‘The Kooples’ Gives Thor Equities an Ultimatum to Lower Retail Rent in SoHo
Even the richest SoHo retailers are fighting back against rent gouging. At Thor Equities’ 115 Mercer Street, The Kooples gave a stiff ultimatum. Lower the rent or they’ll leave.
The French clothier is reportedly threatening to vacate its space six years ahead of schedule unless Thor cuts a deal on the monthly dole, currently pegged at per $650 per square-foot. According to the report in Bloomberg, retail rents in the area have plunged 17 percent in the past year to an average of $440 per square-foot, purportedly the largest decline in all of Manhattan. The Kooples says it’s not making enough coin to stay afloat in SoHo, and cites the high-rent blight plaguing shopping areas citywide.
Thor Equities purchased 115 Mercer Street in 2013 and replaced its commercial tenants with The Kooples one year later. At the time, it was willing to foot the exorbitant rents.
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In Manhattan, home to some of the most valuable retail real estate in the world, a sharp rise in rents following the recession exacerbated the problem, with property owners clinging to unrealistic income expectations. Today, the glut of empty space is taking a toll, pushing landlords to make concessions to plug holes.
Some are signing shorter-term leases to draw tenants that may be reluctant to make long-term commitments. In Soho, Hermes is negotiating a deal at 63 Greene St. that gives the retailer the option to leave after one year, while a few blocks over at 375 West Broadway, Gucci signed a lease that allows it to vacate the space if sales don’t meet expectations after two years, according to people familiar with the deals, who asked not to be identified because terms are private.
At 115 Mercer, Thor is facing a drop in income or the task of filling empty space as rents tumble. The landlord purchased the building in 2013. Gary Cohn, the former Goldman Sachs Group Inc. president who now serves as President Donald Trump’s top economics adviser, invested alongside Thor in the property. The Kooples came into the building in 2014. For a French retailer looking to expand in the U.S., it was a prime location: a bustling area for tourists and shoppers, just a block from Apple Inc.’s first New York City location and Keith McNally’s renowned Balthazar bistro.
The Kooples agreed to pay $650 per square foot for its space, which was part of a plan to open 40 stores in the U.S., according to documents tied to the $37 million mortgage on the property. Retail rents in the area have since plunged, dropping 17 percent in the past year to an average of $440 a square foot, the largest decline in all of Manhattan, according to Cushman data.
Late last year, the Kooples notified Thor that it planned to terminate its lease in May, according to the loan documents. The company now operates five U.S. locations, and is focusing on e-commerce, said Elodie Barbe, a spokeswoman.