Erewhon Countersues Midwood Over Studio City Lease

Weeks after the owner of the Shops at Sportsmen’s Lodge development in Studio City filed a lawsuit against tenant Erewhon claiming it failed to pay rent, the luxury grocery store has hit back with its own allegations.

Erewhon filed a countersuit against Midwood Investment and Development last week, alleging the firm omitted facts during lease negotiations, improperly increased rent, denied access to parking and changed plans for the development since it was entitled in 2019.

“This is the story of a New York developer engaging in a calloused, and illegal, bait-and-switch scheme to dupe its tenants,” Erewhon wrote in its cross-complaint.

“We strongly disagree with Erewhon’s allegations,” a representative from Midwood said, adding it was “simply a commercial lease dispute.” Erewhon declined to comment.

In its filing, Erewhon claimed Midwood promised the grocery chain, known for its $20 smoothies and celebrity clientele, would serve as the anchor for the retail complex in 2017, shortly after it acquired the property from developer Richard Weintraub.

After community opposition and a legal battle with Midwood, Weintraub agreed in 2017 to sell Midwood the land around the historic Sportsmen’s Lodge, which had already been entitled for retail.

Shortly after Midwood acquired the land, it started pursuing Erewhon. But, Erewhon alleged, the complex already had an anchor tenant: Equinox, the luxury gym known for eucalyptus towels and $500-a-month memberships. Back in 2011, Equinox had already agreed to a lease at the yet-to-be-built property.

During negotiations, Midwood “omitted key details,” including the terms of Equinox’s deal, “to induce Erewhon into a lease,” the grocery store said in its cross-complaint. Because of this, Midwood did not act in good faith and breached its commitment to Erewhon, it claims.

Midwood also improperly raised rents under the lease before Erewhon even opened its store, and after construction delays had pushed back the opening of the entire development, the countersuit alleges.

Erewhon paid at least $5 million in construction costs, plus a further $1 million in rent and associated fees, expecting an opening date of March 2021, according to the filing. Midwood “failed to open on that date” and “arbitrarily selected” a new date of December 2021 to force Erewhon to start paying rent, the filing states.

One of the other key details Midwood allegedly omitted during negotiations was the availability of parking — a key provision that Erewhon said was a “material factor” in deciding to enter a lease.

“Erewhon is a grocery store [and] grocery store customers need to be able to take their groceries to their cars,” Erewhon wrote. “Everyone knows that.”

Since Erewhon opened its store earlier this year, Midwood has cut off access to the parking lot closest to Erewhon and has reserved other parking spaces for Equinox members, the suit alleges. The closest parking lot to the grocery store also does not have wheelchair access, as it’s blocked by a curb.

Employees are now having to drive a mile to an off-site lot to park, according to a source familiar with the property.

In August of last year, as the Shops at Sportsmen’s Lodge was working to open, Midwood announced it was planning to raze the entire hotel at the site and replace it with new apartments — a development Erewhon says it didn’t know was coming.

During initial lease negotiations in 2017, Midwood gave the “impression that the hotel would remain unaffected by the center’s construction,” according to the cross-complaint.

Erewhon is worried the parking situation will get worse while construction proceeds, meaning fewer people will be able to visit its Studio City location.

“The construction will take several years to complete,” it said in its cross-complaint, “[and] will have detrimental and wide-ranging effects.”