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Saks Fights Back in Bal Harbour Lease Dispute

The battle between Saks Fifth Avenue and Bal Harbour Shops over the landlord’s move to evict because of a dispute related to lease payments has heated up.

On Tuesday, Saks filed its own lawsuit against its landlord and Matthew Whitman Lazenby, president and CEO of Bal Harbour owner Whitman Family Development, in a Florida state court. Filed in the 11th Judicial Circuit Court, known as the Miami-Dade County in South Florida, the lawsuit alleges that Lazenby breached the parties’ contract, as well as Bal Harbour’s fiduciary duty. Saks occupies an anchor space at more than 143,000 square-feet within Bal Harbour at 9700 Collins Ave.

HBC Properties and Investments, the real estate operating firm connected to The Hudson’s Bay Co. and parent to Saks Fifth Avenue, alleges in the suit that Lazenby disclosed confidential information provided by Saks to Bal Harbour per its lease arrangement in an effort to increase pressure on the retailer to resolve a dispute connected to lease payments during the coronavirus, or COVID-19, pandemic. The complaint also alleges that Bal Harbour and Lazenby caused damage to the retailer’s business reputation by making other public defamatory statements that omitted facts relating to the dispute.

“We are disappointed that Mr. Lazenby chose to breach our long-standing agreement and disparage Saks Fifth Avenue, an iconic luxury retailer that has been vital to Bal Harbour’s success for 45 years. Over the past few months, we have been working with our landlord partners across North America to amicably and logically share the burden of losses stemming from the ongoing global pandemic. Unlike others, this landlord has resorted to providing denigrating statements and confidential information to the media for the sole purpose of coercing Saks into settling a disagreement,” Ian Putnam, HBC Properties’ president and CEO, said.

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“Nonetheless, we have remained eager to reach a fair resolution, just as we have done with other landlord partners,” he added. “Unfortunately, instead of coming to an agreement, Saks has been forced to grapple with the damage to its business and reputation among customers, associates and partners.”

The Saks complaint is a counter-suit to the one filed by Bal Harbour a week ago. Saks was forced to temporarily shut down when the Covid-19 outbreak hit in mid-March. And like many other retailers, it also didn’t pay any rent, hoping to secure a renegotiation of lease terms.

The Bal Harbour lawsuit is seeking to evict Saks from its location and end the lease. Bal Harbor alleges it has good cause to do so. The complaint said Saks hasn’t paid its percentage rent for February through April. Percentage rent is based on the department store’s net sales. The suit also claims Saks hasn’t paid what it owes for its share of the real estate taxes for the property for 2019. The suit also disclosed that the total amount owed is over $1.8 million up through early July. Although the luxury mall was closed due to pandemic-realted government restrictions, Bal Harbour said Saks was able to continue to generate sales in June and alleges in the suit that the sales figures were greater than reported sales from June 2019.

But what might be more troubling for Saks was the disclosure in the Bal Harbour suit that it provided Saks an $18 million advance to renovate its Bal Harbour store. The reason that was disclosed was because Bal Harbour is seeking to have a portion of that advance returned.

Saks issued a statement last week that it would defend against its landlord’s lawsuit, noting that “we are looking forward to the legal system determining what is fair and reasonable for all parties.”

Saks isn’t the only one on the receiving end of lawsuits from landlords seeking payment of back rent. In June, Simon Property Group slapped Gap Inc. with a lawsuit demanding more than $65.9 million in back rent owed since the Covid-19 outbreak. In late June, Simon went on to file a similar claim for back rent for over $8.7 million against Brooks Brothers. Brooks subsequently filed for Chapter 11 bankruptcy court protection and Simon joined forces with Authentic Brands Group to acquire the American retailer out of bankruptcy for $325 million.

In May, Simon CEO David Simon made clear a landlord’s perspective on leases and back rent that’s owed. He told analysts during a first-quarter conference call that the company fully expects tenants to pay their rent, adding emphatically: “The bottom line is we do have a contract [and] we do expect to get paid.”

Mall operators, known better as real estate investment trusts, have had to deal with many retailers including Macy’s Inc. and bankrupt J. C. Penney that have elected to defer payments. And they seem to be taking a fairly hard stand on making sure they get what they are owed. Sources said one reason Simon and Brookfield Property Partners had the inside track to acquire Penney’s was because the mass merchant was hoping to cut some deals on renegotiated lease terms as part of its sale. That didn’t pan out and Penney’s is now expected to go it alone with a plan whereby lenders will acquire the company. If that paperwork can’t get completed and filed with the bankruptcy court overseeing Penney’s case, its next option is likely a liquidation of operations.