The Times Square restaurant Ruby Foo’s is fighting to renew its lease at 1626 Broadway after the 36-story office tower was acquired last May by a U.S. division of the Kuwaiti Investment Authority in one of the priciest deals of the year.
An affiliate of the 300-seat Pan-Asian restaurant filed documents in New York Supreme Court last week seeking a ruling that would prevent the new landlord, Fosterlane Management, from allegedly trying to find a new tenant to replace it in the space.
A hearing on the request is scheduled for April 3.
Fosterlane acquired 1626 Broadway, between 49th and 50th streets and also known as 750 Seventh Avenue, from the privately owned Hines Interests as part of a $485 million package deal that also included the sale of 758 Seventh Avenue – the eighth largest commercial transaction of 2011. The Kuwaiti firm paid more than $800 per square foot for the 561,000-square-foot tower that houses Ruby Foo’s, as well as Morgan Stanley and the law firms Mendes & Mount and Steptoe & Johnson.
Ruby Foo’s claims it notified Fosterlane of its intention to renew the lease by exercising its right of first refusal via oral communications with Hines, which has stayed on to manage the property. But the restaurant, which is operated by B.R. Guest Hospitality, a subsidiary of investment firm Starwood Capital, failed to meet the deadline to provide Fosterlane with written notice, according to the suit.
As a result of “an internal calendaring error” and “an honest mistake,” Ruby Foo’s did not submit written notice to Hines until Sept. 30, 2011 – three months after the June 30, 2011 deadline, the restaurant said in court papers.
According to Ruby Foo’s, the lease does not specify that the tenant must provide notice in writing. Ruby Foo’s claims Fosterlane is “trying to wring additional revenue out of the space,” and has already taken steps to market the space to prospective tenants.
“[Fosterlane] has repeated its willingness to discuss an extension of the lease upon new terms and conditions, but has not participated in good faith on any such discussions,” the complaint says.
The suit seeks a judgment that Ruby Foo’s can legally exercise its right of first refusal.
B.R. Guest opened the self-described “boisterous theme park of Pan-Asian food.” in 2000, after buying out a comedy-themed restaurant that first leased the space in 1996 from Morgan Stanley, which owned the building at the time and still occupies more than half of the square footage with offices.
B.R. Guest paid $1.85 million in 1999 for the lease, which is set to expire Dec. 31, 2012, and has since invested an additional $2.5 million in building out the space, Ruby Foo’s said in the court papers. Later, the company said it negotiated a new provision that would effectively allow the restaurant to extend its tenure in the building to Dec. 31, 2017, the papers say.
Fosterlane’s acquisition of the two Seventh Avenue towers was its latest entrée into the New York City real estate market after selling off its holdings in the city, including the Lipstick Building at 885 Third Avenue and 350 Park Avenue.
Fosterlane could not be reached for comment, and a representative for the Kuwait Investment Authority did not return a call seeking comment. The identity of Fosterlane’s legal counsel was not immediately available. An attorney for Ruby Foo’s, Peter Wang, the managing partner of Foley & Lardner’s New York City office, declined to comment on the suit. Hines did not immediately provide a comment.
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