Westfield Wants To Terminate Retail Lease At Fulton Center, Citing Safety Concerns

Westfield is looking to cease operating the retail center it built a decade ago at the Fulton Transit Center in Manhattan's Financial District, 10 years before its lease expires.

The New York City Transit Authority, which owns Fulton Center, sued the affiliate that operates the retail space in federal court this week, claiming it is trying to break its lease early, causing “irreparable injury” to the transit hub. The lawsuit was filed after Westfield officials notified the NYCTA last month that it would cease operations at the 50K SF retail space.

A Feb. 12 letter directed to the Metropolitan Transportation Authority and signed by Hyura Choi, senior litigation and compliance counsel for Westfield's parent company, Unibail-Rodamco-Westfield, was filed as an exhibit in the lawsuit, showing Westfield's desire to terminate its obligation.

“As the MTA is aware, due to circumstances outside of Westfield’s control, the current situation is financially unsustainable, and Westfield is no longer in a position to be able to operate its Premises at Fulton Center,” Choi wrote in the letter. 

Three days after the letter was sent, the NYCTA, which took ownership of Fulton Center from the MTA in 2015, filed suit in the U.S. District Court for the Southern District of New York, asking a judge to approve an injunction forcing Westfield to continue operating the retail space.

While there are provisions that would allow Westfield to terminate the lease before its scheduled expiration in May 2034, the NYCTA said none of those conditions have been met.

But Choi wrote that Westfield's operations at the center have been challenged by safety concerns and permitting delays. It claimed it conveyed those concerns to the MTA.

“Westfield formally notified the MTA on many occasions regarding security incidents, serious property damage/loss and safety issues caused by MTA’s failure to meet its obligations under the Master Lease which have directly resulted in premature tenant vacancies and leasing difficulties throughout the center,” Choi wrote.

“Multiple tenants have left, citing concerns about safety and security, and additional tenants have expressed a desire to leave, remaining only due to significant economic incentives Westfield has offered (to its financial detriment) simply to keep spaces occupied and help save these local businesses.”

Westfield also operates the retail space at the World Trade Center, which is connected via underground tunnel to Fulton Center, the busiest transit station in Lower Manhattan. 

Its Australian parent company, URW, has for years been looking to reduce its exposure to the U.S. retail market, selling off malls in Connecticut, New York and California in recent years for more than $500M combined, Bloomberg reported. But it also has signaled that it isn't ready for a complete exit. It refinanced its 1.4M SF Westfield Century City mall in Southern California for nearly $1B last year.

A representative for Westfield didn't immediately respond to Bisnow's request for comment.