The Real Deal New York

Bebe countersues Westfield for $10M

Three of four retail tenants sued by the WTC landlord have filed counterclaims

September 14, 2016 03:00PM
By Chava Gourarie and Rich Bockmann

Westfield World Trade Center

Westfield’s World Trade Center retail complex

Fashion retailer Bebe is suing Westfield for $10 million, joining other tenants who have punched back after the World Trade Center shopping complex landlord sued them for not moving into their newly-leased digs.

Bebe, which Westfield sued for $2.5 million in July for not taking possession of its space and then allegedly defaulting on its lease, filed a counterclaim on Sept. 7. Bebe’s lawyers claim that the loss of the “good will” to its brand is worth no less than $10 million.

According to the lawsuit, Westfield never delivered the retail space to Bebe in the proper condition even after the delivery date was repeatedly delayed. In addition, Westfield didn’t disclose that it was fighting with the Port Authority, which owns the building, and knew they could not deliver the space when promised, Bebe’s counterclaim alleges. Whether Bebe defaulted on its lease appears to be a question for the courts.

Two other tenants that Westfield sued, coffee-shop Fika and the shoe store Dune London, have also filed counterclaims against the Australian real estate giant, though neither mentioned grumblings between the Port Authority and Westfield. Fika, whose cumulative rent over a 10-year lease would equal close to $5 million, didn’t quote a damage figure on its counterclaim but argued that Westfield had long known it wouldn’t finish the space in time for the target dates.

The case of the fourth tenant, True Religion, was resolved last week.

Westfield sued True Religion for $6.5 million in June after the jeans company didn’t take possession of its 1,400-square-foot space in March. True Religion had urged Westfield TRData LogoTINY to start finding a replacement tenant in April, though Westfield’s lawyers said the retailer’s belief was “misplaced” and the landlord was only obligated to look for a new tenant after True Religion took possession and then vacated the space.

Mara Levin, an attorney representing Westfield, confirmed with The Real Deal that True Religion wouldn’t be moving into the 365,000-square-foot mall, but wouldn’t disclose the terms of the settlement.

A spokesperson for Westfield declined to comment on the ongoing litigation with the various retailers, and lawyers for the tenants did not respond to requests or declined to comment.

Westfield controls the retail at the white-winged, Santiago Calatrava-designed site under a 99-year lease it acquired in 2001, and assumed full authority in 2013 when it bought the Port Authority’s remaining 50 percent interest for $800 million.

But the handover between the agency and the Australian company wasn’t completely smooth, and the project was serially delayed. Stores like Bebe were left hanging while Westfield and Port Authority worked out their differences, the counterclaims allege.

It seems likely that none of the four retailers will be opening stores in the World Trade Center mall. At the site’s grand opening in August, only 60 of its more than 100 retail spaces were occupied.

As TRD reported in July, mall operators like Westfield usually negotiate co-tenancy thresholds with their tenants, generally between 70 to 85 percent of the gross leasable space. If the threshold isn’t met by opening day, tenants get a break on rent. It’s not clear whether those agreements are built into leases at the World Trade center mall.

Westfield has said the store openings will roll out “in stages” and the complex will be completely full in time for Christmas shopping.

MENU