Simon Property Group has found an upside in Saks Global's bankruptcy, saying it expects to collect significantly more in rent from tenants who will fill space in closed Saks Off 5th stores. And there's another potential bright spot: The mall owner's $100 million investment in the luxury giant in 2024 gave it control of real estate that's in short supply.
The Indianapolis-based real estate investment trust, the largest U.S. mall owner, is dealing with bankruptcies and store closings from some of its tenants but said there's a lack of available retail space across the nation.
David Simon, chairman and CEO of Simon Property, told Wall Street analysts during its fourth-quarter earnings call that the REIT is benefitting from Saks Global closing most of its Saks Off 5th discount stores to focus on its luxury segment.
Saks Global, the parent company of Saks Off 5th, Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, filed for Chapter 11 bankruptcy protection last month. Saks Off 5th was paying Simon Property about $18 million in annual rent and so far the landlord believes it can get $30 million through leases with new tenants for just half of the discount chain's closed stores in the REIT's portfolio, CEO Simon said.
"Those are deals we are highly confident on," Simon said.
Like other retail landlords, Simon Property has to deal with the aftermath of retail bankruptcies and store closings that kicked off the new year. Those included not only Saks Global but Amazon Fresh, Francesca's, Allbirds and Eddie Bauer. Simon pointed out that the REIT was previously able to increase rents when it found new tenants for Forever 21 stores after the chain went out of business.
Simon seeks 'more productive retailers'
"The retailers that don't make it, even though I could sit here and blame tariffs, they're not highly productive retailers," Simon said. "And given that, it's our view that we can replace them with more productive retailers and higher rents."
In December 2024, Simon Property contributed $100 million to help fund Saks' $2.7 billion acquisition of its luxury rival Neiman Marcus. That merger created a new entity, Saks Global. In the fourth quarter, Simon Property took a write-off on that $100 million investment. Despite that, Simon said it benefited from the lease and property rights the REIT had received as part of spending the $100 million.
"We decided we weren’t just going to make that investment unless we got compensated for it, so in case it blew up, we would be whole," Simon said during the earnings call.
"And so, we got the right to terminate two leases," he said. "We got two buildings. And very importantly ... throughout our whole entire portfolio with Saks and Neiman and Off 5th, we got the right to build what we want so we don’t have to go get their approval."
Simon didn't provide details on the two terminated leases. But they appear to be for a Neiman Marcus store at the Stanford Shopping Center in Palo Alto, California, and a Saks Off 5th location at Woodbury Common Premium Outlets in Central Valley, New York. Last month, Simon Property asked the bankruptcy court handling Saks Global's Chapter 11 case to terminate those leases claiming the tenants were in arrears in their rent.
The two stores Simon Property recaptured are at the South Shore Mall in Bay Shore, New York, and the Burlington Mall in Burlington, Massachusetts, according to CEO Simon. He didn't specify what stores he was referencing, but Saks Global has filed court documents seeking to reject leases for vacant Lord & Taylor stores at those two properties.
Saks Global declined to comment on what it described as ongoing discussions when reached by CoStar News on Tuesday. Simon Property didn't immediately respond to emails from CoStar News seeking a comment.
'Plenty of upside'
Piper Sandler, citing in an investor note the benefits Simon Property reaped, said the landlord's "rigor in spending shareholder capital is evident" in its investment in Saks Global.
"Thus, $100 million looks to have acquired plenty of upside," Piper Sandler said. It also estimated that so far, there is a roughly 50% uptick in rents from the tenants set to occupy Saks Off 5th space at properties owned by Simon Property.
By contrast, e-commerce giant Amazon has expressed dismay about the $475 million it put toward the $2.7 billion Saks-Neiman Marcus deal.
"That equity investment is now presumptively worthless after Saks continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year, and ran up additional hundreds of millions of dollars in unpaid invoices owed to its retail partners," Amazon said in court documents.
Occupancy at Simon Property's U.S. malls and premium outlet centers was 96.4% at the end of 2025 compared to 96.5% in the prior-year period, according to the REIT's earnings report.
Simon Property reported that its base minimum rent per square foot was $60.97 for its U.S. malls and premium outlets in December, up 4.7% from 2024. Simon Property owns or has an interest in 254 properties with 206 million square feet in North America, Asia and Europe.