Mall Landlord Taubman Sues Saks Fifth Avenue Over Puerto Rico Store

By Esther Fung Features Dow Jones Newswires

Luxury mall landlord Taubman Centers Inc. filed a lawsuit against its tenant, luxury retailer Saks Fifth Avenue in Puerto Rico, alleging the retailer has dragged its feet in rebuilding its store in the Mall of San Juan after suffering major damage from the recent hurricanes.

Continue Reading Below

Hudson Bay Co., the owner of Saks Fifth Avenue, said it is in the process of repairing the store and is focused on its staff's well-being.

The mall has two department store anchors, Nordstrom and Saks Fifth Avenue, and under agreements signed with the landlord the retailers are required to rebuild and reopen as quickly as possible, said Robert Taubman, chief executive of Taubman Centers, during an earnings call Thursday.

Executives at Nordstrom have indicated they are proceeding quickly and will open the store as soon as they are able. Given the damage, Taubman said it expects it would be well into 2018 before Nordstrom would reopen. But Saks Fifth Avenue hasn't provided a timeline for reopening its 100,000 square-foot store.

"As such, we have filed, as of yesterday, in the Puerto Rico Superior Court a complaint to compel Saks to properly commence reconstruction of its building and to complete the repair to be ready for occupancy as expeditiously as reasonably possible," Mr. Taubman said.

"There has been minimal work done to repair Saks Fifth Avenue," Taubman added Friday in a statement. "We would naturally be thrilled to see a meaningful effort to restore the store and resume normal operations.

Continue Reading Below

"Our store sustained significant damage from Hurricane Maria and we are in the process of repairing and rebuilding the store," Hudson Bay said in a statement. "As a company, our focus has always been the safety and well-being of our associates, and this focus remains in the aftermath of this crisis."

In the legal filing, Taubman said Saks Fifth Avenue hasn't appeared to have made an effort to secure its properties such as temporary repairs to cracks on the roof and other steps to prevent additional mold or water damage. If the department store doesn't start repairs soon, "it will have a devastating effect on the mall and other tenants who depend on Saks Fifth Avenue to generate traffic and therefore business for their stores," the 18-page complaint said, in the original Spanish.

Both anchor stores opened in the Mall of San Juan in 2015.

Puerto Rico is still struggling with power loss and infrastructure damage, and some retail centers there remain closed while others are operating with shorter hours. In the Mall of San Juan, 55 of 90 tenants have reopened their stores, with more expected to reopen by the holiday season, according to Taubman.

Stores that stay closed for extended periods of time could hurt customers' overall impression of the property and trigger cotenancy clauses allowing other tenants to ask for rent relief if anchor stores remain closed for too long. There has been heightened tension among mall landlords and tenants this year, with both sides blaming each other for store closures and lackluster foot traffic.

Write to Esther Fung at esther.fung@wsj.com

(END) Dow Jones Newswires

November 03, 2017 16:48 ET (20:48 GMT)