Local 32BJ Service Employees International Union and three affiliated funds sued their landlord at 101 Sixth Avenue, alleging that the owner of the building owes them more than $5 million dollars as part of an unusual lease provision, Crain’s reported. The union leased the entire 400,000-square-foot building, between Watts and Grand streets, which is owned by the Andalex Group, in 1989, and subleases a minor portion to other tenants. Under the lease, the landlord has to share a portion of money generated from the building with the tenant, a highly unusual arrangement, brokers said. According to the suit, Andalex refinanced the building in 2005 and withheld a portion of the proceeds from the union. Now, the tenant alleges it is owed almost $5.2 million, not including interest.
“Refusal of the landlord to live up to their contractual obligations, compounded by years of delay and obfuscation by them at the [negotiating] table, have left 32BJ and its funds no other option than to pursue the matter in court,” said Matt Nerzig, chief spokesperson for the union. In court papers, the Andalex Group conceded it owed the tenants about $2 million. However, it alleges that the union failed to do the repairs and renovations mandated under the lease, which Andalex says will cost $8 million, adding that costs will rise if the repairs aren’t done now. The union claims it has done the necessary maintenance and that the landlord wants it to pay for massive renovations so it can market the building to future tenants. The union signed a lease at another building and will be moving out later this year. [Crain’s]