The Gap Hit with Lawsuit to Recoup Back Rent

As the U.S. pulls itself out of the coronavirus pandemic, landlords and tenants have a lot of things to sort out. In the retail space, the Simon Property Group is now suing The Gap and other stores for failing to pay rent.  

In one of the first major retail rent showdowns of the pandemic, Simon has filed a complaint in state court in Delaware seeking $66 million in back rent owed by The Gap, which also owns Banana Republic and Old Navy. The lawsuit, first reported by The Real Deal, comes after David Simon, CEO of the company, which owns malls in 37 states, fired off a warning last month to retail tenants who might be considering skipping their rent payments.

“The bottom line is, we do have a contract and we do expect to get paid,” Simon said during the May 12 earnings call with analysts. However, The Gap, like many other retailers, has seen its revenue fall off a cliff since March, when the clothing retailer was forced to shutter stores across the country.

In April, The Gap said it would be suspending $115 million in monthly lease payments on stores in malls and other locations across North America. The retailer also said at the time that it was in talks to renegotiate or terminate leases and to close stores entirely if necessary. The announcement came as The Gap cut staff, furloughed workers, slashed expenses and put $300 million in capital improvements on ice.

The retailer, which has 412 stores in Simon malls, saw its stock price drop initially after news of the lawsuit broke, but later edged up 1.09 percent to $12.08 a share on mid-day Thursday (June 4).

And so a court will decide what is fair and how this will play out for The Gap and hundreds of other retailers and commercial landlords in the exact same situation. Disputes are like khaki pants — they are everywhere! When those nasty things (not the pants) affect YOU and YOUR business including landlord/tenant matters, contract issues, nuisance ADA claims and even collections, call in the good-guy business litigator, Dean Sperling, who will work to resolve YOUR matter with YOUR best interests in mind! 

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