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Neiman Marcus Sues Simon Property Group For $50M Over Scrapped Development Above Its Boston Store

Simon Property Group's planned 52-story residential building would have gone up above the Neiman Marcus in Copley Place.

Neiman Marcus is suing a Simon Property Group subsidiary for $50M in damages involving the REIT's failure to develop a 52-story tower over its Boston store.

The luxury retailer, in a lawsuit filed Tuesday with the Suffolk Superior Court, argued that the mall owner broke its contractual agreement and cost the company millions in sales due to disruptions to the customer shopping experience for a plan that never played out.

The lawsuit was first reported by The Boston Globe. A Simon Property Group spokesperson declined to comment to Bisnow

In 2014, Simon Property Group began plans to expand Copley Place with a residential tower that would be located above the Neiman Marcus store. The retailer's 111K SF store opened in 1984.

Simon told Neiman Marcus that it would need to vacate part of the store in order for support columns to be built for the project, according to the lawsuit. The retailer also had to reorganize by building temporary walls and eliminating certain departments, which it argued impacted its sales and customers' experience. 

"Neiman Marcus, however, was willing to suffer this temporary negative impact in exchange for obtaining a larger, fully renovated store and new lease terms, which [Simon] promised to provide," the lawsuit said.

In January 2016, the parties amended the store's lease to include an eventual expansion and renovation, paid for by a $27M contribution from Simon, because Neiman agreed to the short-term reduction in size, according to the suit. 

The amended lease allowed Simon only one instance in which it could break this agreement, according to the lawsuit: if it was unable to obtain the necessary government approvals to complete the project.  

The lawsuit then pointed to a fall 2016 earnings call in which Simon announced it would not move forward with the planned tower, citing rising construction costs and concerns around market conditions. 

Neiman argued that Simon contradicted its own statement by telling the retailer a week before that the plans had been scrapped because it was unable to obtain the necessary approvals.

"Almost six years later, as a result of CPA’s wrongful termination and breaches of the [amended lease], the Copley Place Neiman Marcus remains in its reduced and temporary condition, which continues to have a significant impact on sales and profits," the lawsuit said.