A Brooklyn landlord is accusing Compass of capitalizing on Covid-19 to get out of its lease.
In a lawsuit filed Tuesday, landlord Stuart Venner said the residential brokerage used the pandemic to ask for rent relief — and ultimately walk away from its office — at 384 Atlantic Avenue in Boerum Hill. Although Compass told the landlord it was “reducing its real world footprint,” Venner cited the firm’s $1.6 billion in venture funding as evidence that it should be able to pay its rent.
“They are simply, and reprehensibly, capitalizing on the current tragic situation to disguise their intentional and unlawful breaching [of] the valid lease,” according to the complaint.
Compass declined to comment.
The office in question is one that the SoftBank-backed firm inherited when it struck a deal to buy Stribling & Associates last year.
According to the suit, Stribling signed a 10.5-year lease in 2012. If Compass walks away, it would owe $792,129, based on current monthly rent of $24,633 and future increases, the suit said.
According to Venner, Stribing (and then Compass) paid its rent with no issues prior to Covid-19. On March 31, the landlord received an “unsigned, anonymous form letter” from Compass stating that because of the pandemic, it had to close its office. For that reason, “it is unclear that rent is due,” according to the letter.
In addition, Compass’ letter claimed, the circumstances warranted some sort of rent relief. “We believe the situation is still too uncertain to begin concrete discussion regarding rent abatements, and waiver of other conditions, but we look forward to discussing these issues in the near future,” it said.
But Venner rejected the claim, expressing surprise at Compass’ request in light of venture backing. Since 2012, Compass has raised more than $1.5 billion from investors, and it was most recently valued at $6.4 billion valuation.
“As the Coronavirus crisis evolved, we thought that due to the combined strength of Stribling and Compass, your lease payments would be timely and uninterrupted,” he wrote in a letter to Compass executives. Venner added that he was “somewhat perplexed by the ambiguous position you took with respect to rent,” given Gov. Andrew Cuomo’s position that cash-strapped tenants can’t be evicted, but still owe rent.
“We respectfully request that your financially-strong organization understand the pressures that local landlords and businesses are under and not add to our financial stress,” Venner wrote, according to the suit.
Like other residential firms, Compass had to make painful cuts in the wake of coronavirus, when many states shut down non-essential businesses. It cut 15 percent of its staff and slashed salaries to cut costs.
According to the suit, Compass is also evaluating its office footprint. In response to Venner’s demand for rent, Compass asked the landlord to apply a portion of Stribling’s security deposit to its April and May rent. Compass later confirmed its intention to consolidate agents from the Atlantic Avenue office into a new, 11,000-square-foot office at 333 Schermerhorn Street.
In the suit, Venner said when offered a deal of reduced rent, while its commercial brokers found a new tenant for the old space, Compass demurred. On May 8, a Compass executive told Venner “that, immediately upon the lifting of the various orders in place in New York State, Stribling/Compass would be vacating the Premises, they had nothing further to offer and that he had no more time to deal with this.”
Compass’ first acquisition in New York City was anything but typical. Instead of swallowing the smaller firm wholesale, Compass has allowed it to operate as “Stribling at Compass” at the behest of some veteran agents. Stribling’s offices have been another matter. Last month, Stribling founder Elizabeth Stribling sold the firm’s former office at 340 West 23rd Street in Chelsea for $7.55 million.