In an apparent case of a creative pandemic lease gone awry, a Soho landlord is trying to evict a high-end tenant paying low-end rent.
One Kings Lane Holdings seeks to oust Italian fashion brand Pinko from the retailer’s flagship U.S. shop on Spring Street, according to a complaint PINKO filed in state court Friday.
The lawsuit alleges that One Kings Lane — a retailer itself — reneged on an agreement to extend PINKO’s sublease. The former had all but signed the lease renewal two months before demanding that PINKO vacate the building, the complaint says.
When Pinko moved into 143 Spring Street in March 2021, it scored a major discount on rent: $30,000 a month for the entire three-story building, or 15% of its sales value, whichever was higher.
That broke down to about $73 per square foot, including the second floor and basement. Average ground-floor retail rents in Soho before the pandemic ran around $550 per square foot.
A year into the pandemic, retail landlords — especially in Soho — were lucky to have any paying tenants at all and many extended concessions. But cheap rent aside, it was a fraught moment for brick-and-mortar PINKO to launch its stateside expansion.
Pinko CEO Pietro Negra (Getty)
“[PINKO] plans to expand its network of stores in the United States from the current six to 10 in the next three years,” Pinko CEO Pietro Negra said in a press release at the time. “Our new Manhattan store launches our American expansion plans.”
Pinko occupies the entire landmarked building, with two levels of shop floor and a cellar totalling nearly 5,000 square feet. The building is owned by Buchbinder & Warren Realty, Commercial Observer reported.
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The top of Pinko’s sublease agreement reads like a heavily cast play, with actors from Crocs to Bed, Bath & Beyond listed as original tenants or original subtenants. In other words, Pinko is subleasing from a subletter, a pandemic-era solution to a pandemic-era problem. (Bed Bath & Beyond bought One Kings Lane in 2016 and sold it four years later.)
Creative lease agreements like this were common during the pandemic, but they have fallen out of favor, according to the Real Estate Board of New York’s most recent Manhattan retail report.
Pinko’s term was one year, but in March when it sought to extend its lease to 2026, One Kings Lane played keepaway.
Pinko “negotiated a longer-term lease … for its expansion and recovery, only to have its landlord attempt to improperly strong-arm the tenant out of the premises at the 11th hour in an apparent case of ‘landlord’s remorse,’” the lawsuit reads.
It is unclear why it did not consummate the sublease renewal; Pinko claims a larger retailer made an offer for the space.
In a prime retail area such as Soho, rent negotiations are a high-stakes affair. One Kings might have been looking for a number closer to what the area used to command, while Pinko might have seen that as unsustainable, even if some retailers are willing to lose money on a New York City flagship.
One Kings Lane’s lawyers responded to the complaint the same day it was filed, saying that because their client never signed the lease agreement, Pinko has no legal leg to stand on. Moreover, the tenant has not paid rent since December, they said.
Pinko’s boutique did not respond to requests for comment. The shop appears to be operating despite the landlord’s demand that it vacate by June 4. Pinko has filed for an injunction to stay put.
Only about 70 percent of consumers report feeling comfortable shopping in person these days. Soho attracts international tourists with money to spend, but visitors have not returned in full force.
The battle for 143 Spring Street is being waged with retail rents in Soho still 66 percent below pre-pandemic levels. Rents elsewhere in the city have rebounded more.