Remember Toto in “The Wizard of Oz,” pulling back the curtain as Dorothy & Co. were set to meet the all-knowing Oz for help in getting her back to Kansas?
Sometimes in my line of work, a curtain will unexpectedly part to give light to things previously unseen. Take, for instance, the lawsuit filed last year in connection with Lord & Taylor’s exit from Crossgates Mall in Guilderland.
It revealed that the upscale fashion retailer signed a 15-year lease in 2013 at $80,000 a month or $960,000 a year. Although described in the lawsuit as being below market rate, both numbers nevertheless elicit a “Wow!”
The retailer also agreed to an additional “percentage rent” of 2% of gross sales over $30 million per lease year, less its share of property taxes and mall common-area costs, according to a footnote in the lawsuit. Wow again!
What’s more, Crossgates says it spent more than $23 million in construction costs and leasing commissions to bring the store to the mall – “the largest tenant investment ever made by Crossgates,” the lawsuit says – and agreed to underwrite $14.5 million to customize the two-story, 100,000-square-foot space. Double wow!
That latter “cash allowance” was in exchange for a covenant in the lease that now is key to the lawsuit filed by PCC NewCo, an affiliate of Crossgates Mall’s owner, acting as landlord, to recover back rent and expenses from HBC US Propco Holdings, formerly Lord and Taylor Holdings, as guarantor of the lease.
Crossgates says the covenant provided that a store carrying the Lord & Taylor name, or comparable cachet, would operate in no less than 80,000 square feet of the space through at least 2024.
Lawyers for HBC Propco, though, say the covenant became unenforceable when Lord & Taylor’s owner filed for Chapter 11 bankruptcy in mid-2020 and closed all 38 of its stores, meaning the L&T name would no longer be on a department store.
After dismissing the lawsuit late last year as premature, a judge in May ruled that an amended complaint could proceed, and this week scheduled oral arguments in the case for January.
Meantime, Crossgates filed a new lawsuit this month against HBC Propco to recover its costs in re-leasing the space. That effort came to fruition just before Thanksgiving when Primark, an Irish fast-fashion retailer likened to H&M and Forever 21, signed for nearly half of the former Lord & Taylor square footage. (The state is using some of the space now for a COVID mass vaccination site.)
According to the lawsuit, the new tenant will pay an initial annual lease of $862,350 beginning a year from now. Another wow!
The lawsuit contends HBC Propco is responsible under the covenant for costs in landing Primark and renovating the former Lord & Taylor space, which it pegs at $4.9 million.
Can I get one more wow?
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected]
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