Saks Global and mall titan Simon Property Group have worked out a settlement to their dispute over leases for two stores, helping to pave the way for Saks Global, the luxury retail conglomerate, to emerge from bankruptcy.
The deal, filed for approval with a U.S. Bankruptcy Court judge in Houston, means that Saks Global will be able to keep open a Neiman Marcus location at Stanford Shopping Center in Palo Alto, California, and a Saks Off 5th store at Woodbury Commons Premium Outlets in Central Valley, New York. Simon Property, the landlord at those two shopping venues, since the start of the year has attempted to evict both the Neiman Marcus and the Saks Off 5th for being in arrears on their rent.
The settlement means that Indianapolis-based Simon won't have to litigate the matter, which could have delayed Saks Global's Chapter 11 process and imminent bankruptcy exit, Mark Weinsten, the retailer's chief restructuring officer, said in an affidavit.
Most of the terms of the settlement were redacted in court documents, but the agreement involves more than the Stanford Neiman Marcus and Woodbury Commons Saks Global stores. Overall, it includes some rent reductions and better lease terms for unidentified Saks Global locations.
Simon Property is the largest landlord that Saks Global — parent of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman — deals with. But their long-term relationship took a turn for the worse after Saks Global filed for bankruptcy in January, and Simon Property subsequently sought to terminate the company's Stanford and Woodbury Commons leases. Saks Global objected, in part arguing it hadn't been given adequate time or notice to make good on its owed rent payments.
Simon Property and Saks Global didn't respond to emails from CoStar News on Tuesday seeking comment.
As a result of the settlement, Sak Global will "continue to occupy many of their most lucrative stores, preserve a constructive go-forward relationship with [their] largest landlord," "provide materially improved lease terms for certain assumed properties" and be paid for certain lease terminations, according to Weinsten.
In exchange, Saks Global has "agreed to shorter terms at certain locations and to certain protections for Simon in the event of a future Chapter 11 case," he said.
The settlement agreement also allows a termination option at the Stanford location, "for which Simon would need to appropriately compensate" Saks Global, according to Weinsten.
As part of its bankruptcy, Saks Global is downsizing its store fleet, closing 18 Saks Fifth Avenue and three Neiman Marcus stores. It has also pulled the plug on nearly its entire off-price chain Saks Off 5th.