Zara Set to Close First NYC Flagship
The owner of the building located at a prime New York address is not happy.
Zara’s first store in New York is set to shutter later this year, according to a $15 million lawsuit launched by a landlord.
International Plaza Associates, the owner of 750 Lexington Avenue, an uptown address on the east side of Manhattan where Zara opened its first New York store 30 years ago, is accusing the retailer of improperly breaking a lease extension agreement by planning to close the location in September.
IPA in December told a local New York court that the previous month, it received a letter from Zara informing the company that instead of extending its lease by five years as it had said it intended in 2016, it was “vacating” the location in September 2018. IPA is a subsidiary of Cohen Brothers Realty, which is owned by billionaire real estate developer Charles Cohen.
The landlord is looking to hold Zara to its expressed intention, claiming breach of contract and breach of fair dealing, or damages of $15 million, at least part of which is calculated on prospective lost rent.
But Zara earlier this week argued for an outright dismissal of the case, claiming there is no breach of contract because the lease extension never materialized, adding that the close of the Lexington Avenue store is intended, but “may never occur.”
Zara noted that the letter it sent to IPA purportedly extending the store lease was “explicitly conditional in nature” and dependent on rent negotiations.
“To claim that this communication, which is little more than a promise to start talking, somehow constitutes an effective lease renewal is inconsistent with common sense and New York law,” the retailer said.
It added that, while it did have talks last year with the landlord, its October letter informing IPA of its plans to terminate the lease said the parties were unable to reach “an agreement on any of the material terms of a potential renewal or extension.”
A representative of Zara and its parent company Inditex, which is not a part of the lawsuit, could not be reached for comment.
Should the Lexington Avenue store close, eight Zara locations will remain in Manhattan. Over the summer, the largest Zara store opened in Spain, Inditex’s home base, and the brand became available online in India.
The financial performance of Inditex also remains solid, but growth is not as consistently high as it once was. For the first nine months of 2017, the retail conglomerate said overall sales were up 10 percent to 17.96 billion euros, adding same-store sales were “healthy.” In previous years, Inditex enjoyed growth of 20 percent or more, often on a quarterly basis.