The Real Deal New York

Budget Travel magazine, evicted from former Newsweek space, faces $2.3M suit over back-rent

Court filings allege that the publication owes $588K for Fashion District office space

November 19, 2012 06:00PM
By David Jones

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From left: Alphonse Fletcher and 530 Seventh Ave. 

The Washington Post Company and the parent company of Arthur Frommer’s Budget Travel magazine are facing a $2.3 million lawsuit from Manhattan-based landlord G&S Realty after the magazine was evicted from the second floor of the 490,000-square-foot building at 530 Seventh Avenue.

According to the Nov. 5 lawsuit filed in New York State Supreme Court, the company formerly known as Newsweek Budget Travel Inc. was evicted May 1, 2012 by a New York City marshal, owing some $588,000 in back rent; the magazine owes an additional $1.72 million in rent through the December 2015 lease expiration.

“We commenced eviction proceedings and then put the guarantors on notice,” attorney Gary Wachtel, who is representing the landlord, said. “The guarantors have failed to step up to the plate and satisfy the tenant’s financial obligations.”

In 2000, Newsweek Budget Travel Inc., signed a 10-year-plus lease for the eastern portion of the second floor, which expired December 31, 2010, according to the complaint. In June 2006, that lease was modified to include additional space on the second floor, which expired on the same date.

In 2007, the tenant signed a lease extension to run through December 31, 2015. The Washington Post Company, which guaranteed the lease, sold Newsweek Budget Travel Inc. in 2009 and the BudgetTravel.com site now operates under the name Intellitravel Media, which was named as a defendant, according to the complaint.

Budget Travel, which also has offices at 469 Seventh Avenue, was sold in December 2009 to Fletcher Asset Management, led by Alphonse ‘Buddy’ Fletcher. The magazine has struggled under the current ownership and is said to be on the market again. In October, paper supplier AT Clayton & Co. filed against Intellitravel in State Supreme Court alleging non-payment of $378,000, and the staffing firm The Hired Guns filed suit alleging nonpayment of $74,100.

Newsweek Inc., which merged with the Daily Beast in 2011, is not affiliated with Budget Travel and should not have been named in the suit, according to a spokesman for Newsweek/Daily Beast. He said the company, located at 555 West 18th Street, will move to have the case against it dismissed.

Fletcher made headlines in 2011 by filing suit against the co-op board at the Upper West Side’s legendary Dakota for alleged racial discrimination by Fletcher, a former president of the board. Fletcher’s lawyers in the case recently filed to withdraw due to nonpayment of fees.

The former Newsweek offices at 530 Seventh, at 39th Street, is considered one of the most prestigious in the Fashion District, housing a number of high-profile tenants ranging from Perry Ellis to Max Mara, New Balance and Michael Stars. According to the suit, the Newsweek space has since been re-leased to new tenants, mitigating the overall rent owed by the tenants.

Bob Savitt, who owns the building, told Crain’s New York in March that asking rents ranged from the high $40s to the mid-$50s per square foot.

A spokesperson for Budget Travel magazine did not return an email query. The publisher of Budget Travel was not immediately available for comment. A spokesperson for the Washington Post Company declined to comment on the story. A spokesperson for Savitt also declined comment.

  • Harlemite

    “mitigating the overall rent owed by the tenants.”
    Rent mitigation is no longer a hard and fast rule. Some judges have ruled that “you signed a lease for x years and you’ve defaulted on those years so pay up. It doesn’t matter that the space has be re-rented.” The judges argue that the re-renting has nothing to do with the breached contract.

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