Simon Property Group sues Gap for $66M in unpaid rent
The apparel company is the mall operator's biggest in-line tenant
The gloves are off between the biggest mall operator in the country and one of its most important tenants.
Simon Property Group is suing Gap Inc. for its alleged “failure to pay more than $65.9 million in rent and other charges due,” according to a lawsuit filed Tuesday that was reviewed by The Real Deal.
The complaint, filed in Delaware state court, marks an escalation in the battle between multinational retail tenants and the real estate investment trusts that control a large chunk of U.S. retail space.
Many tenants including Gap stopped paying rent after coronavirus stay-at-home orders that launched in March, a decision landlords are having a hard time stomaching.
Simon Property Group CEO David Simon made reference to laggard tenants in a May earnings call.
“The bottom line is that we do have a contract, and we do expect to get paid,” Simon said.
That simple message animated a lawsuit that barely stretched six pages against a tenant who leases more than 400 properties from Simon Property Group, and is, according to CNBC, the company’s biggest in-line (non-anchor) tenant in terms of rent.
Gap, a San Francisco-based company whose brands include Old Navy and Banana Republic, is in contractual default “for failure to pay rent for April, May and June 2020,” the suit states. “The amounts due will continue to accrue each month, with interest,” according to the suit.
Simon Property Group is asking the court to order Gap to pay up the $66 million plus any future rent payments.
Gap declared in an April public filing it would stop paying rent for shuttered stores. That stance has already sparked lawsuits by individual landlords in Manhattan and Orange County against the clothing company. It’s unclear how long the company plans to continue its nonpayment policy, as the company said last month that it would reopen in 800 locations by the end of May.
Messages left with Gap Wednesday were not returned. A company spokesperson declined comment to a separate query earlier this week, stating the Gap was in a quiet period before an earnings call.
Both landlord and tenant have taken a beating since the pandemic struck.
Simon Property Group’s stock has went from $142 in February to $72 at close of business Wednesday as the company has battled with tenants over rent payments, and state governments on when they can reopen stores.
A TRD analysis found that foot traffic at malls Simon Property Group opened at the start of May was 25 percent of pre-covid foot levels.
Gap’s stock price has nearly halved since February. and the company laid off 10 percent of its corporate workforce last month after furloughing most physical retail employees.