Things are getting tougher in Herald Square for Jeff Sutton.
The billionaire’s retail buildings at 27-29 West 34th Street have been hit with a pre-foreclosure suit. Sutton has been named as a defendant in the case for serving as a guarantor on a $50 million loan connected to the property.
It’s the second foreclosure in recent months on the street for Sutton and his company, Wharton Properties. In June, he was named as a defendant in a suit regarding 15 West 34th Street. Vacancies have grown in the area around Herald Square as rents have fallen.
The lender, German bank Helaba, is seeking to collect any remaining debt after foreclosure from Sutton. The bank claimed in its complaint that the borrowing entity submitted false financial statements, obscuring the amount of tax owed on the property, while also failing to enforce a master lease. Those actions trigger “bad boy” clauses in the guarantee agreement, the bank argued, making Sutton liable.
In April, delinquent taxes on the properties totaled more than $12 million, according to court filings. Outstanding principal balance on the loan is $48.4 million, according to the bank. Annual property taxes on the lot are currently about $1.8 million, according to city documents.
Sutton acquired the buildings in a joint venture with SL Green in 2006. The deal totaled $30 million and included a third adjacent building, with the publicly traded developer financing a portion of Sutton’s equity, according to financial disclosures first reported by PincusCo.
But by 2016, Sutton was signing the paperwork for the owner.
The footwear brand Geox signed a 15-year lease at No. 29 in 2007, but filed for bankruptcy in 2021, according to Commercial Observer. Base rent was $2.6 million in 2021. The company agreed to pay Wharton Properties $8.8 million. The site is now occupied by a souvenir shop. However, that store, along with Superdry located at No. 25, have both indicated intent to vacate, according to a person familiar.
Footwear brand Aldo signed a 15-year lease on No. 27 in 2009. In 2018, the brand’s annual rent on the space was $2.3 million, according to court documents.
Ups and downs in a legacy retail corridor
The Herald Square area has seen flagging interest from retailers. The average asking rent has fallen nearly 10 percent year over year in the first half of 2025, now coming in at $447 per square foot, according to the most recent figures from the Real Estate Board of New York. The asking rent is down 59 percent from its peak in 2015.
The number of available storefronts in the corridor rose from 14 in the first half of 2024 to 21 in the same period this year.
Major retailers, including the Gap, Victoria’s Secret, American Eagle, Uniqlo, and Zumiez, have departed from the corridor in recent years. Forever 21 moved from West 34th Street to Seventh Avenue before the pandemic and has since closed all its stores as a result of bankruptcy.
Vacant space and less foot traffic can accelerate decline. Flagging rents combined with steady or rising property taxes can make it difficult for property owners to refinance.
But the situation varies block by block, said Dan Biederman, president of the 34th Street Partnership. The block between Seventh and Eighth Avenues has been feeling tailwinds from some of the redevelopment developer Vornado has been doing in its Penn District.
But the block from Fifth Avenue to Sixth Avenue, where Nos. 27 and 29 are located, hasn’t done as well.
“Fifth to Sixth is generally up from the pandemic times,” Biederman said. “But it’s a varied group of owners and you never know when a retail site is going to go upwards in quality or downwards.”
There are some bright spots for Herald Square. Old Navy inked a lease at No. 50 earlier this year, moving from its former location at No. 150, now occupied by Primark. The lease represents a bullish attitude on the neighborhood, Richard Cohan, retail adviser for partnership, said in June.
Neither Sutton or a lawyer for Helaba immediately responded to a request for comment.
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