Victoria’s Secret Hit With Landlord Suit for Lapsed Store

June 3, 2021

The real estate ramifications of the COVID-19 pandemic and retail store closures during last year’s lockdowns are playing out in court.

Victoria’s Secret is facing allegations by its landlord that the company prematurely ended its stay at the Westfield World Trade Center Shopping Center, located in downtown Manhattan, in alleged violation of a lease agreement.

In a complaint filed in late May in New York state court, Westfield made claims for more than $30 million, alleging that the retailer had “refused to pay rent” and backed out part way through from a 12-year lease that was meant to end in 2029. The suit seeks more than $4.2 million in unpaid rent and roughly $28 million in damages for the alleged violation of the lease.

“By virtue of Victoria’s Secret’s impermissible surrender of the premises, failure to continuously open for business and operate and failure to pay rental as it became due and owing, Westfield terminated the lease effective May 27, 2021,” Westfield wrote in its complaint. “As a result of Victoria Secret’s defaults under the lease and the resulting termination, Westfield is entitled to accelerate all rental as if the lease had not been terminated.”

Representatives for Victoria’s Secret didn’t respond to a request for comment.

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The dispute centers on a point of contention facing mall tenants and their landlords around the country as retailers have closed thousands of stores during the pandemic. When major tenants leave a mall during a crisis, what happens to those left behind?

Lease agreements sometimes address these scenarios through what are known as co-tenancy clauses. Such provisions may allow tenants to reduce their rent or leave their premises during their lease term, if they can show other important tenants have already left.

Victoria’s Secret allegedly invoked such co-tenancy failures and sought to terminate its lease. But Westfield argues in its suit that the retailer had not shown evidence for its claim about such co-tenancy issues.

“Westfield responded with documentation evidencing that there was no failure to meet the co-tenancy requirements for 12 consecutive months that would entitle Victoria’s Secret to terminate the Lease,” Westfield said in the complaint.

“Victoria’s Secret nevertheless maintained that, based on nothing more than ‘physical observ[ations] on multiple occasions by [Victoria’s Secret] personnel,’ the co-tenancy requirements were not met,” it said.

Victoria’s Secret parent company L Brands had said early in the pandemic that it was halting rent payments amid the store closures, a move adopted by many retailers during the pandemic, even those in Chapter 11, a process that usually requires bankrupt companies to continue paying their rent and bills during the proceedings.