Judge rules Jay Goldman lease dispute can move ahead at 510 Madison

By David Jones | November 17, 2009 06:42PM

A New York State Supreme Court judge conditionally blocked the eviction of Jay Goldman, one of the city’s largest hedge funds, from Harry Macklowe’s speculative office tower at 510 Madison Avenue, and will allow the dispute to go to trial based on the failure to properly build out the tenant’s office space.

Manhattan-based Jay Goldman filed suit earlier this year alleging that Macklowe locked it out of the building following a three-alarm blaze, and that it previously refused to pay rent because the developer failed to install fire alarms, sprinklers and other required systems in the building.

Judge Doris Ling-Cohan ruled that Goldman will be able to block the eviction pending the payment of nearly $133,000 in rent and signing a “floor designation notice” that establishes the hedge fund will lease the building’s 19th floor, which has 11,500 square feet of space.

“The court’s decision confirms and ratifies Jay Goldman’s position that the landlord failed to meet its obligation under the lease, thereby entitling Jay Goldman to cancel the lease,” said Todd Soloway, head of real estate litigation at Pryor Cashman and attorney for Jay Goldman.

He said Jay Goldman “fully expects to prevail and protect its rights.”

At the same time, the judge tossed out some of Jay Goldman’s arguments as to why it should be allowed to cancel the lease entirely. As The Real Deal previously reported, Macklowe officials have argued that Jay Goldman got cold feet because it over-committed to a 10-year lease when the commercial real estate market was overheated.

Jay Goldman originally agreed to the decade-long lease at the building for $125 per square foot in December 2007, making it the first and only office tenant signed by Macklowe at 510 Madison, located at the corner of 53rd Street. Earlier this year, luxury watch retailer Tourneau filed suit to get out of its 3,300-square-foot ground-floor lease.

“We are pleased with the court’s decision in the Jay Goldman matter,” said a Macklowe spokesperson. “It holds that Jay Goldman is in default of his lease in two respects and it leaves open only a few minor issues that we are confident will be resolved in our favor.”

The speculative office tower has been a constant source of concern since Macklowe launched construction more than two years ago. Earlier this year, William Macklowe, president of Macklowe Properties, wrote an open letter to the real estate industry assuring brokers that the tower would be ready for lease this year.

Sources familiar with the building say there remains “strong interest in the building and lots of paper going back and forth,” but they did not offer specifics about potential tenants and what the current asking rents are at the building.

The Macklowe Web site says that the rest of the floors of the building are available, with rents available “upon request.”

An October report by commercial brokerage Colliers ABR shows that average Midtown Class A asking rents were down to $67.34 per square foot, compared with $91.28 per square foot a year ago.