A collection of some of the country’s most recognizable retail brands have taken to court the company that owns and operates Water Tower Place, as well as a host of other shopping malls and retail centers throughout the country, accusing Brookfield Properties of improperly refusing to give the retailers a break on their rent amid government-ordered closures in response to the COVID-19 pandemic.
The retailers are asking for repayment of their rent, and a court order either rewriting or canceling their leases outright due to the rapid changes in the retail landscape wrought by COVID-19.
On July 16, The Gap Inc., Athleta LLC, Banana Republic LLC, Janie & Jack LLC and Old Navy LLC filed suit in Cook County Circuit Court against Brookfield Properties Retail Inc., a company that operates and manages the malls and other retail properties held by affiliates of Brookfield Property Partners.
According to its website, Brookfield Properties operates more than 170 retail locations in 43 states. In all, the website says Brookfield holds more than 150 million square feet of retail space.
In Illinois, the holdings include Water Tower Place along Chicago’s Magnificent Mile, as well as other retail properties on Michigan Avenue and properties in Northbrook, Oak Brook, Willowbrook, West Dundee and Champaign, among others.
The complaint centers on leases held by the retailer plaintiffs at 84 properties operated by Brookfield.
The lawsuit takes aim at what the retailers said is the unwillingness of Brookfield Properties to consider the retailers’ requests for leniency in the face of the spread of the novel coronavirus that causes COVID-19, and the heavy-handed state and local government response to the illness.
“In a world of unforeseeable events, the circumstances the subject stores have faced are at the extreme end of unforeseeability,” the complaint said.
In their complaint, the retailers assert the “extreme” and “unforeseeable” responses to COVID-19, which included store closures across the country for months, left the retailers with empty pockets.
“State and local governments’ reactions have been profound, varied, and constantly evolving, and prevented Tenants from opening their doors for months,” the retailers wrote in their complaint. “To protect the health and safety of their employees, customers, and the surrounding communities, and comply with applicable law, Tenants have been required to close their stores and keep them closed for extended periods of time.
“And like innumerable other companies, they were required to make the difficult decision to furlough tens of thousands of store employees for closed stores across the country to preserve their finances while revenue from the stores dropped to zero overnight.”
They claim the circumstances have fundamentally altered the terms of their leases. They said the rent they pay assures them the opportunity to “operate a store” in the malls.
However, even as the country reorients itself after the spring store closures, the shape of retail will “radically change … for a long time to come,” leaving retailers unsure of the continued viability of their presence within the shopping malls that heavily rely on foot traffic and crowds.
The changed landscape, the retailers said, has “frustrated the express purposes of these leases and made their principal object illegal, impossible and inapplicable, all for a period of time that remains unknown and unknowable.”
The retailers said this invalidates their obligation to pay rent for the time their stores remained closed, either by governors’ edicts, or by choice, to help reduce the spread of the new disease.
The retailers said they are asking the court to redetermine their “rights and obligations” under the leases amid the new circumstances, and a court order restricting the leases and ordering the landlords to refund the rent the retailers may have paid during or immediately before the COVID closures.
The retailers are represented by attorneys Charles A. Valente and Isaiah A. Fishman, of Kaplan Saunders Valente & Beninati LLP, of Chicago.