One of the nation’s largest mall owners is instructing its tenants to make their rent payments even though their malls are closed due to the coronavirus pandemic.
A letter sent to Taubman Centers nationwide and obtained by USA TODAY shows the company’s directive to its tenants to make their payments on time.
“Landlord’s obligation to pay its lenders, utility companies, insurance companies and the like, to ensure the safety and security of the building and maintain the appropriate level of operations, remains,” Taubman told tenants in the letter. “The rental income that we receive from Tenants is essential in order to meet these obligations. All Tenants will be expected to meet their Lease obligations.”
The company said in the letter that it had received “numerous inquiries” from tenants regarding potential rent relief.
With 15.8 million square feet of space, Taubman Centers is the 16th largest mall property owner in the country, according to real estate data source CoStar Group.
Taubman spokesperson Maria Mainville confirmed the authenticity of the letter and defended the company’s decision to send it.
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“We understand that these challenging times are going to be hard for some tenants,” Mainville said in an email. “We are attempting to navigate through this situation in the best way we can, while being as flexible as we can with our tenants in light of our ongoing obligations. The tenant memo does not replace our willingness to talk to each tenant about their respective challenges and help them chart an appropriate course for the future.”
Taubman’s move comes amid a brewing showdown between retail tenants and property landlords throughout the country, both of which are facing significant economic losses amid widespread shutdowns connected to the impact of COVID-19.
The Cheesecake Factory, which has 294 restaurants in the U.S. and Canada, said this week that it won’t pay make rent payments due April 1.
“We have very strong, longstanding relationships with our landlords,” The Cheesecake Factory said in a statement. “We are certain that with their partnership, we will be able to work together to weather this storm in the appropriate manner.”
Alex Victor, partner in the hospitality and restaurant group at law firm Davidoff Hutcher & Citron, said the “force majeure” clause in leases between retailers and landlords typically includes provisions that would suspend rent payments in the event of an “act of God,” terrorism or a government shutdown.
But he said it’s unclear whether a global pandemic qualifies as an event that would suspend payments under most leases.
“Most leases are going to say the requirement to pay rent is absolute and independent of all the other covenants,” he said. But tenants “might say, well, because of this whole thing, it’s made it impossible for me to conduct my business.”
In Taubman’s case, the company has temporarily closed most of its malls through at least March 29.
The company’s nearly two dozen properties malls include the Beverly Center in Los Angeles, the Cherry Creek Shopping Center in Denver, the Dolphin Mall in Miami, Twelve Oaks Mall in Novi, Michigan, and Fair Oaks Mall in Fairfax, Virginia.
Bloomfield Hills, Michigan-based Taubman announced in February that it had agreed to sell itself to Indianapolis-based Simon Property Group in a deal expected to close later this year.
Simon Property Group – the nation’s second-largest mall property owner, according to CoStar – did not respond to a request seeking comment Friday.
Victor, the hospitality group lawyer, said he expects a flurry of lawsuits over missed rental payments due April 1.
“But the courts aren’t even open to address those claims, so it behooves everybody to try to work something out,” he said.
In future leases, he said, he expects retail tenants to demand that their contracts release them from paying rent when a pandemic occurs.
“I’m sure going forward, pandemics are going to be included,” he said.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.