Simon Property Group is suing Gap on the grounds that the retailer has failed to pay more than $65.9 million in rent and other charges during the COVID-19 pandemic, according to CNBC. Gap stopped paying rent on its temporarily closed stores in April, a move that was expected to save approximately $155 million in monthly costs.
Gap and its banners, including Banana Republic and Old Navy, operate 412 stores at Simon properties, making it one of the mall operator’s biggest in-line tenants in terms of rent. Simon seeks up to $66 million from Gap in addition to future rent payments.
The fashion retailer was struggling even before the COVID-19 crisis, which resulted in the cancellation of a planned Old Navy spinoff. Gap is attempting to renegotiate leases where possible, but the retailer noted that if it is unable to renegotiate terms, landlords could allege the company is in default and attempt to terminate the lease agreements and accelerate future rents due.
“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 a statement sent to CNBC. “We are pleased with the progress we’ve made with many landlords as we’re reopening stores across the country, moving forward together towards growth.”
Simon and the rest of the shopping center/mall industry has suffered under the pandemic as well. The company reportedly furloughed approximately 30% of its workforce and laid off an unspecified number of personnel in late May, while CEO David Simon waived salary for the duration of the pandemic. Simon has previously said that retail tenants need to pay rent despite temporary store closures.
“The bottom line is, we do have a contract and we do expect to get paid,” Simon said during a May conference call with analysts.