Simon Property Group Sues Gap Over Missed Rent Payments
Simon Property Group, the biggest mall owner in the country, is suing one of its biggest tenants, Gap, saying it failed to pay more than $65.9 million in rent and other charges due during the coronavirus pandemic. The court battle highlights the mounting tension between retail landlords and their tenants, many of which stopped paying rent after the crisis forced them to shut stores. The suit was filed Tuesday, and more of its kind are expected. Simon malls have 412 Gap stores, including Banana Republic and Old Navy locations. This makes Gap Inc. Simon’s biggest in-line tenant at its malls in terms of rent.
Total Retail's Take: This development seemed inevitable when back in April Gap announced that it stopped paying rent on its temporarily shuttered stores, amounting to about $115 million in monthly expenses in North America. Many other retailers followed Gap's lead, opting to temporarily withhold rent payments from landlords. Gap noted at the time that its decision could lead to it ending up in court, but it believed there was legal ground that it's not obligated to pay rent for stores that were forced to be closed under government order. Conversely, Simon Property Group is sticking to its argument that contracts had been signed with its retail tenants, including Gap, and that rents are expected to be paid. It will be interesting to see the outcome of this case, as it figures to have repercussions beyond just Gap. I think it's fair to say that Gap has a lot of retailers rooting for it in this legal matter.