Amazon is so fixated on getting the best real estate deals in the best locations that it not only looks at all the availabilities but also trades paper and negotiates down to the wire on multiple locations, sources report.
Then, like a fickle friend, it stops returning calls and texts, while stamping its feet and claiming confidentiality.
Several sources tell me that Amazon has negotiated multiple leases with multiple owners going as far as signature copies before making a final decision — similar to the way you compare items on its Web site before abandoning your shopping cart and heading to a local mall.
“They tee up and have a signable lease,” advised one source, requesting anonymity as did the other sources for fear of reprisals. “They are doing this on warehouse space and office space.”
Then the parties twiddle their phones and wait.
In one case, an owner in another state held the vacant property off the market for over six months. He was lucky as Amazon finally sauntered back and signed that deal as if nothing had ever come between them.
The Durst Organization wasn’t so lucky and is still in the throes of a lawsuit over a failed deal for 310,290 square feet for office space at 1133 Sixth Ave. that went south back in 2014.
Durst alleges it not only ditched another building tenant early but also stopped negotiating with yet a different tenant and spent $1.6 million to make the space fit Amazon’s “delivery conditions,” all while putting finishing touches on the lease worth almost $20 million.
Yet the Durst saga is worth telling since it appears that Amazon’s same modus operandi continues. The online giant did not return an e-mail for comment.
In response to a January 2013 request for proposals by Amazon, Durst pitched 4 Times Square and, while that building didn’t work, the parties kept communicating. Durst suggested 1133 Sixth, so eventually an Amazon honcho toured and there were further discussions about what work Durst would do to make it over.
The parties signed a non-disclosure agreement on April 28, 2014, and talks centered on Amazon leasing 10 floors plus a private lobby entrance that did not yet exist.
A letter of intent signed on July 2 included a 60-day negotiation clause to be extended if negotiations continued toward a signed agreement, which was later scheduled on the 66th day.
The letter of intent stated the space needed to be in delivery condition and, according to court filings, Amazon allegedly pressed Durst to do work to prepare its future space, which included removing windows and getting a crane to clean out the space, doing lots of mechanical work, creating new escalators, lowering the lobby floor by six inches and fixing terraces.
Since Durst was also in discussions with another tenant, those needed to stop. The LOI therefore also created an exclusivity period when neither side was to negotiate with another party for a different deal. But after 10 days, if either party thought the other was not negotiating in good faith, that party could terminate the deal on three days’ notice and thus cut its losses.
On July 16, I revealed the deal was in the works, and court documents say lease markups remained on track.
Durst received Amazon’s second draft comments on Sept. 3. But on Sept. 10, Amazon sent a letter saying it could not discuss the deal again until about Sept. 30 because of executives’ “travel schedules.”
In mid-September, an affidavit and other documents say, Durst executive Tom Bow heard there was something brewing with Vornado Realty Trust at its office building located at 7 W. 34th St. and reached out to Amazon’s brokers, who allegedly replied there were no worries, as that was just for “warehouse” space.
Durst executives then met with Amazon’s brokers several times to flesh out remaining “nonmaterial” items, including the date of possession, and prepare for an “all hands” meeting on Sept. 30.
Instead, Durst was told Amazon was signing a deal for office space with Vornado.
“We were surprised and disappointed by their conduct,” Durst spokesman Jordan Barowitz said.
Durst initiated a lawsuit on Dec. 11, 2014, in New York State Supreme Court in Manhattan. Amazon wanted the case heard in Washington and denied it was responsible for the work Durst had done. After much legal bickering, Justice Shirley Kornreich ruled on Aug. 17, 2015, that New York was the proper forum and not Washington state as written in the nondisclosure agreement. She also decided that Amazon was not responsible for Durst’s attorney fees, lost profits or punitive damages, but stated that Amazon “may be liable for fraud damages.”
In a footnote, the judge noted that the money spent on renovations by Durst before the lease was signed was at risk but that Durst may have stopped spending “once it became aware that Amazon was, as is alleged, not negotiating in good faith. The moment in time, if ever, that Amazon committed a good faith breach is a question of fact to be probed in discovery … and will impact which of Durst’s costs, if any, are recoverable.”
Discovery and fact-finding are ongoing in that matter with a telephone conference scheduled for January.
One of the most interesting items in all the filings was the “list of competitors” that Amazon would not allow Durst to sign in the future. Some of the 10 could be changed on a yearly basis, but in 2014 they were: Adobe, Apple, eBay, Hewlett-Packard Dell, Google, Microsoft, Sony, Barnes & Noble, Facebook, Samsung, Walmart, Twitter, Yahoo and Zynga. Zynga had dumped Amazon’s cloud services and spent $100 million on its own before returning to the Amazon fold in 2015.
