Dive Brief:
- A landlord for Twitter has filed suit against the San Francisco-based, social media giant, alleging that it owes more than $3 million in past-due rent on about 462,855 square feet occupied at company headquarters. The complaint was filed in a California court on Friday.
- The Delaware limited liability company SRI Nine Market Square states it owns the 1355 Market office building that houses Twitter’s headquarters, and that Twitter and two other entities breached the lease by failing to pay the rent due on Jan. 1. The landlord asks the court to step in and force Twitter to increase the letter of credit it holds as security by $10 million.
- The suit points to the potential legal headaches and financial complexities that companies face while seeking to trim real estate costs. “If the lease is in effect, a tenant just can’t decide to walk away,” said Eric Anton, a senior managing director with the commercial real estate brokerage firm Marcus & Millichap, who is not involved in the Twitter case. “I don’t know the terms of this lease in this particular deal with Twitter, but I’d be willing to bet they can’t just leave and not pay the back rent without penalty.”
Dive Insight:
Billionaire investor Elon Musk acquired Twitter and took it private in a $44 billion deal in October. Since then he has initiated an “enormous” cost-cutting campaign that has included slashing its workforce as well as renegotiating and in some cases not paying vendors, The New York Times reported.
The suit filed last week states that Twitter’s lease for the 355 Market space was inked in April 2011 and later amended to cover a greater number of floors.
In addition to the allegation of past due rent, part of the suit centers on a dispute over a letter of credit issue. Though it does not specify that it is related to Musk’s acquisition, the landlord’s lawyers assert that a transfer of control of the lease in October triggered the requirement that the landlord’s letter of credit would be increased by $10 million. But Twitter contended that the higher value letter of credit was not required, according to the suit.
Twitter and attorneys for the landlord entity did not immediately respond to requests for comment.
Musk is also facing pushback for unpaid rent it allegedly owes in London, according to an Associated Press report. The Crown Estate, “has started court proceedings against Twitter after it fell behind on rent at its offices near London’s famed Piccadilly Circus,” according to the report.
The lawsuit against Twitter also comes as a growing wave of tech firms, including Salesforce and Microsoft, have announced massive layoffs along with plans to trim their real estate or lease costs.
