The Real Deal New York

Outdoor retailer sues for $10M at Thor’s 530 Broadway

EMS claims lease interference at Soho building

November 26, 2013 01:50PM
By Adam Pincus

530-Sitt

530 Broadway and Joe Sitt

Camping and hiking chain Eastern Mountain Sports is accusing a company controlled by investor Joe Sitt of unfairly refusing to allow it to assign a lease at 530 Broadway in Soho to an Italian fashion company. EMS is seeking at least $10 million in damages.The New Hampshire-based sport and recreation retailer filed the lawsuit Friday in New York State Supreme Court, after Sitt’s Thor Equities withheld consent to assign the lease to the women’s fashion chain Brandy Melville.

The foot-dragging over the lease came as news broke in September that retail investor Jeff Sutton had inked a contract to buy the 40,000-square-foot building at Spring Street for $327 million.

Sutton and Sitt are major property owners in Soho. They are partners along with Bobby Cayre and the Adjmi family at 529 Broadway. Sutton also has stakes in 599 and 560 Broadway, and Sitt owns an in interest in a handful of properties, including 440 Broadway and 494 Broadway.

The denial of the sublease is causing EMS to continue to owe rental payments on the space, after Sutton had announced his intention to purchase the building and restructure the tenancy.

EMS inked a 15-year deal in 2008, with a starting rent of $283,333 per month, and today is paying about $3.6 million per year. It took possession of the space in January 2009, and opened the store in May of that year. However sales were weak, and in late 2012 it decided to vacate, either by assigning the lease to another company or having Thor terminate it, the suit says. But first, it needed to find a tenant.

Although initially skeptical that the brokerage Thor High Street Advisors would act independently and not have a conflict of interest because it was also owned by Sitt, Eastern Mountain on Jan. 28 inked a deal giving Thor High Street a six month exclusive to represent the company in its search.

“Both the broker and the landlord assured EMS’s representatives that such affiliation made broker uniquely attuned to the landlord’s requirements for an acceptable assignee or sublessee and would afford the parties better lines of communication,” the suit says.

Yet, instead, the complaint alleges, Thor High Street ultimately “would abandon its fiduciary duties to EMS in favor of the landlord, its affiliate.”

Thor High Street brought just one tenant for the space, the complaint alleges, Brandy Melville. The women’s fashion clothing chain has 17 stores in the United States among 60 globally, the suit says. In August, the Italian firm and EMS signed a letter of intent in which the fashion firm would pay $310,285 per month in base rent, more than EMS pays, with the landlord pocketing the difference.

Then in September word broke of Sutton’s contract to buy the building.

Despite the alleged claims that the affiliation between the landlord and the brokerage would be an asset in the search, it turned out not to be the case.

In October, the landlord Thor officially said it would not provide its consent, claiming in a letter that the Italian retailer was not “an entity of good character,” and was too similar to Club Monaco, another retailer in the same building.

In addition to claims of conflict of interest, the suit accused Sutton — who is not an owner of the property — of “intentionally” inducing the landlord to reject the Brandy Melville lease. The court papers do not explain more precisely how Sutton did that, and insiders said that a landlord’s obligation under the lease is not subject to the opinions of others whether they be contract holders or otherwise.

A spokesperson for Sitt and another for EMS did not respond to requests for comment. Sutton declined to comment.

3 Responses to “Outdoor retailer sues for $10M at Thor’s 530 Broadway”

  1. November 26, 2013 at 2:27 pm, Beni the Bear said:

    This is the beginning of the end with a handful of families own all prime retail space in NYC

  2. November 26, 2013 at 2:51 pm, Onassis Popkinian said:

    I hear Ryan Horowitz is advising Thor….Congrats RYO

  3. November 26, 2013 at 6:03 pm, small time but... said:

    I can’t believe EMS agreed to have Thor High Street be the broker.
    And yes, Sitt and Sutton are thick as ….ves
    Ems would have been better off in midtown anyway. Soho Broadway is one big
    woman’s shopping Mall now, so Brandy Melville was a perfect fit.
    Joe Sitt is brilliant, but….

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