America’s biggest mall owner, Simon Property Group, is suing fashion chain Gap, as tensions between landlords and retail tenants surge over unpaid rent.
The California-based retailer, which is among the largest tenants for Simon properties, has failed to pay nearly $66m in rent to the real estate company, as the coronavirus pandemic forced retail businesses to cut expenses while their stores remained closed.
Gap, which has 412 stores in Simon-owned shopping malls, had previously said it had stopped making rent payments on its closed locations, citing a debt of $115m with landlords by the end of April.
The retailer also said it anticipated potential legal conflicts from these unpaid bills. In an April filing with the Securities and Exchange Commission it said: “Although we believe that strong legal grounds exist to support our claim that we are not obligated to pay rent for the stores that have been closed … there can be no assurance that such arguments will succeed”.
“We remain committed to working directly with our landlords on mutually agreeable solutions and fair rent terms, just as our hundreds of industry and government partners have sat with us in good faith to shape the post COVID business landscape”, said a GAP spokesperson in an e-mail sent to CNBC related to the news.
GAP (GPS) shares have been on a four-day rally since 29 May, gaining 36% after closing yesterday’s stock trading session at $12.14. However, the stock is down 3.7% during today’s pre-market trading after the company reported worst-than-expected quarterly results yesterday.
Shares of Simon Property Group (SPG) were surging up 7.2% this morning on pre-market trading after a four-day rally that pushed the stock to $76.73, posting a 33% gain during that period.
Industry experts have already warned that a host of retailers may face enforced claims for any unpaid rent during the pandemic, which means that Gap’s lawsuit from Simon could be the first of many to come.
Simon chief executive, David Simon said: “The bottom line is, we do have a contract and we do expect to get paid”.
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