Saks Global, the luxury retail conglomerate, has resolved initial disputes with a number of mall owners over unpaid rent as part of its Chapter 11 bankruptcy case. But it's still butting heads with its biggest landlord, Simon Property Group.
Even so, the five-week-old proceeding is moving along for New York-based Saks Global — parent of Saks Fifth Avenue, Saks Off 5th, Neiman Marcus and Bergdorf Goodman. On Friday, it obtained final court approval to receive $1.75 billion in debtor-in-possession, or DIP, financing to continue operations during its restructuring process.
A number of Saks Global vendors, its investor Amazon and various landlords had initially objected to granting that financing. But at Friday's virtual court hearing, Saks Global attorney Debra Sinclair said that the vendors, Amazon and all but one of the retail firm's landlords had withdrawn their objections after negotiations.
Sinclair didn't identify that landlord at the proceeding, but in a dispute, Simon Property is seeking $7 million in back rent — for a Neiman Marcus in Palo Alto, California, and a Saks Off 5th at the Woodbury Commons Premium Outlets in Central Valley, New York — as well as trying to terminate those leases. Earlier in the week, Saks Global filed court documents opposing Simon Property's attempt to take over those spaces.
"Unfortunately, and notwithstanding a long-standing relationship with the global debtors, Simon has decided that it can make more money on certain of the leases by reletting them at higher rates."
Simon Property and Saks Global didn't respond to emails from CoStar News on Friday seeking comment.
Saks Global filed for bankruptcy protection last month roughly a year after taking on debt to acquire Neiman Marcus Group for $2.7 billion in December 2024. The repercussions have been rippling out ever since. Saks Global is closing nearly its entire off-price chain Saks Off 5th, eight Saks Fifth Avenue stores and one Neiman Marcus location.
Retailers that file for Chapter 11 typically engage in negotiations with their landlords, seeking to reject leases or obtain better terms, which is likely to happen with Saks Global.
Saks, Simon joint venture
That can be a complicated process, but the relationship between Saks Global and Simon Property is more entwined than just that.
The two companies are partners in a joint venture that owns a portfolio of Lord & Taylor stores, some of which are leased now years after that department store chain was liquidated. For example, the first location of Netflix House, the streaming giant's immersive entertainment-and-shopping venue, leases a former Lord & Taylor anchor space at the King of Prussia mall in Pennsylvania.
In two separate actions, Saks Global landlords asked the bankruptcy court to make sure they were paid "stub rent," or the pro-rated rent and related charges a tenant owes a landlord for the period between the date it files for bankruptcy and the end of that same month.
In one filing, landlords including Aventure Fashion Island, Brixmor Park Shore, GGP Retail, formerly known as Brookfield, and Regency Centers claimed that they are owned $19 million by Saks Global in lease obligations from Jan. 13, when the retail company filed for Chapter 11, and Jan. 31.
In a second, similar filing, landlords Centennial Real Estate Co., Macerich, Street Retail, Forbes Co. and Irvine Co. are seeking $5.8 million in the back stub rent for Saks Global stores for that same period of time, Jan. 13 through Jan. 31.
The DIP financing has been modified to address those concerns, so that landlords don't have to wait months to get that rent, according to Saks Global attorney Sinclair.
"We built in the payment of sub rent within 10 business days after entry of the final DIP order," she told the court. "We've also resolved the objections I believe of all but one of the landlords that are on the docket. ... All post-petition rent payment are otherwise accounted for in the DIP budget, and we have been making them in the ordinary course and will continue to do so."
Battle over two stores
At the end of the hearing, Bankruptcy Judge Alfredo Perez, based in Houston, expressed satisfaction with the nailing down of the final DIP order.
"It seems that we've gotten a solution that resolves 97, 98% of the issues," he said.
But Saks Global and Simon Property's dispute over the two stores where the landlord is trying to terminate leases is not settled. In its filing this week, Saks Global voiced its objection that the landlord was seeking to kick it out of its properties in New York and California.
"Unfortunately, and notwithstanding a long-standing relationship with the global debtors, Simon has decided that it can make more money on certain of the leases by reletting them at higher rates," Saks Global said in court documents.
Saks Global claims if it is forced out of those locations, it won't have the option of selling those leases to help repay its creditors.
Simon Property invested $100 million and Amazon invested $475 million to help fund the Neiman Marcus deal, which created Saks Global. The real estate investment trust wrote off that $100 million on the fourth quarter, Chairman and CEO David Simon said on an earnings call this month.
He added that the investment was worth it because Simon Property had gained lease and property rights from Saks Global.
"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. "And so, we got the right to terminate two leases. We got two buildings."
At a court hearing last month, Amazon threatened to block the DIP financing, saying its investment in Saks Global was essentially worthless now because of the bankruptcy. But the e-commerce giant is onboard with the DIP financing now, according to Sinclair.
"Amazon is no longer pursuing an objection to the DIP," she said.
Amazon didn't return an email from CoStar News seeking comment Friday.