The Real Deal New York

Menswear retailer sues Plaza Hotel owners over alleged eviction attempt

Angelo Galasso says it was served with default notice claiming it owed $545K in back rent

September 19, 2014 06:10PM
By David Jones

Angelo Galasso and the Plaza Hotel's Edwardian room

Angelo Galasso and the Plaza Hotel’s Edwardian room

The owners of the Plaza Hotel are scheduled to face off in Manhattan Supreme Court Sept. 29, after a judge granted a restraining order to menswear retailer Angelo Galasso over an eviction proceeding.

The London-based clothing store filed suit for $3.5 million because it says it is being wrongfully evicted on false pretenses from the iconic hotel.

Angelo Galasso, which operates its U.S. flagship store from the Edwardian Room of the Midtown hotel, says it was served with a default notice on Sept. 5, alleging it owed around $545,000 in back rent. The notice says it will begin the process of cancelling the lease on Sept. 22, if the default is not cured, according to the complaint filed on Sept. 18.

However, the retailer claims the hotel repeatedly rebuffed attempts for a lease modification due to disputes over signage and construction scaffolding at the hotel, which the store says impacted its business and should have resulted in a credit.

The retailer entered a 12-year lease with the hotel starting in August 2011, which runs through 2023. It claims it was told during lease negotiations that scaffolding around the property would only be up for a few months, while remedial work was done on the building façade, according to the complaint.

Lawyers for the retailer say the firm spent $1.4 million to build out the store, which fronts on Central Park South, and it opened in April 2012. However lawyers claim that the scaffolding had a negative impact on the store’s sales, in court filings. By November 2013, scaffolding was then installed on the Fifth Avenue side of the store, according to the complaint.

Also according to the complaint, the landlord entered an agreement with the retailer that would require only half the monthly rent be paid due to the scaffolding and signage issue, or $77,100 per month since February 2014, and lawyers claim that the modified rent has been paid and is current.

Lawyers for the retailer claim they have repeatedly reached out to the landlord since then to resolve the dispute, but claim they have been rebuffed, in part because the property’s billionaire owner Subrata Roy was arrested in February on contempt charges after he did not appear at a hearing on allegations that he failed to repay $3.9 billion from investors.

According to the complaint, the default notice claims that the retailer failed to provide the landlord with quarterly reports detailing gross sales and that the retailer failed to provide the landlord with an advertising plan. The lease requires the retailer to spend $250,000 a year on promotion.

The property is reportedly the subject of a $2.2 billion bid from an investment group that includes sports agent David Sugarman and Fugees co-founder Pras Michel.

Officials from the property were not immediately available for comment. Lawyers for the retailer declined to comment, saying they would need permission from the client.

A spokesperson for the Plaza Hotel declined to comment citing the ongoing litigation.

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