the agreement with Istithmar, Jones Apparel can weigh other offers made for Barneys by July 22, and it can explore bids for the whole company through August 11.

Jones Apparel, which owns clothing, shoes and accessories brands such as Nine West, Gloria Vanderbilt and Jones New York, put itself up for sale last year, but failed to find a buyer.

Like other apparel makers, the company has been feeling the pinch as department stores have consolidated, reducing the number of potential clients and increasing pressure among vendors fighting for floor space.

The sale of Barneys unwinds one of the biggest moves made by Jones Apparel's chief executive Peter Boneparth.

The company agreed to buy Barneys in 2004 for $400 million, a move which puzzled analysts and investors since the luxury retailer seemed an unlikely fit for Jones Apparel, whose clothes and shoes fill the racks of mall department stores and discounters.

Under Boneparth's tenure, Jones Apparel also bought Maxwell Shoe, juniors denim brand LEI, jeans-maker RSV Sport Inc., and women's suit and sportswear company Kasper Ltd. Many of these deals failed to perform as expected and now look like missteps, analysts said.

The company said in April that Boneparth's contract would expire on March 31, 2009, and would not be renewed.

Jones Apparel said it expected to report a net gain from the sale of Barneys of about $290 million. It may use the proceeds to return cash to shareholders, repay some short-term debt or other uses.

Under the agreement with Istithmar, Jones Apparel would have to pay a breakup fee of $20.6 million if it terminates the deal before July 22, and $22.7 million after that.

 Istithmar, whose $7 billion to $8 billion global real estate portfolio includes prime properties in London and New York, has been aggressively buying US properties and other assets over the past year.

 The investment firm owns off-price apparel retailer Loehmann's Holdings Inc. and a major stake in the Mandarin Oriental New York hotel. Reuters