Vornado sues Century 21, Gindi, over Rego Center mall lease

Vornado Realty Trust sued Raymond Gindi and affiliates of Century 21 alleging they broke a deal to return as an anchor tenant to Vornado’s Rego Center mall. Vornado says Century 21’s absence from the mall has, “disrupted and negatively impacted the tenant mix of the shopping center, reduced overall traffic to the mall, made it more difficult to attract other first-class tenants, and caused reputational harm.”

The Rego Center mall is located at 61-55 Junction Boulevard in Rego Park, Queens.

Vornado, the large real estate investment trust, alleges it struck a deal with Raymond Gindi of discount retailer Century 21, to assist in the re-purchase through a bankruptcy auction of the intellectual property of Century 21, which was needed to reopen the flagship store in Lower Manhattan.

The case underscores the impact that Covid and other changes in shopping patterns have had on retailers, their landlords, and the relationships between the parties.

According to the complaint, Vornado’s Haim Chera struck the deal with Raymond Gindi, in which Vornado would fund 40 percent of the intellectual property purchase price — whatever it was at the auction — and in exchange Century 21 would re-sign its 135,000-square-foot anchor tenant lease at Vornado’s Rego Center, which had been terminated in the bankruptcy process.

The lease deal, according to the complaint, even survives Gindi’s repayment of the $3.6 million, which he did shortly after borrowing the mondy.

The Gindis, for their part, say they don’t need to sign a lease at Rego Center because it was not their company that re-opened in Lower Manhattan, but their partner Legends Hospitality.

According to excerpts of the complaint, “At the bankruptcy auction held on November 19, 2020, a bidding war ensued over the Century 21 IP and the purchase price quickly increased several fold over the opening bid of $800,000. With Alexander’s financial backing, however, the Gindi Family outbid the competing bidders and ultimately won the auction to purchase the Century 21 IP for $9 million. 8. On or about November 30, 2020, ALX invested $3.6 million (40% of $9 million) in Gindi C21 IP to enable it to fund its bid to purchase the Century 21 IP. In exchange, the Gindi Family reaffirmed its agreement that if a Century 21 store opened in New York City within five years, i.e., by November 2025, it would cause the operator of the Century 21 store to enter into a new lease upon the same terms as the Rego Lease and reopen the Rego Store.

“There was no other consideration for this time-sensitive deal. Indeed, ALX [Vornado] did not ask for interest on its contribution, and all income and profits from the future use of the Century 21 IP were to be distributed to the Gindi Family only, notwithstanding ALX’s $3.6 million contribution.

“The only consideration ALX bargained for in return for its emergency bailout of the Gindi Family’s business was for Century 21 to be obligated to reopen the Rego Store if it one day resumed operations in New York City. On May 16, 2023, the Gindi Family reopened the Flagship Store but Defendants failed and refused to comply with their obligation to reopen the Rego Store. As a result of the foregoing, Plaintiffs have incurred substantial damages in an amount to be determined at trial and suffered significant non-economic harm.

“The term of the Rego Lease was approximately twenty years from the Commencement Date, which occurred on February 23, 2010. The term of the Rego Lease was due to expire January 31, 2031. Upon information and belief, the Gindi Family was unwilling to allow its family retail chain to permanently close and needed to generate income for rent payments under the Flagship Lease. Thus, the Gindi Family sought to repurchase the Century 21 IP—including certain Century 21 trademarks, copyrights, URLs and domain names, social media accounts, customer data, and telephone numbers—in the Bankruptcy and reopen the Flagship Store.

“Accordingly, before the Auction commenced, the Gindi Family proposed the following agreement to Alexander’s: if Alexander’s contributed 40% of the purchase price of the Century 21 IP and Century 21 resumed operations in New York City within five years, Century 21 would enter into a new lease at the Rego Center upon the same terms as the rejected Rego Lease and reopen the Rego Store. This was the only consideration for the deal.

“In numerous November 2020 phone conversations between Raymond Gindi and Haim Chera, Executive Vice President – Head of Retail of Vornado Realty Trust, Alexander’s external manager, Raymond Gindi requested that Alexander’s contribute 40% of the purchase price for the Century 21 IP in the Bankruptcy. Raymond Gindi further represented that if Alexander’s made the 40% contribution, the Gindi Family would reopen the Rego Store and enter into a new Rego Lease.”

In March 2021, the Gindis paid back the $3.6 million, according to the complaint, “By Membership Interest Purchase Agreement dated March 5, 2021 (the “MIPA”) between WF Blue [Gindi] and ALX [Vornado], WF Blue purchased ALX’s membership interests in Gindi C21 IP for $3.6 million. Therefore, WF Blue became the 100% owner of Gindi C21 IP.

“Notwithstanding ALX’s divestiture from Gindi C21 IP, WF Blue and Gindi C21 IP expressly reaffirmed the Gindi Family’s promise to re-sign the Rego Lease and reopen the Rego Store in the event that Century 21 resumed operations in New York City.

“By letter dated May 25, 2023, Defendants rejected ALX’s demand and stated that “[they] are not obligated to enter into a new lease in Rego Park Mall.

“In subsequent communications with Alexander’s, the Gindi Family claimed that Century 21 was not required to reopen the Rego Store because Legends Hospitality was the alleged new operator of the Flagship Store. Upon information and belief, the Gindi Family’s partnership with Legends Hospitality was merely a ruse to obscure the fact that the Gindi Family maintained ultimate decision-making power and control over the reopening and operation of the Flagship Store. For instance, upon information and belief, the Gindi Family funded the renovation of the Flagship Store prior to its reopening. Plaintiffs have suffered substantial, nonmonetary harm. For example, Century 21 was a premier, anchor tenant in the Rego Center and occupied 135,000 square feet of space, i.e., over 20% of the property.

“The absence of Century 21 from the Rego Center and Defendants’ failure to reopen the Rego Store have disrupted and negatively impacted the tenant mix of the shopping center, reduced overall traffic to the mall, made it more difficult to attract other first-class tenants, and caused reputational harm… increases Rego II’s exposure to co-tenancy penalties under other tenants’ leases. As a result of Plaintiffs’ contribution of $3.6 million, Defendants obtained numerous benefits including, without limitation: (i) the ability to quickly repurchase the Century 21 IP in the Bankruptcy; (ii) the revival of the Century 21 brand; and (iii) the reopening of the Flagship Store.”

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