Simon Property Group is suing Gap Inc., one of its largest tenants, for failure to pay $65.9M in rent and other changes. Gap, which operates Old Navy, The Gap and Banana Republic stores, has 412 locations at Simon malls.
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The lawsuit is one of the more high-profile legal actions in a growing number of landlord-tenant disputes in the retail sector.
Moody Law Group founder John Moody said during a Bisnow webinar on Tuesday that tenants are raising all kinds of legal theories for not paying rent, including condemnation claims, force majeure claims and claims related to the doctrine of impossibility.
“The biggest dispute we're having as a result of all this is really the classic landlord-tenant dispute: Tenants not paying rent,” Moody said.
Retailers large and small haven't been paying rent since March. Datex, a retail data specialist that tracks more than 1,000 shopping centers and many more retail stores, found that landlords were able to collect only 42% of total retail rents by early May, or half as much as a year earlier, Chain Store Age reports.
Among other chains that hadn't paid by that time were 24 Hour Fitness, AMC Theatres, Bed Bath & Beyond, Dave & Buster's, Foot Locker, Men's Wearhouse and Party City, some of which were suffering from sluggish business before the coronavirus pandemic struck.
The Gap suit, which Simon filed in a Delaware state court on Tuesday, came just ahead of Gap Inc.'s release of its first-quarter results Thursday. The company reported that for its first quarter (ended May 2), net sales were down 43%, since most of its locations closed in March.
Gap Inc. didn't provide a report on same-store sales for the quarter, saying that the metric wouldn't be meaningful. Its operating loss for the quarter was $1.2B, or $2.51/share.
Investors sold Gap shares in great numbers in the first weeks of the pandemic, but have been buying since then. At the beginning of 2020, Gap traded for over $17/share, with its price dropping to a low of $5.50/share in early April. As of early June, the company is trading for over $12/share.
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