Laurel start leasing in West Palm. Will renters get access to fitness center at The Square?
After two years of construction, Related Cos. of New York recently began leasing apartments at The Laurel, the development company's first luxury rental residence in Florida.
The 21-story tower, built on the former Macy's department store at 575 Rosemary Ave., promises to offer a different level of amenities — and cost about $1,000 more per month — than the starting price at other downtown rental apartments. At The Laurel, rents range from $3,400 a month for a studio to an eye-popping $20,000 for a furnished three-bedroom unit.
For this money, residents will enjoy Bosch kitchen appliances, resort-style pools and many fitness extras, including an outdoor fitness pavilion, Pilates studio, indoor fitness center and even fitness classes led by top trainers.
LA Fitness alleges Related is violating 12-year-old lease
That's the question of the hour for Related Cos. and LA Fitness, a tenant of The Square that is suing Related over, among other things, the fitness amenities planned at The Laurel.
LA Fitness alleges in a 2023 lawsuit that fitness amenities at The Laurel and new office towers violate a 2012 lease that gives LA Fitness the exclusive right to fitness-related operations at The Square.
The fitness chain said the landlord-created fitness facilities at The Laurel are competition for LA Fitness, and they are not allowed under the lease. LA Fitness recently asked a Palm Beach County Circuit Court judge to block the opening of The Laurel's fitness facilities.
But will this pricey new apartment tower be able to offer renters the advertised fitness perks when the building opens in May?
If granted, this could mean tenants of the 322-unit apartment complex might not be able to use the facilities, at least right away.
The legal dispute is top of mind for Related's chairman, Stephen Ross, the billionaire Palm Beach resident and Miami Dolphins owner who has poured billions of dollars worth of investments into West Palm Beach.
During a Feb. 29 court hearing conducted via Zoom, Ross listened in from his company's conference room in West Palm Beach. Joining him in the room were Related Urban Chief Executive Kenneth Himmel and Related senior vice president Jordan Rathlev.
The Related executives did not speak during the hearing.
But the company's court filing, as well as its attorney, John Shubin, argued that the buildings' fitness facilities are mere building amenities, and not commercial fitness centers or operations covered under the lease.
Related doubles down on its investment in West Palm Beach
The Laurel apartment tower is a big bet by Related, which wants to attract well-paid professionals to the rental site.
The company also wants to lure people who are wealthy enough to buy a second home in Palm Beach County but who prefer the flexibility of renting, said Bryan Cho, Related executive vice president.
"It's an appealing solution for the luxury rental customer that didn't have a professional quality building to go to until now," Cho said.
The Laurel's apartments offer views of the city, the Intracoastal Waterway and, from the fifth floor up, the ocean. The resort hotel-style building also has plenty of perks, including cabanas, men's and women's spas, and an outdoor bar and grill.
In addition to regular apartments ranging from 636 to 1,825 square feet, The Laurel's premium penthouse collection features apartments ranging from 1,505 square feet to 2,487 square feet with rents starting at $9,600 per month.
Cho said there's a big demand for large rental apartments, which The Laurel provides with 24 three-bedroom units.
All the apartments have nine-foot ceilings, floor-to-ceiling windows, and open kitchens with custom Italian cabinetry, Carrara Marble tile backsplashes and quartz countertops.
And in a perk typically seen in ultra-luxury condos, residents also will have access to three rentable furnished guest suites designed by Restoration Hardware. These can be used by visiting guests or family, Cho said.
The Laurel marks the third new residential building planned by Related in West Palm Beach.
The company is marketing for-sale condominiums at the planned South Flagler House on South Flagler Drive and the planned Shorecrest condo on North Flagler Drive. Both condo complexes will have views of the Intracoastal, Palm Beach and the ocean.
Fitness amenity vs. fitness center: What's the difference?
Before Related can lock down wealthy renters for The Laurel, however, the global real estate firm needs to overcome a fitness center kerfuffle with its tenacious tenant, LA Fitness.
The LA Fitness action is part of a Palm Beach County Circuit Court lawsuit first filed in April 2023 against CityPlace Retail, an affiliate of Related Cos., which built The Square, The Laurel and the 360 Rosemary office tower.
LA Fitness maintains that its 2012 lease with Related contains an exclusive use provision: "Landlord will not allow any other fitness operation .... to operate in the project."
These barred operations includes a health club, aerobics, yoga, Pilates, fitness classes, spinning/cycling, circuit training, personal training, basketball, boxing, cardiovascular or jazzercise operations, according to the lease.
The LA Fitness exclusive is very broad and without any limits, the fitness company said. It doesn't create exceptions for any other operator, including the landlord. It doesn't describe whether barred operations can charge money or how they can charge money to users.
Up until the appearance of The Laurel and 360 Rosemary, a deal was a deal between Related and LA Fitness.
Then LA Fitness said in court records it began learning about the in-house gyms being built and advertised at both buildings.
LA Fitness sues Related Cos. over plans to bring Equinox gym to The Square in West Palm
More: Related to LA Fitness: Play ball with changes at The Square — or else
Related repeatedly argued in court documents that the apartment and office towers merely provide fitness amenities, which are not the same as fitness centers.
LA Fitness called the distinction "fanciful."
LA Fitness noted that during a Feb. 6 deposition, Related partner Gopal Rajegowda, who signed the LA Fitness lease on behalf of Related, was unable to explain any distinction, either.
"Is there a difference between a fitness amenity and a fitness center? I don't think. I don't know," Rajegowda said. "To me, I guess not."
Related's marketing and advertising materials repeatedly refer to these building perks as fitness centers.
This includes marketing material for The Laurel, the 360 Rosemary office tower and The Flats apartments, where potential residents are urged to lease at The Flats to take advantage of its "state-of-the-art, 24-hour fitness club, so you can say goodbye to expensive gym memberships."
And while Related argued that building amenities aren't a paid business the way LA Fitness charges a monthly membership, Related's Rajegowda testified the company charges for the perks by adding them onto the monthly rent, LA Fitness lawyer Scott Atherton pointed out in the Feb. 29 hearing.
Only apartment residents who are current on their rent, or employees of 360 Rosemary office tower tenants who are current on their rent, are allowed to use the fitness centers, LA Fitness said. They are not open to the public or free.
Some 3,500 residents or office workers could occupy The Square's new apartment and office towers, LA Fitness said in court documents. These are all new potential customers for LA Fitness, the fitness company said.
But instead of directing these customers to the fitness chain, Related wants to "usurp" these customers to its own fitness centers in a bid to charge higher rents, increase profits and boost the value of its buildings, LA Fitness said in court filings.
In the Feb. 29 hearing, Judge Jaimie Goodman was mostly poker-faced. But he probed both sides on the meaning of a "fitness-related operation," which is not defined in the lease.
Regardless of his ruling on the fitness exclusivity issue, other lawsuit issues remain.
LA Fitness also is challenging changes that Related is making to parts of The Square previously occupied by retailers at 550 S. Rosemary Ave. and 545 Hibiscus St.
LA Fitness said the changes to the mixed-use center violate the 2012 lease that prevents Related from turning existing retail space into other uses.
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Related recently tore down retail space that once housed the Brio Tuscan Restaurant, the AMC West Palm Beach 12 movie theater, the Copper Blues Rock Pub & Kitchen and the Palm Beach Improv.
Related wants to build two office high-rises on the land instead.
The goal is to capture new businesses that plan to move or expand to West Palm Beach, a trend which slowly has been taking place during the past decade but dramatically accelerated with the COVID-19 pandemic.
In court records, Related pushed back against LA Fitness. The real estate developer says the lease makes clear that the shopping center portion of the development could be reduced.
A fed-up Related also is countersuing LA Fitness for breach of contract.
While Related said it doesn't need LA Fitness' permission to make changes at The Square, LA Fitness is supposed to cooperate and not "unreasonably" withhold its approval or consent, according to the lease, Related said.
Related's lawyer sent a letter warning LA Fitness its interference could cost it "tens of millions (or more) of dollars in damages," the company said in court records.
Goodman is expected to issue a ruling on the fitness facility matter in the next few weeks.
Alexandra Clough is a business writer at The Palm Beach Post. You can reach her at aclough@pbpost.com. X: @acloughpbp. Help support our journalism. Subscribe today.
This article originally appeared on Palm Beach Post: Related, LA Fitness fight could limit West Palm luxury rental perks
