New York state Attorney General Eric Schneiderman and retail property giant Simon Property Group Inc. reached a settlement in an antitrust case that requires Simon to end practices that the attorney general alleged protected Simon's popular Woodbury Common Premium Outlets from competition.
Simon Property, the largest shopping mall owner in the U.S., agreed to pay the state $945,000 and revise existing leases to end restrictions that deterred retailers from opening additional outlet stores, according to a press release from the attorney general. The company didn't deny or admit to wrongdoing, the statement said.
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Mr. Schneiderman said the settlement was a victory for New York regional shoppers. "No business should be allowed to stifle an entire industry at the expense of consumers -- but for years, that's exactly what Simon Property Group did to New Yorkers," his written statement said.
But Indianapolis-based Simon issued a statement after the settlement was announced describing the two-year investigation by the attorney general's office as "meritless." Simon also said the probe "has become an unnecessary distraction" and that the company believes its time "is best spent focusing on providing the best shopping and working environment to the Woodbury Common community."
The settlement and the subsequent public relations battle provides a glimpse into the world of brass knuckle negotiations between retailers and owners of the country's most popular shopping locations. Retailers and owners of competitive shopping centers have long complained that owners of the top spots extract onerous lease terms for their choice real estate.
But landlords argue they're doing nothing wrong. "Simon has never sought to limit competition," the company's statement said.
One of the controversial lease terms -- the so-called "radius restriction" -- was at the heart of the attorney general's investigation. Generally, the provision prohibits tenants of a shopping center from opening shop within the specified radius.
The 60-mile radius provision had been in place since 1985, before Simon Property bought the outlet center as part of its 2004 acquisition of Chelsea Property Group.
Woodbury Common, an open air center with 240 stores across 910,000 square feet of retail space, generates more than $1.3 billion in annual sales and is a major tourist attraction. It includes tenants such as Kate Spade, Tory Burch and Gucci.
The attorney general's office said it investigated Simon because the mall owner allegedly had "monopoly power" in the outlet center space in the New York City area. Retailers at Woodbury Common were prevented from opening other outlet stores within a 60-mile radius with the threat of substantial penalty, the statement said, adding that several developers had attempted to develop outlet centers in New York City but were thwarted in signing up retailers due to the radius restrictions.
The settlement required revisions to existing leases that would now allow stores in Woodbury Common to open a second outlet store in Brooklyn, the Bronx, Queens and Staten Island. But Simon noted in its statement that lease provisions "will continue to cover Woodbury Common's essential trade area, extending to all of Manhattan."
Analysts said they don't expect the outlet center to face major competition from this settlement, noting that it takes time and expertise to build a successful shopping center.
"It's not the radius restrictions that make Woodbury Common. It's the lineup of tenants, sales productivity that makes a dominant mall dominant. It's pretty tough to replicate," said Alexander Goldfarb, a managing director at Sandler O'Neill + Partners.
But one potential competitor applauded the settlement "This is a huge win for New York City residents who have for years demanded easier access to affordable shopping," said Don Capoccia, principal of BFC Partners and developer of Empire Outlets, an outlet center currently under construction on Staten Island's North Shore.
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(END) Dow Jones Newswires
August 22, 2017 11:14 ET (15:14 GMT)