Westfield won $13.3M arbitration over Fulton Center construction failures

The retail mall giant Westfield, a division of the parent company Unibail-Rodamco-Westfield, in 2022 won an arbitration award now totaling $13.26 million against the New York City Transit Authority and its parent, the Metropolitan Transportation Authority, alleging defective and incomplete construction at the Fulton Transit Center. The judgment remains unpaid.

The arbitration award provides additional context to Westfield’s attempt to terminate its 20-year lease at the Fulton Transit Center, which started May 16, 2014.

Bloomberg first reported last month that Westfield wanted to terminate its lease in the Fulton Transit Center, calling it “financially unsustainable.” The arbitration award has not been previously reported, according to a PincusCo review of related articles.

NYCTA filed its suit, alleging, “NYCTA will face irreparable injury if Westfield abandons the Fulton Center in derogation of its Lease obligations by advancing its own self-serving business interests over the interests of NYCTA, retail establishments in the Fulton Center, and members of the public.”

In addition to the arbitration award, the Westfield filing said the retailer had been in discussions with NYCTA and another, unnamed company that would step into its shoes at the Fulton Transit Center, but the authority scuttled those talks.

According to Westfield, “As a result of this complete breakdown in the parties’ relationship and NYCTA shirking its contractual obligations, Westfield was forced to begin discussions regarding a surrender and assignment of its management obligations. After discussing a specific third-party operator that NYCTA believed could seamlessly step into Westfield’s role at Fulton Transit Center, and therefore, appearing receptive to Westfield’s request, NYCTA instead filed this premature lawsuit.”

Westfield also details a list of safety concerns in a March 2022 letter to the MTA (pdf), focused heavily on violent disturbances initiated by allegedly homeless individuals, including threats, property destruction, and assaults.

NYCTA and MTA had sought to block the arbitration from taking place at all, suing in 2021 under index number 450428/2021 but lost in State Supreme Court and again in Appellate Court. The arbitration was confirmed and a judgment entered in Supreme Court on August 4, 2023. The NYCTA and MTA filed an appeal which remains open.

The arbitration was critical of the construction at the Fulton Transit Hub, noting in part that “MTA did not diligently pursue Substantial Completion and Final Completion of Landlord’s Work” and “[T]he construction carried out by MTA was defective and incomplete in several material respects, with the result that the Premises, as turned over to Westfield, were rife with defects rendering the large portions of the Premises unfit for use and occupancy in accordance with the Retail Standard specified in Section 5.1 of the Lease.”

The surrounding

Within a 400-foot radius of Fulton Transit Center, PincusCo identified five commercial real estate items of interests occurred over the past 24 months. One of those five items was a sale which Niarchos family bought the 8,071-square-foot, one-unit mixed-use building (K2) on 144 Fulton Street for $38 million from Crown Acquisitions on October 25, 2023. Of those five items, four were loans above $5 million totaling $250.5 million. The most recent of the four was DSA Property Group in which borrowed $27 million from Greystone & Co. secured by the 58,354-square-foot, 68-unit rental (D5) on 9 Maiden Lane on August 31, 2023.

Direct link to the property’s ACRIS page and link to DOB NOW portal.