Flagship Apple Store in Toronto in Jeopardy Due to Legal Battle

[MacRumors]

Over a decade has passed since rumors first surfaced about Apple's interest in opening a flagship retail store at one of Canada's busiest intersections, but the plans might be abandoned due to a legal battle between Apple and a real estate developer.

The Globe and Mail this week reported that Apple has sued Mizrahi Developments to terminate its lease at the developer's long-planned condominium tower at the southwest corner of Yonge Street and Bloor Street in Toronto. Apple was widely rumored to be planning a large street-facing store at the ground level of the 85-story skyscraper, called "The One," which is set to become Canada's tallest building when construction is completed.

"Apple regrets that Mizrahi's failures have resulted in Apple having to take the step of ending its relationship with Mizrahi," said Apple in a January 28 filing with Ontario's Superior Court of Justice, according to the report. Apple added that it had been "looking forward to opening this new store for its customers," the report said.

Specifically, Apple accused Mizrahi Developments of missing crucial deadlines, allowing it to exercise its option to terminate its lease agreement with the developer, according to the report. Mizrahi Developments attributed the delays to issues such as a plumber strike and the COVID-19 pandemic, but Apple disagreed with these claims.

The original lease agreement between Apple and Mizrahi Developments is dated March 23, 2016, and the deadline for Apple to take occupancy was amended twice from November 30, 2019 to October 31, 2021, according to the court filings.

All four of Apple's existing retail stores in Toronto are located in shopping malls, including the Eaton Centre, Sherway Gardens, Yorkdale, and Fairview Mall.

(Thanks, Bob Allan!)

Article Link: Flagship Apple Store in Toronto in Jeopardy Due to Legal Battle

 

[fuchsdh]

If you've missed not one but two deadlines, I don't think there should be any expectation your tenant is going to stick around.

Part of managing things is knowing that stuff outside of your control is going to impact the project and plan accordingly. If Covid is an "act of god" you couldn't plan for, it seems weird that you don't have to honor your contract but everyone around you does.

Also, the builders did the usual thing of razing the existing buildings before the city could consider designating the property historic. So I'm always happy with these kinds of people getting the short end of the stick.

 

[satchmo]

I'd be surprised if Apple ultimately walks away from this. This is about as prime real estate in the city as you can get. Especially when the structure is 80% done. The huge glass panels are already in.

 

[MYZ]

If the original opening date was November 2019 then it seemed like a joke? There’s no way you could finish building a supertall skyscraper in 3 years. Speaking as a Torontoian, the physical site of the building is so small there would literally be no room for any construction work if the store opened, so there was no way they could have opened it before everything was fully complete. Surprised the folks at Apple didn’t walk around the site and put 2+2 together?

 

[fuchsdh]

If the original opening date was November 2019 then it seemed like a joke? There’s no way you could finish building a supertall skyscraper in 3 years. Speaking as a Torontoian, the physical site of the building is so small there would literally be no room for any construction work if the store opened, so there was no way they could have opened it before everything was fully complete. Surprised the folks at Apple didn’t walk around the site and put 2+2 together?

It's always been in the plans that the retail portion would open well in advance of the rest of the building. That said, you're right that it seems like a kind of terrible plan from the standpoint of actually getting the rest of the building up since you now have to consider a lot more variables.

 

[Timelordprime]

I was looking forward to this location. It's more convenient than the Eaton's Centre, as it is right at the intersection of the two main Toronto Transit Commission's (TTC) subway lines. Also, being right at ground level makes it a nicer experience as well. I'm hoping Apple does actually end up there, but I'm guessing the legal challenges deal with getting a better deal, now that the developer apparently missed many deadlines.

 

[MYZ]

It's always been in the plans that the retail portion would open well in advance of the rest of the building. That said, you're right that it seems like a kind of terrible plan from the standpoint of actually getting the rest of the building up since you now have to consider a lot more variables.

Right, the only way that could explain it is if the developer and Apple’s team both completely ignored practical reality. To put the proposal into perspective, if accomplished, this would be a world first as I’ve never heard of an Apple store, or any store for that matter, opening while a giant skyscraper was still under construction right above.

On second thought maybe there were going for that wow factor? This would have certainly been the greatest feat in retail development history if they pulled it off. If a thousand foot tall building suspended over an Apple store wouldn’t have been enough for every award out there.

 

[atomwork]

It's astonishing how the ultra chains like Apple, Louis Vuitton, Zara never pay rent anywhere. Just cover the bare operating cost from the owners.

 

[jazz1]

I'd love to live above an Apple Store...check that...I'd love to live in an Apple Store ? When I traveled more I visited every Apple Store in the city I was visiting. Is there an Apple Store in Edinburgh, Scotland...my next stop!

 

[now i see it]

“Flagship” is an overused and now meaningless term

 

[applicious84]

Six years since the original agreement? That's a lot of time!

 

[fuchsdh]

“Flagship” is an overused and now meaningless term

I'd argue Apple Stores are one of the few cases where flagship/anchor tenant actually is still applicable, actually. The research tends to bear this out, e.g. https://hbswk.hbs.edu/item/does-app...y-stores-on-the-formation-of-market-structure And in terms of "flagship" in just the sense of "this is our fanciest store in the location", that's still very much a thing. It's why the 5th Ave. store in NYC is always mobbed, why people travel from across the country to go to the Macy's etc.

 

[FreakinEurekan]

Is there an Apple Store in Edinburgh, Scotland...my next stop!

There is!

 

[Expos of 1969]

I imagine @ipedro will post soon as he knows whats happening in TO

 

[antiprotest]

I am puzzled at the headline.

Apple has already decided to leave this deal.

It's not in JEOPARDY since it's already decided.

And it's not in "jeopardy" BECAUSE of legal battle since it's because of the delays.

The lawsuit is just the procedure to terminate the agreement.

Right?

 

[satchmo]

I am puzzled at the headline.

Apple has already decided to leave this deal.

It's not in JEOPARDY since it's already decided.

And it's not in "jeopardy" BECAUSE of legal battle since it's because of the delays.

The lawsuit is just the procedure to terminate the agreement.

Right?

I don't think it's dead. I'm guessing Apple is posturing to get an even better deal. And the developer will likely capitulate knowing the traffic it will bring to the rest of the building.

 

[DocMultimedia]

Can't honor the contract... Goodbye.

 

[CarpalMac]

“Flagship” is an overused and now meaningless term

As is "Pro".

 

[pasamio]

Surprised the folks at Apple didn’t walk around the site and put 2+2 together?

Perhaps they did and they set a date for occupancy with that mind, they then extended it to 2021 but that has to have happened before the November 2019 date and COVID. That makes one wonder what has triggered Apple to change their mind now. Realistically though there is no significant risk to Apple beyond pausing opening more stores whilst the construction occurs, if they hit their date then they go in and if they don't Apple has an out as it's exercising here.

 

[Marshall73]

If the original opening date was November 2019 then it seemed like a joke? There’s no way you could finish building a supertall skyscraper in 3 years. Speaking as a Torontoian, the physical site of the building is so small there would literally be no room for any construction work if the store opened, so there was no way they could have opened it before everything was fully complete. Surprised the folks at Apple didn’t walk around the site and put 2+2 together?

Took 3 years to build the shard in London (a building of similar height). General practice is to construct the building, have a number of floors completed to allow some clients to move in then finish the remaining floors. That way you can start taking money before the building is completely fitted out. So, you would WANT to have a client like Apple to have a big shiny store to attract other businesses etc.

 

[ipedro]

Right, the only way that could explain it is if the developer and Apple’s team both completely ignored practical reality. To put the proposal into perspective, if accomplished, this would be a world first as I’ve never heard of an Apple store, or any store for that matter, opening while a giant skyscraper was still under construction right above.

On second thought maybe there were going for that wow factor? This would have certainly been the greatest feat in retail development history if they pulled it off. If a thousand foot tall building suspended over an Apple store wouldn’t have been enough for every award out there.

The plan was always to move retail in before completion of the tower. If you visit the site, you can see that the building envelope is complete for the levels pertaining to Apple's space, construction staging has moved to the back of the building and the remaining parts of the common areas are speeding towards completion long before Apple would outfit their store for opening. In 6 months to a year when Apple would realistically have their store finished (which they build, not the developer), the tower will be twenty or more stories above with no effect on Bloor and Yonge where the Apple Store would operate.

Apple is 100% posturing here for concessions. They want this location and always have. They're not going to find a better location in this prime neighbourhood.

 

[Galve2000]

It's astonishing how the ultra chains like Apple, Louis Vuitton, Zara never pay rent anywhere. Just cover the bare operating cost from the owners.

Think of the "Astronomical" rents as a marketing expense and it makes a lot more sense.

The crazy thing is that some of these apple stores actually break even.

the location of the apple store is why people will pay several hundred dollars more for a Mac or a iPad when a similar PC or Tablet gets you 90% of the features and functionality.

it's the association with luxury.

again, all marketing.

 

[Galve2000]

I'd argue Apple Stores are one of the few cases where flagship/anchor tenant actually is still applicable, actually. The research tends to bear this out, e.g. https://hbswk.hbs.edu/item/does-app...y-stores-on-the-formation-of-market-structure And in terms of "flagship" in just the sense of "this is our fanciest store in the location", that's still very much a thing. It's why the 5th Ave. store in NYC is always mobbed, why people travel from across the country to go to the Macy's etc.

When located in a shopping mall, the Apple store is ALWAYS treated as an anchor tenant. Apple's effective rent at these locations is effectively lass than it's neighbors because "landlords" know having an Apple store there will increase foot-traffic to the rest of the stores/restaurants.

 

[Danoc]

For the record, that Bloor street portion is the most expensive in Canada for retailers.

It is surprising that Apple is ready to walk away. Unless Apple can secure another location around.

 

[FreakinEurekan]

It doesn’t make sense for Apple to do this as “Posturing” or to “save money.” They’ll be getting a good deal anyway, as mentioned above as a premium retailer to draw people to the property…. And at Apple’s margins, the cost of the store is a rounding error to profitability. If they want out, they want out for their own reasons. Maybe another property is available nearby?