A new luxury shopping mall under the Plaza Hotel – less than a year into its little-noticed ramp-up – already faces a brewing crisis.
With their business in the red following a brutal holiday season, more than half of the upscale shops at the so-called “Plaza Retail Collection” are demanding lower rents, sources told The Post.
Accusing Plaza owner Elad Properties of penny- pinching – including skimping on sorely-needed marketing – a few of the shops are threatening to leave and may take Elad to court in the process, sources said.
The retail rift is the latest black eye for Elad, an Israeli real-estate firm that shelled out $675 million to buy the city landmark in 2004. While Elad spent another $400 million on renovations, it has since been engulfed in legal tussles with unions, contractors and angry condo buyers.
Last week, top chef Joel Antunes quit just months after he was hired to resurrect the Plaza’s Oak Room restaurant. The Palm Court restaurant, once the centerpiece of the ground floor, shuttered Jan. 1 amid squabbles between Elad and the operator.
Now, as consumer spending takes a nosedive, sources said Elad has been nickel-and-diming its tenants downstairs, which include Nokia’s luxury cellphone brand Vertu, Parisian bookseller Assouline and chic handbag maker Ghurka.
“We remain confident that the Retail Collection, which only recently opened to the public, will weather the current financial crisis and emerge as one of New York’s leading shopping destinations,” Elad said in a statement.
But Elad “isn’t budging” on terms of its multiyear lease agreements, even as retailers nationwide furiously haggle over rents in a bid to cut costs.
If the brewing crisis isn’t resolved within the next 90 days, the exit of a few cash-strapped tenants could spur a “domino effect,” according to one source close to the situation.
“All you need is for one or two of them to go dark,” the source told The Post. “How do you lease out space when others are moving out?”
A key problem is that the development lacks a “destination” – such as a restaurant or gourmet foods shop – to lure shoppers to the underground mall, said Faith Hope Consolo of Prudential Douglas Elliman. But neither Elad nor prospective tenants, which have included Dean & Deluca, wants to risk the build-out costs, sources said.
The mess is a far cry from Elad’s initial ambition to lure big names like Gucci. In 2005, Harrods owner Mohammed al-Fayed angrily accused Elad of spreading rumors that Harrods might come to the Plaza “in order to drum up interest in the project.”
Hidden in the back of the hotel with smallish side entrances and scant signage (because of city landmark regulations), the mall is invisible to shoppers on bustling Fifth Avenue. Once inside, adventurers who circumnavigate the now-empty Palm Court find a retail area that’s likewise “unusually quiet,” said Consolo.
“There was nondescript music in the air, and I almost felt lost,” Consolo said, recounting a recent visit. “I felt like I was sleepwalking.”
Last week, Elad fired p.r. agency Trachtenberg & Co., having pooh-poohed ideas that included hiring stylists to create magazine spreads for shop items. Elad recently replaced General Manager Anthony Nicola with John Gregory, a Macy’s veteran with a marketing background.
One skeptical retailer dismissed the moves as “window dressing,” noting that Elad has said little about its marketing plans.
To date, the Retail Collection’s biggest publicity event was an October shopping party it co-hosted with the Council of Fashion Designers of America. While Elad guaranteed the CFDA a $25,000 donation, it withheld payment for months, and the CFDA “had to chase that money,” a source said.