Reports: Simon Property Sues Gap Over Unpaid Rent

(RTTNews) - Mall owner Simon Property Group has filed a lawsuit against one of its biggest tenants, Gap Inc., for failing to pay rent on stores that were closed due to the coronavirus pandemic, according to reports.

The lawsuit reportedly filed by Simon Property in Delaware state court earlier this week claims that Gap failed to pay $65.9 million in rent and other charges. Simon Property is the biggest mall owner in the U.S. and Gap has more than 400 stores in Simon Property malls.

In April, Gap said it suspended rent payments under the leases for its stores in North America, which were closed due to the COVID-19 pandemic. The apparel retailer noted that these rent payments amount to about $115 million per month.

At that time, Gap added it was in talks with the counter-parties under those leases to defer or abate the applicable rent during the store closure period. However, the company noted that if it was unable to renegotiate and modify lease terms, it could be deemed to be in default.

Gap and other brick-and-mortar retailers have been severely impacted by the coronavirus pandemic. Following the temporary closure of its stores in March, Gap furloughed the majority of its store teams in the U.S. and Canada, while reducing headcount across its corporate functions and temporarily reducing pay for its entire leadership team.

On Thursday, Gap reported a net loss for the first quarter of $932 million or $2.51 per share, compared to net income of $227 million or $0.60 per share in the year-ago period. Revenue for the quarter fell 43 percent to $2.11 billion from $3.71 billion last year.

In May, Simon Property said it reopened 77 of its U.S. retail properties that were temporarily closed in March in response to the coronavirus pandemic and said it was encouraged by the customer response. The company also reported a 20 percent decrease in its profit for the first quarter from last year.

Simon Property's owns almost 200 malls and outlet centers in the U.S. The company's decision to reopen its retail properties came after its major tenants such as retailers Macy's and Nordstrom announced plans to reopen their stores in a phased manner.