Judge Rules Victoria’s Secret, Gap in NYC to Pay Over $40M in Back Rent to Landlords

By Marty Raminoff

Judges are starting to crack down on big commercial tenants who were hoping the Covid-19 pandemic and the empty Midtown sidewalks would allow them to skip out on paying rent.

As reported by Crain’s NY, on Friday, a judge held the Victoria’s Secret store in Herald Square on the hook to pay landlord SL Green more than $23 million in back-rent. In another judgement, on Thursday, a state Supreme Court judge in Manhattan ruled that Gap Inc. has to pay 15 months of back rent, worth $24 million, on a Gap store and an Old Navy in Times Square.

Last year, the big-name retailers had sued their landlords to get out of paying millions in rent on their Midtown leases, arguing that the pandemic had ravaged their business and prevented them from using their retail spaces.

The judge’s rulings in favor of the landlords may set a precedent for dozens of other suits in which retail tenants have sought to get out of paying their rents. “A lot of tenants raised the issue of not using their space because of the pandemic. It’s all getting sorted out now,” said Warren Estis, the attorney for Gap’s landlord, Bow Tie Partners. “The excuses they’re giving are not going to be bought by the appellate courts.”

In May 2020, Gap had taken legal action against landlord Bow Tie Partners to terminate its leases at 1530 Broadway, where the rent costs $3 million per month. The retailer said it “would never have agreed to pay rent in excess of $1.5 million per month for each of the Gap and Old Navy retail stores … without Times Square’s teeming sidewalks and hordes of eager shoppers,” as per the complaint. Last July, Judge Debra James dismissed Gap’s case and ruled that the company must continue paying rent. The judge is now holding Gap responsible for the 15 months of back-rent, arguing that it continued to occupy the stores. Both stores are now closed; the Old Navy location is vacant. The 10-year lease is worth $600 million, and it is yet to be decided how much in all the company will be on the hook for. “They have the option to go back in if they keep paying us,” Estis said. Gap intends to appeal the decision, said the company’s attorney Jesse Schneider.

Victoria’s Secret and H&M’s suit against landlord SL Green to stop paying rent at their Herald Square stores was similarly tossed by a court judge.