Proceedings for the eviction of retail tenants are picking
up across the country as courts reopen and states’ moratoriums on evictions are
expiring or getting curtailed as the economy reopens.
In Miami, a luxury-shopping-center landlord began legal
proceedings to evict Saks Fifth Avenue two weeks ago for nonpayment of rent
amounting to $1.9 million as of early July.
In other parts of the country, smaller retail landlords also
have filed lease termination and eviction notices to restaurants, bridal shops,
entertainment operators and co-working tenants that haven’t paid rent and
weren’t able to come to mutually agreeable modifications to their leases.
Before the pandemic, most of these disputes end up getting resolved before the
sheriff throws them out, but lawyers said they are seeing higher volumes of
disputes which could lead to more evictions.
“We hope and think that the outcome of the lawsuit is that
Saks would come to its senses and pay its rent in full. If Saks still doesn’t
do so, we’ll have a whole host of other options for the space,” said Matthew
Whitman Lazenby, chief executive officer of Whitman Family Development, a
private company that owns the ritzy Bal Harbour Shops in Miami.
Saks Fifth Avenue has a ground lease with the outdoor mall
and pays percentage rent, or a percentage of sales as rent. Compared to fixed
rents, such lease structures already have built-in protections if sales fall.
“It’s perplexing,” said Mr. Lazenby. Bal Harbour Shops was closed from
mid-March until the third week of May, and Saks Fifth Avenue recorded stronger
sales in June this year compared with last year, he said.
Tens of thousands of leases have been modified, including
deferrals or discounts, landlords say, in exchange for lease extensions or
“Unlike the majority of our landlord partners, Matthew
Lazenby and the Whitman family have not acted in good faith. Not only have they
chosen not to adequately assume their fair share of the damages created by the
global health crisis still gripping our nation, they have used the press and
legal system to bully tenants,” said a Saks Fifth Avenue spokeswoman, adding
that the company has been able to work with other landlords “to amicably and
logically share the losses incurred during the pandemic.”
“For many years, Saks has been a significant part of the
success of Bal Harbour Shops, and we expect to continue to be part of that
success for a long time to come,” the spokeswoman added. The
luxury-department-store operator, whose parent company Hudson’s Bay Co. went
private in early March, had a hard time before Covid-19 competing with online
upstarts and other rivals.
While overall retail rent collections have improved to 77%
in July from around 54% in April, some tenants, particularly from the apparel,
fitness and theater categories, have continued to struggle with payments,
according to data from Datex Property Solutions, a real-estate data firm that
tracks rent collection on thousands of properties across the country.
During the coronavirus-shutdown period that started
mid-March and extended to as late as August in some cities, tenants have
implored their landlords for deferrals and lower rents to stay in business.
States also imposed moratoriums on commercial-real-estate evictions, which
offered temporary respite until they expire. New York Gov. Andrew Cuomo
extended the state’s moratorium until Sept. 20 from a previously extended Aug.
Landlords said they have modified tens of thousands of
leases over the past few months, including deferrals or discounts in exchange
for lease extensions or other concessions, such as the removal of clauses that
prohibited certain types of tenants in the neighboring space, such as direct
competitors or other uses of common-area space. But for some, negotiations
reached a stalemate and landlords said they have no choice but to resort to
“It’s an unfortunate but necessary tool to enforce the
lease,” said Derek Waltchack, partner at Shannon Waltchack, a real-estate
landlord based in Birmingham, Ala., with more than 400 tenants across 64
properties. “We also have to balance the expense of securing new tenants versus
working with our tenants and providing some rent deferrals.”
Shopping at Bal Harbour stores continues in Miami amid the
pandemic. An Alabama landlord says his firm lost 10 tenants, mostly bars and
restaurants, due to the coronavirus.
Mr. Waltchack said his firm has taken legal action against
more tenants for missed rent payments, mostly bars and restaurants, compared
with a year ago. He added that the majority of his tenants would subsequently
pay the rent late rather than get evicted.
He said his firm lost 10 tenants, mostly bars and restaurants,
due to the Covid-19 pandemic.
In Minneapolis, Eric Ruzicka, a partner at Dorsey &
Whitney LLP, said his law firm has commenced around 30 eviction filings for
commercial tenants, including restaurants, children’s play zones and bridal
shops that were hurt by the drop in tuxedo rentals for proms.
He expects most cases to be resolved before trial and that
many of his landlord clients still have a desire to work things out. So far,
only one, a restaurant, has an eviction trial date set for late September.
“Landlords need to figure out which tenants are going to
thrive and make the center better and which ones have been struggling already,”
said Mr. Ruzicka. “If it was a good relationship before coronavirus, it’s a
A landlord last month began legal proceedings to evict Saks
Fifth Avenue from Bal Harbour Shops in Miami.
—Jim Oberman contributed to this article.
Write to Esther Fung at firstname.lastname@example.org
here for the original article.