Kushner Cos. Sued by Times Square Food Hall Tenant Over Lease

lawsuit

(Bloomberg)—A dispute over space at a Times Square property owned by Kushner Cos. has escalated into a lawsuit.

Outstanding Hospitality Management, a St. Louis-based operator of airport restaurant spaces, filed a lawsuit on Monday against the company owned by the family of Jared Kushner over more than 1,900 square feet at the former New York Times Building in Manhattan, according to the lawsuit. OHM planned to use the space for a Roaring Twenties-themed champagne bar before Kushner Cos. told them the area had to be shared with another tenant — directly countermanding their lease and previous communications, according to the lawsuit.

“The landlord’s conduct was unjustified and constitutes a spectacularly well-documented fraud,” the lawsuit reads.

Kushner Cos. disagrees. OHM hasn’t paid February rent and its failure to open for business is “an incurable event of default under the lease,” according to a Feb. 15 letter from a Kushner Cos. lawyer, sent to a lawyer for OHM and seen by Bloomberg.

“Untruths, Misrepresentations”

“OHM, aware that we were about to file a lawsuit against them for being in default of their lease agreement for not opening their food hall by the date set in the lease, rushed to file their own suit filled with untruths, misrepresentations, and salacious and false accusations in an attempt to litigate in the press rather than meet their plain leasehold obligations,” Christine Taylor, a spokeswoman for Kushner Cos., said in an email.

Richard A. Chinsammy, executive vice president with OHM, declined to comment.

For its purchase at the building, Kushner Cos. received $370 million of loans from Deutsche Bank AG. Those were later sold to investors across Wall Street under the assumption the property would be 100 percent occupied. One tenant has already left, and another had been late on rent, threatening the company’s ability to make interest payments, Bloomberg reported last month. Kushner Cos. said then that it is “very happy with this investment and continue to meet all our financial obligations and will continue to do so in the future.”

Last year, New York prosecutors requested documents from Deutsche Bank AG related to the property. Kushner Cos. said it is cooperating with all investigations.

The champagne bar was slated to be part of a food hall named for celebrity chef Todd English, which was scheduled to open in April 2017, but construction hasn’t begun. In an October legal complaint against the Plaza Hotel, which contains a Todd English restaurant, the chef is accused of sexual harassment. The lease would pay Kushner Cos. $2.3 million annually, according to loan documents.

A Hallway

At issue is a hallway off of 44th Street. Kushner Cos. now contends it’s meant to be used by another tenant as well, but had previously been complimentary of the champagne bar plans, according to the lawsuit. OHM says that its lease calls for 11,970 square-feet of usable space, and that, without the hallway, they would come up more than 1,900 square-feet short.

But the lease makes clear the area wasn’t part of OHM’s premises, according to the Feb. 15 letter from a Kushner Cos. lawyer.

Kushner Cos. purchased the property for $296 million in 2015 and signed up four new tenants, including OHM. Then, defying the broader market which had experienced a downturn, the building was re-appraised at $445 million a year later. The calculations assumed the building would be 100 percent occupied and would generate $24 million of rent annually.

The appraisal helped justify $370 million in loans, mostly from Deutsche Bank, to Kushner Cos. The family firm took out $59 million of the debt in cash. Underwriters estimated annual expenses of $4 million, indicating a modest cushion after covering $18 million of interest payments, Bloomberg reported in January.

Since then, a Guy Fieri-branded restaurant, which paid $1.8 million in rent, has closed. Kushner Cos. will soon announce a higher-caliber, higher-rent tenant for the space, likely before month’s end, Taylor said.

Kushner Cos. is owned by the family of Jared Kushner, senior adviser and son-in-law to President Donald Trump. Kushner divested from some assets that he deemed potential conflicts when he joined the White House. The move has received criticism because the transfers were mostly to family, and their exact nature and timing weren’t disclosed.

To contact the reporters on this story: Caleb Melby in New York at [email protected]: David Kocieniewski in New York at [email protected] To contact the editors responsible for this story: Ethan Bronner at [email protected] Jason Gale

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© 2018 Bloomberg L.P

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