The Real Deal New York

Chabad synagogue sues 509 Fifth partners over Skechers signage

Institution says signage at property hurts its ability to get donations -- but retail owners say suit is without merit

June 05, 2015 03:58PM
By Kyna Doles and Hiten Samtani

Scaffolding outside 509 Fifth Avenue, Rabbi Joshua Metzger, Jeff Sutton and 509 Fifth Avenue

From left: Scaffolding outside 509 Fifth Avenue, Rabbi Joshua Metzger, Jeff Sutton and 509 Fifth Avenue

UPDATED, June 8, 11:15 a.m.:A Midtown synagogue that enlisted Jeff Sutton’s help to acquire its premises at 509 Fifth Avenue is now suing the retail mogul over signage at the property. The ownership of the building’s retail section, however — a partnership between Sutton, Bobby Cayre and the Adjmi family — said that it was “shocked” by the synagogue’s allegations, which it says are without merit.

The Chabad Lubavitch of Midtown Manhattan, led by Rabbi Joshua Metzger, claims in a new lawsuit that Skechers’ “billboard” at the property blocks the synagogue’s new signage on the building’s façade and prevents it from advertising and bringing in donations. The synagogue also alleges that when the retail partners started building out the Skechers space, “the construction set off fire alarms, broke pipes in the building and filled the stairways with dust and debris,” disturbing its daily prayers and Sabbath services.

A spokesperson for the retail partners, collectively known as 509 Fifth Retail LLC, said in a statement to The Real Deal that “we have the utmost love and respect for the Chabad organization and the dignity and sanctity of the synagogue located at 509 Fifth Avenue.”

“Evidencing our love and support,” the statement continued, “we arranged financing for the closing on the acquisition of Chabad’s portion of the building, and provided this Chabad chapter with a loan, so that Chabad did not default under its contract to purchase. That is why we are both shocked and extremely disturbed by the allegations in this complaint which are totally without merit.”

The spokesperson added that all the partners’ actions have “been legal and appropriate as the construction of a retail store and installation of signage announcing a store’s name can hardly be deemed inappropriate.”

Scaffolding around the retail unit at 509 Fifth Avenue

Scaffolding around the retail unit at 509 Fifth Avenue

In 2012, Chabad and 509 Fifth Avenue Retail LLC paid $39.8 million to purchase the 60,000-square-foot building from Murray Hill Properties. The asset was purchased as a tenants-in-common entity, with Chabad owning the upper floors and the LLC owning the retail. SL Green Realty, a frequent business partner of Sutton, gave Chabad a $16 million loan to help the synagogue close the deal, sources said.

Eastern Consolidated’s Brian Ezratty, who represented MHP in the deal to sell 509 Fifth Avenue, said Friday that Chabad was struggling to put together the funds for the purchase and that without Sutton, the synagogue “would never have got the loan from SL Green.”

In January, Skechers inked a 15-year lease for the 3,500-square-foot retail unit to replace former tenant Steve Madden. The asking rent was a reported $1,000 per square foot.

509 Fifth Avenue

The retail space at 509 Fifth Avenue

In May, Chabad was granted permits to install a new sign on the building above the retail unit with the words “Chabad Lubavitch Midtown Center” in both English and Hebrew. A week later, Skechers installed the framing for its new sign, which the synagogue alleges caused damage to a shofar on Chabad’s sign.

“Skechers’ sign,” the suit claims, is “completely antithetical to the spirit and sanctity of the synagogue.”

Chabad is seeking at least $500,000 in damages as well as an injunction to use the rights it claims it was promised by the retail owners. Chabad also seeks a temporary restraining order that would prevent Skechers from continuing to install the sign until the court makes a decision on whether it is appropriate.

“The lawsuit seeks to uphold the property rights of a Synagogue beloved by thousands. We categorically deny and reject the assertion that Jeff Sutton entered into a retail arrangement with Chabad for any reason other than pure business motives,” a lawyer representing Chabad said in a statement to TRD. “We are disappointed that our dispute with Jeff Sutton and Skechers has resulted in litigation. We have tried in good faith to resolve our differences. As Chabad asserts in its complaint, Jeff Sutton pledged  to respect the dignity and sanctity of our Synagogue. Instead, the Synagogue has been desecrated with inappropriate signage and banners for months. Sabbath, holiday and daily prayer services have been disrupted with incessant construction, noise and dust. We seek to protect the property rights, dignity and sanctity of a beloved community institution.”

509 Fifth Avenue entrance

Entrance to 509 Fifth Avenue

Sources familiar with the retail partners said that Chabad had put scaffolding on the building in September. Skechers’ logo is currently on the scaffolding, and the Chabad sign is still visible from street level.