Restoration Hardware’s foray into the Miami Design District was supposed to jump-start the redevelopment of a less glamorous part of the high-end retail and dining neighborhood.
The deal is now a disaster.
Restoration Hardware is suing its landlord, an entity connected to Apollo Commercial Real Estate and Michael Comras, alleging that the partners didn’t hold up their end of the deal and are seeking to push RH out of its lease. RH claims that it began paying rent in November and Apollo and Comras are stopping it from using eight properties on Northeast 39th Street, Northeast First Avenue to North Miami Avenue. It hasn’t yet opened.
The gallery space was leased for a period of four years to a high-end furniture retailer. It was anticipated that it would open in 2021. A copy of the lease shows that it started at $1.6million per year.
RH was also negotiating an extended lease at the Savoy Hotel on Ocean Drive, Miami Beach, according to the lawsuit. The proposed deal would see RH rebrand the Savoy Hotel as a RH property and RH spending over $100 million on renovations. It’s unclear if the deal is still in the works. Allied Partners, the owner, did not immediately return a request for comment.
RH filed the lawsuit on January at Miami-Dade Circuit Court. At the heart of the dispute is RH’s goal of connecting neighboring properties into a combined title so that RH could operate one single gallery/store with connecting pathways.
But that plan hit a roadblock: The retailer was required to get Apollo’s signoff before the city of Miami could approve or deny the unity of title, according to RH’s lawsuit.
Apollo declined to comment.
Negotiations between RH Chairman and CEO Gary Friedman and Apollo and Comras dragged on, Friedman doubled the goal, according to text messages attached at court docket. These were obtained by The Real Deal and have since been removed from the public record.
“You’ve got good cash flow, no capital investment, no fucking around with a bunch of buckethead tenants with multiple leases, and an anchor tenant that gives you a much better chance of renting the other space,”Friedman sent Comras an SMS in April 2021.
Apollo/Comras argued that RH was legally required to accept the lease as it was written in a June motion for dismissal. Apollo/Comras claim the lease doesn’t require RH to file any Miami applications. Apollo and Comras claim that RH failed to submit plans to the landlord by the July 6th deadline.
Apollo/Comras also claimed RH tried not to delay Friedman’s deposition for more than two hour. Friedman claimed that Friedman had no direct knowledge about drawings and construction documents. According to a motion filed Sept. 11, 11. According to a motion filed Sept. 11, 11.
Friedman had previously sent Comras an SMS. “do something big or stay put”You can refer to the site at “the no man’s land”According to the motion, the district.
Friedman stated that the Miami Design District boom was temporary due to Covid. Soon, people will return home to New York City and other places.
Friedman did no immediate respond to a request for comments. RH’s attorney also did not return a request to comment.
“We can help you legitimize the next couple of blocks and enter into real discussions with the right tenants for the next generation,”Friedman wrote. “Otherwise you risk the status quo, and the same pile of crap.”
Apollo and Comras’ short-term plan had called for pop-up shops and restaurants surrounding Restoration Hardware. It eventually planned major renovations.
Friedman also advised Comras that they should tell Apollo “not to make the same mistake twice,” likely referring to the site’s convoluted history.
RedSky Capital and JZ Capital spent a lot of money to purchase more than 2.5 acres of Northeast 39th or North 40th streets, extending from North Miami Avenue to Northeast First Avenue. The majority of the assemblage consisted of smaller retail shops. JZ was paid $236 million by RedSky. Apollo provided funding for RedSky, JZ with $220 million.
RedSky was Downtown Brooklyn’s most aggressive buyer and ran into financial difficulties. RedSky began to sell their Brooklyn portfolio. In 2020, Cushman & Wakefield listed RedSky and JZ’s 14 Miami Design District properties. JZ ultimately wrote down its Design District portfolio to zero dollars because of the high carrying costs and excessive supply in the area, according to JZ’s 2020 Annual Report.
According to Florida corporate records, Apollo had already taken over JZ RedSky Design District’s property company by last year. It’s unclear how much of a stake Comras has in the development site.
According to RH’s complaint, “Monetary damages would be inadequate to compensate RH.”It said that it is still seeking “tens of millions of dollars.”