Lawsuits, pop-ups and ragers: Why 60 Guilders took a $25M loss on its prized Soho retail property
Seller’s three-year tenure marked by litigation, leasing troubles before sale to SL Green
In spring 2016, retail-focused investment firm 60 Guilders and the Carlyle Group made a big bet on Soho with one of the priciest retail investment deals ever. In the three years since, all they’ve gotten in return was a soured expansion deal, repeated eviction threats, just two short-term pop up tenants, and finally, a $25 million loss.
60 Guilders and Carlyle have sold the retail co-op unit at 106 Spring Street to SL Green Realty for $79.5 million, a significant discount from the $105 million they originally paid for the space, according to city property records filed last week. The firms’ fraught relationship with the building’s co-op board — represented by an entity called Workspace, Inc. — appears to have played a significant role in the price cut, according to court documents examined by The Real Deal.
“Since the start of the parties’ relationship, Workspace has consistently attempted to oppress Plaintiff and find ways to terminate the Proprietary Lease without any valid justification or reason,” the retail owners say in the second of two lawsuits filed against Workspace, Inc.
60 Guilders, Carlyle, SL Green, and a member of the co-op board all declined to comment. The story of 106 Spring and 93 Mercer is told through multiple lawsuits filed by the retail investors against the co-op board.
The partners’ plans for the southwest corner of Spring and Mercer were as bold as the $17,800-per-square-foot price tag. They would pick up the newly vacated 106 Spring Street and neighboring 93 Mercer Street, reposition them, and lease out the combined 12,000 square feet to two luxury tenants. The 106 Spring Street deal closed in April 2016, and 93 Mercer was expected to come soon after. But it never did.
Workspace, which owned both units, disputes 60 Guilders’ take on why the Mercer deal fell through. According to the co-op board, property values in Soho had started to decline in mid-2016, and 60 Guilders thought they could get a better price by backing out of their contract. 60 Guilders, on the other hand, blames one of the many quirks of zoning in Soho – even though 93 Mercer Street was already being used as a retail space, it did not actually have a retail certificate of occupancy. Workspace says the unit had a special permit from the city to be used for retail.
In any case, 60 Guilders never closed on 93 Mercer, and the unit was put back on the market, but now with a twist – as owner of one of the retail co-op units, 60 Guilders was entitled to representation on the co-op board, and potentially to the profits of any future sales. Workspace argues this represented a conflict of interest, and that 60 Guilders’ representative on the board agreed to be excluded from discussions related to the sale of the unit. 60 Guilders, on the other hand, says the other board members improperly concealed the sales negotiations from them, and that there was no conflict of interest because they weren’t bidding for the unit again anyway.
In late 2017, Workspace entered into a contract with Madison Capital to sell the 93 Mercer retail unit for $18.25 million, a nearly 50 percent discount from the $35 million 60 Guilders went into contract on in 2016. 60 Guilders then sued Workspace in an effort to block the Madison Capital sale until the board agreed to give them their cut of the profits, and things really started to go off the rails.
Shortly after the lawsuit was first filed, the co-op board sent the retail owners a notice of default, seeking to evict them from the property over their alleged failure to maintain a cooling tower on the roof. This evolved into a dispute over HVAC renovations and air conditioning, which were necessary upgrades to satisfy a high-end tenant, the lawsuit states.
As the lawsuit dragged on, Madison Capital withdrew from its contract for the Mercer unit. A representative for Madison said the firm no longer has plans to acquire the property.
Through the end of 2017, the only lease 106 Spring Street had been able to ink was for a short-term tenant over the 2016 holiday season. Despite these struggles, 60 Guilders remained bullish on retail in Soho, noting that every location is unique. In January 2018, 60 Guilders co-founder Kevin Chisholm told the New York Post that “If you let 434 Broadway negatively impact you, it’s like if John Goodman can’t get a date, it should affect Leo DiCaprio’s ability to get a date.”
106 Spring Street did eventually get another date, but this just led to further acrimony with the co-op’s residents.
The Italian Job
Moncler, the Italian luxury brand most known for its puffy down jackets, signed a license agreement with 60 Guilders for its “House of Genius” pop-up store to use the space from August 2018 to mid-January. They agreed to pay $85,000 a month, according to court documents. On the night of October 4, concurrently with other stores in Los Angeles, London and Tokyo, Moncler hosted a launch party at the Soho store. Rapper Meek Mill, Japanese designer Hiroshi Fujiwara, and Moncler CEO Remo Ruffini were in attendance.
The residents of the building did not appreciate this. In another notice of default addressed to 60 Guilders, the co-op board’s president noted that “the music was playing at extremely high levels, and with extreme amounts of bass. […] The walls in my unit were pulsating with the bass from the party. And by the end of the evening, the police showed up because there were reports of a nuisance coming from the building.”
Additionally, the fact that Moncler installed velvet rope barriers outside the building and served alcohol on the premises (a “Noxious Use”) were also deemed violations of 60 Guilders’ co-op lease, the lawsuit claims.
60 Guilders sued Workspace a second time in November, but it seems that by then both sides had had enough. Workspace withdrew its notice of default in January and the case was closed the following month. In April, SL Green scooped up the property at a $25 million discount, paying $14,300 a foot.
Though SL Green’s plans for the space are unclear, the firm is already familiar with the retail market in the area, having acquired the retail condominium at 115 Spring Street across the street for $52 million in 2014. That property is now home to an Adidas, and is right next door to 60 Guilders’ 119 Spring, which hosted a Brooklinen pop up shop from November to February. 60 Guilders is still seeking a long-term lease at the property.