Tuesday, 19 April 2011

FAO Schwarz & Boston Properties in Landlord Dispute

FAO Schwarz in New York is engaged in a landlord dispute with Boston Properties, which owns the General Motors Building housing the iconic toy store. FAO Schwarz is trying to extend the term of the lease for the store, while Boston Properties has hinted that the toy store will likely have to relocate.

In January, FAO Schwarz’s parent company, Toys "R" Us, exercised the five-year option in its lease, which had been originally set to expire in 2012. The lease option allows the tenant, Toys "R" Us, to extend the lease for a fair market value. However in June 2008, Boston Properties President Douglas Linde, admitted at a press conference that FAO Schwarz would likely not be the most ”economically viable tenant” for the company. That announcement came just a few days after Boston Properties announced that it would be buying the 59-story building.

Both Boston Properties and FAO Schwarz are now in arbitration over the rent for the store which is located at Fifth Avenue and E. 58th St. At the center of the dispute for Boston Properties is the fact that this is one of the priciest pieces of commercial real estate in the world. Some stretches of Fifth Avenue boast of an average asking rent of about $1,850 per square foot, making this the most expensive stretch of office space in the world.

California real estate lawyers
find this dispute tilting a little in Boston Properties’ favor. FAO Schwartz will find that its relocation options are extremely limited. For one, the retailer would probably not find the kind of massive space it requires for its store elsewhere on Fifth Avenue. Besides, the current location is a New York landmark, and the store would not want to lose out on that kind of neighborhood. Even if it did, there are exorbitant moving costs linked to the relocation. The company could move the store to Times Square, but there, FAO Schwarz would be competing with the flagship Toys "R" Us store.

If you are involved in any kind of real estate dispute, related to commercial/residential leases, landlord/tenant disputes, condominium laws, zoning laws and other real estate-related issues, a California real estate litigation attorney can help you obtain a favorable outcome.

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