Feisty tenant disobeys SL Green in Times Square

Refusal to change locks at 719 Seventh Avenue forces REIT to take unusual action

TRD New York /
Aug.August 15, 2014 12:00 PM

A small firm that leases the entire Times Square building that powerhouse real estate investment trust SL Green Realty purchased in July for $41.1 million, is refusing to take orders from its new landlord.

The tenant, Great Locations New York, received a request from the real estate investment trust to change the locks at 719 Seventh Avenue, which is located on the corner of 48th Street. SL Green, headed by CEO Marc Holliday, plans to demolish the structure and replace it with a three-story, 25,000-square-foot retail building. But first, the REIT wants to follow its company’s “standard practice” and change the locks on the building’s front door and basement door, which it says is necessary to secure the property.

But in an email sent to SL Green earlier this month, Great Locations’ attorney wrote that the building was not unsafe, and there was no reason to change the locks.

“There is nothing in your notice that even hints that the building is unsafe,” Burton Ross, the attorney for the tenant, said in an email Aug. 8 to SL Green.

In response, SL Green filed a lawsuit Wednesday in Manhattan State Supreme Court asking a judge to force Great Locations to change the front door and basement store locks. SL Green declined to comment, and an attorney for Great Locations did not respond to a request for comment.

Real estate insiders said it was uncommon for a landlord to appeal to a judge to enforce a change in locks. In fact, a review of New York cases did not turn up any similar incidents.

“It is unusual that this matter rose to the level of litigation that it has,” Darren Oved, a partner with the law firm Oved & Oved, said. He was not involved in the case.

He could not predict what a judge would do, but said, “It is possible, if not likely, that a judge would grant the landlord’s request or, at the very least, urge the parties to a prompt and amicable resolution of this ministerial issue.”

The publicly traded SL Green has developed a number of retail properties in Times Square, and co-owns a retail stake in 1552-1560 Broadway with Jeff Sutton, located at the corner of 46th Street, where the main tenant is Express.

Great Locations is the net lessee for all of 719 Seventh Avenue, but it does not occupy the building. Instead, it subleases the whole structure to another company, the delicatessen Smiler’s. The deli in turn sub-subleases portions of the building to two gift shops, a laser hair removal salon and a signage company.

Great Locations was paying an annual rent of $836,481 on the lease that was set to expire July 31, 2018, court records show. That date was moved up to January 31, 2015, following the notice SL Green sent in July. Great Locations is entitled to a $1 million payment after the building is vacated, lease documents show.

Meanwhile, the complicated landlord-tenant structure — along with the peculiar squabble over locks — is set to end soon. SL Green sent a letter in July saying it planned to demolish the building next year, thus giving the tenants the required six months notice.

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