UPDATED, March 30, 8:15 p.m.: It’s the chicest new lawsuit in town.
Giorgio Armani Corp,, which has its flagship retail location at 752-760 Madison Avenue, is suing its landlord SL Green Realty for allegedly conducting “an illegal and collusive scheme to squeeze” the retailer out of its sublease.
Armani is looking to maintain the terms of its current sublease — in which it pays well below market-rate rents for its 16,468 square feet — and wants the court to declare that SL Green’s move to hike the rent for the space is invalid, according to a complaint filed in New York State Supreme Court Monday.
Armani signed a sublease for the site two decades ago, and in 2011, signed a lease extension through 2025. After the extension, Armani claims to have spent millions on a major renovation of the space. “Armani made these substantial expenditures in reliance on the terms of the Sublease and the Sublease Extension, including a covenant of quiet enjoyment in the Sublease,” the complaint states.
In 2012, SL Green, the city’s largest commercial landlord, bought the ground lease at the location in partnership with Ofer Yardeni’s Stonehenge Management for $14 million. And last year, it acquired the land under 760 Madison and 19-21 65th Street for $282.4 million, as The Real Deal reported.
Once it owned both the master lease and the land, “SL Green was in position to further its scheme,” the suit alleges. The real estate investment trust started an appraisal process last year to adjust the rent on the master lease — a process that was conducted between two entities controlled by SL Green and therefore designed to hike up the rent, according to the suit.
SL Green, Armani alleges, is trying to force it out of its lease 10 years before it is set to expire. Armani’s current rent for 2015 is $3.5 million— $2 million above its original rent of $1.5 million. Armani claims, however, that when SL Green had the property appraised, it estimated Armani’s rent should be $9 million per year. The retailer claims that if it were to lose its store, it would be forced to pay significantly higher market rates for a new space.
Armani is seeking a temporary restraining order that would prevent SL Green from terminating its sublease on Apr. 2, and also seeking compensation for costs incurred.
“This is a desperate attempt by Armani to protect its far below market rent at one of the most valuable retail locations in New York City, ” a representative for SL Green said in a statement. “The fact is, Giorgio Armani extended their sublease with the prior lease owner with full knowledge that the underlying lease provided for a ground rent reset on April 1st. At the time, Armani also agreed not to extend their existing non-disturbance agreement. Unfortunately, Armani has refused attempts by SL Green to negotiate a new agreement going forward, and we are confident we will prevail in court.”