The dispute between Saks Fifth Avenue and Bal Harbour Shops is getting nastier.
On Monday, Bal Harbour Shops filed a lawsuit against Saks in the 11th Judicial Circuit Court of Miami Dade County seeking to terminate the Saks lease and evict the store due to “extensive arrearages,” as reported first by WWD.
But on Wednesday, Richard Baker, executive chairman, governor and chief executive officer of the Hudson’s Bay Co., which owns Saks, told WWD that his company will file a lawsuit against Matthew Whitman Lazenby, ceo of Bal Harbour Shops, and the Whitman family, which owns the center, for significant damages to the Saks Fifth Avenue brand and breach of confidentiality agreements.
Baker declined to specify the amount of damages being sought. But sources said it’s a multimillion-dollar lawsuit, and possibly as much as $50 million.
“Landlords who use the media and bring frivolous litigation as a way to coerce retailers to settle disagreements will not be tolerated by Hudson’s Bay Co. Because of the unreasonable actions of Matthew Lazenby and the Whitman family, we have been forced to commence an aggressive action for substantial damages caused to the Saks Fifth Avenue brand and business,” Baker said in an interview Wednesday.
The dispute between Saks and Bal Harbour Shops is just the latest in a proliferation of lawsuits over unpaid rents and various charges between retail tenants and landlords spawned by the pandemic, which forced most malls and many retailers to temporarily close for months. In recent weeks landlords have sued Victoria’s Secret and H&M, among other retailers, over arrearages occurring when malls or stores were closed. Depending on the case, landlords and retail tenants have sometimes come to terms through forbearances, abatements and/or changes in lease terms.
Baker said he believes there will be many more lawsuits in the weeks ahead, though that’s not representative of the state of affairs at HBC.
“Saks Fifth Avenue, Hudson’s Bay and Saks Off 5th [the three retail divisions of HBC] have been working with their landlord partners throughout North America, location by location, in order to amicably and logically share the damages that have occurred at each location due to store closures, mall closures and the pandemic itself. We feel very strongly and our reasonable landlords agree that there is a fair solution to share the significant costs of this public health crisis,” said Baker. “This is a time when both tenants and landlords are going to need to work together in order to share the pain.
“We have reached agreements or understandings with the majority of our landlords regarding sharing these damages.…Unfortunately, for unknown reasons, Matthew Lazenby and the Whitman family appear not to be acting in good faith and violating confidentiality obligations, which have caused significant damage to the business and reputation of Saks Fifth Avenue. It’s not OK to use the press and the court system to bully tenants.”
By suing Saks, Bal Harbour Shops could be sending a strong signal to its other tenants not to back away from what the center feels it’s owed.
The situation between Saks and Bal Harbour Shops is unfortunate because there’s been a history of mutual admiration. Bal Harbour Shops, located at 9700 Collins Avenue in north Miami, is among the nation’s most luxurious and productive shopping centers. And the 120,000-square-foot Saks store there is among the luxury chain’s highest-performing units. Baker noted that the store is undergoing renovations, and worth continued investments.
“Matthew and the Whitman family operate one of the highest-quality retail shopping centers in the U.S.,” said Baker. “Saks Fifth Avenue has, for a long time, been a significant part of the success of the Shops at Bal Harbour and expects to continue to be part of that success for a long time to come. We have tremendous respect for the Whitman family and what we together have been able to accomplish in Bal Harbour.”
Saks, he added, had discussions with the Whitman family about “appropriately sharing the significant losses resulting from the pandemic, which included the temporary closure of the property. Unfortunately we were unable to reach an agreement of how to equitably share the significant losses that Saks Fifth Avenue has suffered because of the public health crisis presented by COVID-19.”
“In cases where we cannot reach a solution or where we believe we are being bullied by an aggressive landlord, we will look to the courts to resolve the situation.”
Leases often dictate that an arbitration occurs to settle a dispute before it gets litigated in court. Baker would not comment on any terms of the Saks lease at Bal Harbour Shops or the possibility of arbitration, or what would constitute a resolution of the dispute for Saks.
The complaint against Saks contends that the store owes about $1.9 million, which includes rents for January, February and March; a percentage of sales for the first quarter of 2020, which was due in April, as well as charges, including common area maintenance and marketing.
According to Bal Harbour Shops, Saks paid common area charges in January, February and March, but stopped paying them starting in April, and it said that Saks hasn’t paid percentage rent at all this year. A notice of default was dated July 8, which covers the first quarter only. According to Lazenby, the last payment received by Saks covered charges prior to the center closing temporarily in mid-March, not rent or percent sales.
Bal Harbour Shops temporarily shut down in mid-March due to the pandemic but reopened on May 16. That situation caused Saks to reassess what it felt was its financial obligations to the center. Lazenby said when the shopping center was closed, Saks conducted some business through curbside pickups.
Three years ago Saks threatened to vacate due to concerns over the shopping center’s expansion plans. The center secured a $550 million loan from MetLife Investment Management for its largest expansion project yet so it could add at least 241,600 square feet of retail space, bringing the center to 716,000 square feet.
Saks at one time planned to relocate its existing 120,000-square-foot store to a 180,000-square-foot space in the expansion but instead decided to renovate the existing store.
Saks opened at Bal Harbour Shops in 1976, becoming the center’s second anchor tenant, following Neiman Marcus, which opened there five years before.
“Saks is one of about 110 tenants here,” said Lazenby on Monday. “Each has been impacted by COVID-19, but we worked out some kind of solutions with them, not always perfect. Only a handful have taken a very firm position — not paying anything at all. Unfortunately, Saks took that position.”
Despite the lawsuit, Lazenby said he’s still hoping that an amicable resolution can be reached.