Apple Inc. AAPL-Q has threatened to pull out of Sam Mizrahi’s massive retail and condo project in downtown Toronto, dealing a blow to the development of the nation’s tallest residential building.
The 85-story skyscraper at Yonge and Bloor streets called The One is currently under construction, including a unique space designed to house Apple’s flagship store, with its striking glass architecture and soaring ceiling.
But the tech giant told Mizrahi Developments it could exercise an option in the lease agreement that would allow the retailer to walk out without penalty if the developer misses certain deadlines, according to court documents filed by Mizrahi in the Superior Court of New York. Ontario court on October 5. , 2021.
Mizrahi says he didn’t miss the deadlines and Apple no longer has the ability to terminate the lease. The promoter is seeking a court order to stop the retailer from leaving. In his court submission, Mizrahi said he would “suffer irreparable harm from the loss of a world-class tenant who was meant to be the anchor tenant of a world-class property, which is a loss that cannot be compensated by damages”.
An Apple spokesperson declined to comment. Mr. Mizrahi’s development company and its lawyers did not respond to a request for comment. No judgment has been rendered in this case and it is not clear whether the parties are on the verge of resolving their differences amicably.
Getting Apple to set up its Toronto flagship store on the ground floor was a coup for Mr. Mizrahi. Apple stores are magnets for consumers and have reportedly drawn crowds of people to the building and neighborhood.
Condo plans also include restaurants and a hotel, in addition to luxury condos and a multi-level penthouse. Although the project is led by Mr. Mizrahi, a company controlled by Jenny Coco, the co-founder of struggling lender Bridging Finance Inc., is a 50% investor in The One.
Like other commercial real estate projects, The One has suffered from restrictions related to the COVID-19 pandemic which have slowed construction. Additionally, Mizrahi said he had to wait for Apple to choose a design for the storefront glass and had to deal with other delays beyond his control, including a strike by plumbers at the province-wide in 2019.
During lease negotiations, Mizrahi also signed an agreement with Apple and its architect Foster + Partners, a leading London-based firm that has worked on Apple’s flagship stores in New York, Los Angeles, Milan and other locations. major cities of the world. Foster + Partners did not respond to a request for comment.
Mizrahi said he exercised his right to delay delivery of the space due to events beyond his control, such as the pandemic and the plumbers’ strike. In December 2020, he told Apple that he would push delivery of the space to October 31, 2021. Apple responded by saying it would exercise its right to terminate the lease and provided a list of items it would thought Mizrahi couldn’t deliver. .
Apple’s “position runs counter to the business and practical realities of the process of building a project,” like The One, according to Mizrahi’s court filing.
The developer accused Apple of threatening illegal termination to get more concessions. Mizrahi said the entire building was designed and built to be specifically tailored for the Apple store.
The technology company’s lease was for more than 15,000 square feet, including more than 9,000 square feet on the ground floor. As part of the deal, Mizrahi agreed to pay Apple’s architect to cover the cost of designing the store, which as of mid-October was $6.24 million, Mizrahi said in his submissions to the court.
Apple’s space is surrounded by seven layers of unbreakable glass. It was made up of 34 custom-made panels from built-in units at an average cost of $400,000 per panel, in the signature and iconic style of flagship Apple stores around the world, Mizrahi said in his court documents.
If Mizrahi can’t block Apple’s departure, the developer will have to find another tenant for the space built for Apple. Michael Emory, commercial real estate developer and managing director of Allied REIT, said the location was prime real estate and Mizrahi would be able to find a replacement.
The One is near designer shops and museums – a luxury strip of Bloor Street that some call the Mink Mile. It’s a neighborhood that’s usually bustling with activity, given its location west of the intersection of the city’s two main subway lines. Like other stores and malls, the street has lost business and tenants due to the pandemic closures.
“It’s almost the epicenter of Toronto. It’s a fabulous place, just outstanding,” Mr. Emory said. “Bloor Street may have deteriorated a bit lately, but it’s deteriorated from an incredibly high level, and I don’t think Bloor Street is ever going to decline.”
Jones Lang LaSalle Inc., a commercial real estate services company, found that retail vacancies on Bloor Street near The One are at the same level as before the pandemic. The situation has improved since the summer of 2020, when many retailers were closing down.
“We’ve seen a substantial increase in rental activity and tenant interest on Bloor Street,” said Brandon Gorman, JLL’s senior vice president of retail, adding that retailers such as Alexander Wang and Rolex have recently signed leases.
Your time is valuable. Receive the Top Business Headlines newsletter in your inbox morning or evening. register today.