Victoria’s Secret and its parent company L Brands are suing the landlord of their flagship store in New York’s Herald Square, arguing that the coronavirus pandemic has rendered it “impossible” to continue paying almost $1 million a month in rent.
The city’s retail industry has been “shattered” and “forever altered” since New York Gov. Andrew Cuomo, D, issued a stay-home order in March that closed all but essential businesses, Victoria’s Secret said in the lawsuit filed Monday in state court. The company spends $938,000 a month on its midtown Manhattan store, located on a Broadway corner that gets two million visitors a year and is adjacent to Macy’s flagship department store.
The coronavirus shutdowns are more severe and longer-lasting than normal downswings in the economy, the lingerie retailer said. In its lawsuit against landlord Herald Square Owner, which is owned by SL Green Realty, Victoria’s Secret asked a judge to rescind its 2001 lease for the store at 2 Herald Square.
“The purpose of tendering a monthly rent of $937,734 or more to operate a retail store is completely frustrated when that store cannot open,” Victoria’s Secret said in the complaint. “That purpose is also frustrated when the subject store can open at only a marginal capacity, or when customers are too fearful of profound illness and potential death to venture out to shop for lingerie or other personal items.”
SL Green said Tuesday it has “made several approaches to defer a portion of the rent” on the Herald Square property.
“Instead, this large national, publicly-traded conglomerate is exploiting the current health and economic crisis for its own financial gain rather than honor its contractual rent obligations — all at the expense of the local real estate tax base and the fiscal health of New York City,” Stephen Meister, counsel to SL Green, said in a statement.
Tensions have been ramping up among landlords and retailers in the city. Dozens of national tenants have missed rent payments after sales plummeted following months of lockdown. Default notices are piling up. At the same time, landlords are increasingly cash-crunched with their own payments coming due for lenders.
“Retailers are getting increasingly worried, demanding more,” says Tom Mullaney, managing director of restructuring at Jones Lang LaSalle. “Getting all these workouts done between landlords and tenants is going to be tricky.”