A developer who tried unsuccessfully to buy the Macy’s Inc. buildings on Nicollet Mall in downtown Minneapolis sued the retailer on Tuesday for the money it spent on the effort.
City Center Realty Partners, which has offices in Minneapolis and San Francisco, accused Macy’s of “pulling the rug out from under City Center at the last minute” by deciding in late December to sell the three buildings to a New York firm.
In the suit filed in Hennepin County District Court, City Center Realty Partners seeks financial compensation for work it did as it planned to purchase the Macy’s property, a retail landmark for more than a century.
A Macy’s spokeswoman declined to comment late Tuesday, saying the company doesn’t discuss litigation.
601W Cos., a New York firm chiefly known for buying and selling prominent skyscrapers in American cities, is paying more than $40 million for the property and plans to redevelop the buildings into a mix of office and retail space.
The store, known for decades as the flagship location of the Dayton’s department store chain, had been on the decline for years. Macy’s had only about half of its 1 million square feet of space. It will close the store in March.
In the suit, City Center Realty said it had been in talks with Macy’s for most of 2016 on a deal that would have been worth around $50 million.
It said the two sides in August signed a letter of intent to do a deal. After that, Macy’s required City Center Realty to conduct due diligence on the property as they negotiated the terms of a purchase agreement.
As City Center Realty conducted its due diligence, it did the work to apply for tax credits for the property based on its historic nature, the company said in the suit.
During that time, Macy’s was supposed to provide environmental reports about the property, the suit said. But City Center Realty said it independently found out the property had significant amounts of asbestos that would require work.
As late as Dec. 20, Macy’s representatives spoke with City Center and said they were close to finalizing the deal, according to the suit. City Center Realty said a “small disagreement” over the cost of asbestos remediation remained. Then, on Dec. 23, a broker for Macy’s informed City Center Realty that the retailer was going with a different buyer.
“On the eve of finalizing last minute details of the parties’ purchase and sale agreement at the end of December 2016, and only after months of significant financial and time investment by City Center on this project, Macy’s abruptly and without explanation terminated its relationship with City Center and had its broker [not even any Macy’s executive] notify City Center that Macy’s would be selling the property to a New York investment firm instead,” the suit said.
City Center Realty said in the suit that it lost millions in the unfinished deal because of the due diligence costs, including the cost of the environmental investigation and lost profits.