business

City Center and Office Depot Inc. are embroiled in a legal dispute that has raised the prospect of eviction for the longtime tenant in the downtown Minneapolis office and retail complex.

In a suit filed in U.S. District Court in Minneapolis, City Center Associates has claimed the office products retailer owes more than $30,000 in rent. City Center said Office Depot has been in default since last fall, when it triggered certain provisions in its lease by failing to remove, replace or fix a damaged store awning in a timely manner.

The Boca Raton, Fla.-based company has had a store in City Center since 1999.

Office Depot has shot back with claims of its own. In court documents filed Wednesday, the company said it isn't required to pay rent because of a "co-tenancy" clause in its lease that requires City Center to have at least 65 percent of the mall's space occupied by retail tenants. That hasn't been the case for about three years, since City Center completed a $15 million renovation that converted much of the space on the second and third floors to office use. The tenants include Target Corp. and the Minnesota State and Hennepin County bar associations.

The office conversion "destroyed the synergy that Office Depot Inc. had been hoping for, but it also abated ... annual rent," the court filing said.

Office Depot also said City Center's complaints about the awning are just a pretext. The store said that it took six months to get City Center's permission to remove the awning and that it was taken down this month. Office Depot said the building owner's real goal was to make Office Depot pay rent even though it's not required to do so, or force the store to move out.

The court filings also disclosed that Office Depot and City Center discussed reducing the store's space in the complex last year but were unable to reach an agreement. The retailer now occupies about 25,000 square feet on the ground floor.

Neither Office Depot nor City Center's owner, New York-based Brookfield Properties, would say who initiated the talks, and both declined to comment beyond the court filings.

Eviction in weak market?

Why would City Center want to evict a tenant in a weak real estate market that has retail landlords struggling and offering concessions like reduced rent to keep space filled?

Richard Grones, whose Edina-based Cambridge Commercial Realty specializes in the retail market, said City Center has had recent success in filling vacant space, adding a Brooks Brothers store on the skyway level and Fogo de Chao restaurant on the ground floor. Another restaurant, Ringo, is set to open this spring in ground-level space that's been empty since Goodfellow's closed a few years ago. Grones said that it's conceivable Brookfield could have a tenant interested in the store's prime space on Nicollet Mall.

"Brookfield is big and strong and looking for the long term," Grones said. "It's not desperate and wouldn't be affected that much if the [Office Depot] space was vacant for a while."

Even so, Grones said the move to evict Office Depot may be nothing more than a legal gambit by Brookfield to establish grounds for resolving the rent dispute.

Susan Feyder • 612-673-1723