Diesel USA and Original Penguin Lincoln Road stores skipped April and May rent payments: lawsuit

Diesel pays $44K/month and Perry Ellis pays $53/month in rent for Original Penguin, according to lawsuits

Rendering of Sterling Building by Kobi Karp
Rendering of Sterling Building by Kobi Karp

Miami Beach real estate investor Sam Herzberg wants to kick out two national retailers from the Sterling Building on Lincoln Road. The historic property’s owner recently filed eviction lawsuits in Miami-Dade Circuit Court against Diesel USA and Perry Ellis for failing to pay rent in April and May.

Herzberg joins developer Jeff Berkowitz as the latest South Florida landlord wasting no time in threatening to get rid of delinquent retail tenants in spite of economic woes caused by the coronavirus pandemic. In May, Berkowitz Development Group sued Petsmart to evict the pet store chain from Dadeland Station and Aventura Commons.

Last Friday, The Sterling Building Inc., which is managed by Herzberg, sued Diesel USA for failing to pay $179,973 in back rent for April and May, as well as other charges, according to the lawsuit. A 2019 contract extension attached to the complaint shows Diesel agreed to pay $44,018 a month for a 2,800-square-foot ground-floor retail space and a 300-square-foot mezzanine space in the Sterling Building, located at 925 Lincoln Road.

On Tuesday, The Sterling Building Inc. sued Perry Ellis, alleging the clothing company owes $124,239 in rent for its Original Penguin store on Lincoln Road and another $4,673 for a storage room. Perry Ellis has had a leasing agreement since 2005, which was last modified in 2014, according to the lawsuit. The modification shows Perry Ellis’ rent for Original Penguin increased from $47,208 a month six years ago to $53,133 a month currently.

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Lawyers for The Sterling Building Inc. and representatives of Diesel USA and Perry Ellis did not respond to multiple phone and email messages seeking comment.

Herzberg’s decision to evict two major brand clothing stores comes at a time Lincoln Road is in a state of flux. The pedestrian-only street reopened on May 20. Data provider Trepp reported that Steve Madden vacated its lease at 663 Lincoln Road, which accounted for 45 percent of the building’s total square footage. Property owner Thor Equities was also 30 days delinquent on its $7.3 million loan for the building, according to Trepp. At the same time, Amazon signed a lease for a 5,000-square-foot store at 700 Lincoln Road where it will sell products rated four stars or greater by the online retailers’ customers.

Tony Arellano, co-founder and managing partner of DWNTWN Realty Advisors, who is not involved in the Sterling Building’s leases, said Herzberg is a hardball landlord. “Sam is an old school real estate guy,” Arellano said. “I know him to be someone who doesn’t play games if a tenant can’t pay rent. He will ask them to leave.”

In the “new normal” of living with Covid-19, Lincoln Road Mall is starting to see renewed interest because it is an open-air shopping district, Arellano said. “Lincoln Road is incredibly resilient,” he said. “There are probably a few [prospective] tenants already looking at those spaces in the Sterling Building. It has some of the best space on Lincoln Road.”

Herzberg is also in the process of obtaining final permitting approvals to build a 144-room hotel addition to the Sterling Building.

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