Gap suspends rent payments for closed stores
Rent payments for closed North American stores total $115 million a month
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Gap Inc. said, beginning in April, it suspended rent payments under the leases for stores temporarily closed due to the Covid-19 pandemic.
In a Securities and Exchange Commission filing, the retailer said, in response to the pandemic, it has temporarily closed its North American retail stores and a significant number of stores globally.
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The company said it suspended rent payments under the leases for these stores, which are about $115 million per month in North America.
The company said it is currently negotiating with the counterparties under those leases to defer or abate the rent during the closures, modify the terms of leases going forward after the stores reopen, or in some cases terminate the leases and permanently close some of the stores.
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Gap said if it is unable to renegotiate the leases and continue to suspend rent payments, the landlords under a majority of the leases in the U.S. could allege the company is in default under the leases and attempt to terminate the lease and accelerate future rents due.
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"Although we believe that strong legal grounds exist to support our claim that under common law we are not obligated to pay rent for the stores that have been closed because of the governmental and public health authority orders, mandates, guidelines and recommendations, there can be no assurance that such arguments will succeed and any dispute under these leases may result in litigation with the respective landlord, and any such dispute could be costly and have an uncertain outcome," the company said in the filing.