The Lincoln at 1691 Michigan Avenue
As retailers struggle amid the pandemic, Williams Sonoma and Pottery Barn are taking a new tack, attempting to terminate their lease by alleging a government “taking.”
Claiming government shutdowns and restrictions are hampering their connected stores off Lincoln Road in Miami Beach, they are suing their landlord to break the lease agreement that amounts to nearly $800,000 per year, according to a recently filed lawsuit.
Williams Sonoma, which also owns Pottery Barn, sued New York-based Clarion Partners affiliate CLPF – Lincoln this month in Miami-Dade Circuit Court. The home furnishings company wants to break a lease agreement for 43,000 square feet of ground-floor retail space of an office building with a garage at 1691 Michigan Avenue, known as The Lincoln.
A Clarion Partners spokesperson declined comment. A Williams Sonoma spokesperson and the local attorney representing the company did not respond to requests for comment.
Clarion’s affiliate paid $109.25 million in cash for the ground lease of The Lincoln in 2016, records show. The six-story building was completed in 2003 and is connected to a 709-space parking garage.
According to the complaint, Williams Sonoma notified Clarion’s affiliate on June 11 that it was terminating the lease under a clause that the agreement is voidable in the event of government actions that impair the stores’ business operations, also known as a “taking.”
Williams Sonoma claims the forced closures of non-essential businesses during the initial months of the pandemic, and then precautionary measures enacted after the shutdowns were lifted have created a significant impact on retail sales.
Williams Sonoma has been unable to operate its stores at The Lincoln in a manner consistent with the material purpose of its lease, the lawsuit states. “The market for in-person retail sales in Miami Beach has not recovered to the pre-pandemic levels upon which the lease was based and is unlikely to do so,” the complaint claims. “The described effects of COVID-19 have utterly and irreversibly frustrated the purpose of the parties’ lease agreement.”
On June 17, the Clarion affiliate rejected Williams Sonoma’s intention to exercise the “taking” clause, the lawsuit alleges. Meanwhile, the home furnishings retailer states it has not missed any rent payments since March when the shutdowns began.
Williams Sonoma signed the lease in 2015 and agreed to pay a monthly rate of $64,446 based upon “Lincoln Road’s status as a premier shopping destination with heavy pedestrian traffic. Lincoln Road is walking distance,” the lawsuit states. “The number of visitors and the unparalleled popularity of the area.. were the dispositive factors in plaintiff’s decision to agree to pay nearly $780,000 annually in rents.”
Lincoln Road’s commercial real estate has taken a big hit during the pandemic. Embattled co-working space firm WeWork moved out of its 40,000-square-foot Lincoln Road location in August just as its landlord sued the company for nearly $20 million in unpaid rent. Independent bookstore Books & Books permanently shuttered its 950 Lincoln Road space after being there more than 30 years. And Miami Beach real estate investor Sam Herzberg filed eviction lawsuits against Diesel USA and Perry Ellis’ Original Penguin.