Related to LA Fitness: Play ball with changes at The Square — or else
When the 575 Rosemary apartment tower opens early next year at The Square, will the building feature a tricked-out gym for residents, plus leased offices, as planned?
The answer is getting murky, judging by an increasingly nasty lawsuit between The Square's owner and one of its tenants, LA Fitness.
Since April, LA Fitness and Related Cos. of New York have sparred in court over major changes Related is making to The Square, formerly known as CityPlace, in West Palm Beach. That legal spat is about to get worse, as Related switches from playing defense to offense against the California-based fitness chain.
On Nov. 16, Related asked a Palm Beach County circuit judge for permission to file a counterclaim that accuses LA Fitness of failing to abide by its lease.
More: As economy shifts toward slowdown, Related Cos. is bullish on The Square, West Palm Beach
LA Fitness inks deal in 2012 to take space once home to a bookstore
For 13 years, LA Fitness has leased 28,674 square feet on the south side of The Square. The space formerly was occupied by Barnes & Noble Booksellers.
Since then, Related periodically has tinkered with the mixed-use center, built in 2000 in an Italianite style.
A few years ago, the real estate development firm led by billionaire Miami Dolphins owner Stephen Ross decided on a massive redo of the complex. The goal was to create a modern high-rise destination for office tenants and residents, with much less space for stores and entertainment venues.
LA Fitness was not OK with the changes.
In April, LA Fitness filed a lawsuit against a Related affiliate that asked a judge for an injunction to stop Related from opening a gym in 575 Rosemary, a 21-story tower being built on the former Macy's department store site.
The 322-unit apartment high-rise, which also contains space for shops and offices, is slated to open in the spring.
LA Fitness said its lease gives it the exclusive right to operate fitness centers at The Square. This means Related can't open a dedicated gym at 575 Rosemary for apartment tenants, LA Fitness said.
The website for the luxury apartment complex lists a fitness center as an amenity.
In its complaint, LA Fitness also asked a judge to prevent Related from opening the boutique Equinox gym at the 360 Rosemary office tower. LA Fitness says Related, which is part-owner of Equinox, has discussed bringing the trendy gym to the office building.
There's more.
More: LA Fitness sues Related Cos. over plans to bring Equinox gym to The Square in West Palm
LA Fitness lawsuit seeks to stop changes in parts of The Square
LA Fitness later asked a judge to halt changes that Related is making to parts of The Square previously occupied by retailers at 550 S. Rosemary Ave. and 545 Hibiscus St.
Related recently tore down retail space that once housed the Brio Tuscan Restaurant, the AMC West Palm Beach 12 movie theater, the Copper Blues Rock Pub & Kitchen and the Palm Beach Improv. Related wants to build two office high-rises on the land instead.
LA Fitness said the changes to the mixed-use center violate the 2012 lease that prevents Related from turning existing retail space into other uses. Specifically, the lease says "the shopping center shall not now, nor will it ever, include portions of the project primarily used for office use, residential use, hotel use or any other commercial use other than primarily retail use."
In court records, Related pushed back, saying that the lease with LA Fitness makes clear that the shopping center portion of the development could be reduced.
Now Related is going one step further by asking a judge for permission to file a counterclaim against LA Fitness alleging breach of contract, among other claims.
Related acknowledged it missed an October deadline to file a counterclaim, but it said the law allows a judge permission to accept the complaint anyway "when justice requires."
Related switches to hardball, warns LA Fitness it risks damages costing 'tens of millions' of dollars
Months ago, Related Urban Chief Executive Ken Himmel expressed confidence that the matter would be settled.
But court documents show Related is getting fed up with LA Fitness' interference in its grand plans to revamp The Square.
In its recent filing, Related said its longtime plan to build offices above ground-floor retail space is no secret. It's in the lease.
And while Related said it doesn't need LA Fitness' permission to have office space above the ground-floor retail space planned for the three new buildings, Related has been trying to obtain it behind the scenes to resolve the dispute.
LA Fitness is supposed to cooperate and not "unreasonably" withhold its approval or consent, according to the lease, Related said.
To get LA Fitness to play ball, Related said it tried a mediation. The company's lawyer also sent a letter warning LA Fitness its interference could cost it "tens of millions (or more) of dollars in damages," the company said in court records.
In November, Related's lawyer even asked LA Fitness to just give the OK for it to lease the 36,000 square feet of office space at 575 Rosemary, court records show.
But nothing has worked.
Having failed with both the carrot and the stick approach, Related now publicly calls LA Fitness' stance a "litigation-driven attempt to seek concessions under the lease."
It's not just Related's ability to lease office space at 575 Rosemary that is at risk, either.
In a separate, earlier filing, Related told a judge that the two office towers' completion dates and construction financing are being jeopardized by the uncertainty created by the LA Fitness lawsuit.
Despite Related's urgency in trying to resolve the dispute, a trial date is set for a year from now.
A Related spokeswoman said the company would not comment. An LA Fitness lawyer could not be reached for comment.
Alexandra Clough is a business writer and columnist at The Palm Beach Post. You can reach her at aclough@pbpost.com. Twitter: @acloughpbp. Help support our journalism. Subscribe today.
This article originally appeared on Palm Beach Post: Related goes on offense against LA Fitness in legal spat at The Square
