Free People liable for $13M over Delshah Meatpacking property

Landlord spiked Urban Outfitters subsidiary’s lease in 2020 after missed rent

58-60 Ninth Avenue in Manhattan NYC and Delshah Capital's Michael Shah (Google Maps, LinkedIn, Getty)
58-60 Ninth Avenue in Manhattan NYC and Delshah Capital's Michael Shah (Google Maps, LinkedIn, Getty)

Free People hit a snag in a dispute over rent in the Meatpacking District, according to a new ruling.

The Urban Outfitters subsidiary is responsible for more than $13 million in back and future rent at 58-60 Ninth Avenue, Crain’s reported. A hearing next month will determine the exact amount the apparel brand owes to landlord Delshah Capital.

Michael Shah’s company took the retailer to court in 2020, suing for at least $11 million as a result of missed rent and future rent owed at the site. Prior to the lawsuit, Delshah terminated Free People’s 6,800-square-foot lease following two months of missed rent.

Free People stopped paying rent in the onset of the pandemic, outside of a partial payment in May. The lease wasn’t set to expire until January 2027 and was worth $1.4 million a year, according to loan documents.

Tensions between Free People and Delshah have been brewing from the start. Delshah delivered the space to the retailer more than a year behind schedule, in the summer of 2016.

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Free People claimed the delay caused the company to miss the 2015 holiday season and suffer reputational and financial harm. The retailer filed a lawsuit, seeking 825 days of rent credit or nearly $3.2 million in damages. A judge ruled that Delshah owed only $650,000 for the delay.

Rent payments hit the chopping block in 2020 as national retailers strategized for pandemic survival. Free People owner Urban Outfitters announced in late March 2020 it would stop paying rent at stores closed in the wake of the pandemic, sparking a $1.2 million lawsuit filed by Empire State Realty Trust over unpaid obligations at a Herald Square location.

Delshah acquired the Meatpacking mixed-use building in 2013 for $18.2 million. Four years later, the landlord scored a $28 million CMBS loan for the property, along with another nearby retail building at 69 Gansevoort Street.

— Holden Walter-Warner