Bal Harbour Shops to Saks: Pay Up or Get Out

Bal Harbour Shops is seeking to evict Saks Fifth Avenue due to “extensive arrearages,” including overdue rent, according to the luxury shopping center.

WWD has learned that a lawsuit against Saks was filed on Monday afternoon in the 11th Judicial Circuit Court of Miami Dade County, seeking to terminate the lease and evict the store.

The complaint indicates that Saks owes about $1.9 million, which includes rents for January, February and March; a percentage of sales for the first quarter of 2020, which was due in April, as well as charges, including common area maintenance and marketing.

Saks paid common area charges in January, February and March, but stopped paying them starting in April. Saks, according to Bal Harbour Shops, didn’t pay percentage rent at all this year. A notice of default was dated July 8, which covers the first quarter only.

“Saks’ extensive arrearages include long overdue rent that accrued pre-COVID-19 as well as percentage rent on sales that occurred after Saks reopened for business after the lifting of closure orders from county and municipal governments. Yet, despite being given months to honor its past due rental obligations and despite Saks’ impressive post-COVID-19 sales at Bal Harbour Shops, Saks steadfastly refused to make any effort to pay any part of its rent,” said Matthew Whitman Lazenby, president and chief executive officer of Bal Harbour Shops.

“Bal Harbour Shops has worked tirelessly to ensure our business and our tenants can survive and thrive in this environment,” Lazenby added. “Regrettably, this injudicious behavior has left us with no other option than to terminate the Saks lease and sue to evict Saks from Bal Harbour Shops.”

However, in response to the lawsuit, a Saks spokesperson, said, “The landlord was not willing to work with us on expenses when the mall was closed during the pandemic. We’ve tried very hard to come to an agreement and if it needs to be determined by arbitration then we’ll be satisfied with that conclusion. During this pandemic period, tenants and landlords will need to work together to come up with reasonable solutions.”

Bal Harbour Shops, among the nation’s most luxurious and productive shopping centers, temporarily shut down in mid-March due to the pandemic but reopened on May 16. Situated in north Miami at 9700 Collins Avenue, its tropical, open-air setting and outdoor dining are considered safer environments than enclosed malls with indoor dining.

“It’s a happy place of refuge,” said the ceo. “The emotional connection this property creates with our customers has been amplified” during the pandemic. “We have certainly benefited from a public health perspective. Some tenants did 50, 60, 70 percent more business this July than July last year; some tenants did less business. Restaurants generally speaking are doing well, and I think the traffic-generating aspects of department stores are still important in markets where they have been operating successfully.”

Lazenby said when the shopping center was closed, Saks conducted some business through curbside pickups. More significantly, “Post opening, sales at Saks have been strong,” he said.

This isn’t the first time Saks and Bal Harbour Shops have locked horns. Three years ago, Saks threatened to vacate due to concerns over the shopping center’s expansion plans. The center secured a $550 million loan from MetLife Investment Management for its largest expansion project yet so it could add at least 241,600 square feet of retail space, bringing the center to 716,000 square feet.

Saks at one time planned to relocate its existing 120,000-square-foot store to a 180,000-square-foot space in the expansion. “We had long conversations with Saks about what they wanted to do,” said Lazenby. “Ultimately, they [decided] not to grow, but instead to renovate their store. They thought that the best future for them was to stay in their existing space.”

For Saks Fifth Avenue, southern Florida is a key region. It’s performed well with snowbirds from the north, overseas tourists, particularly from Latin America, and affluent residents.

The retailer may be less dependent on its Bal Harbour location since opening a 106,000-square-foot unit in Brickell City Centre in downtown Miami in the fall of 2016. The two stores are 9.4 miles apart. The Whitman family has a minority stake in the retail component of Brickell.

However, Saks has been investing in renovations at its Bal Harbour store, signaling that the site is still a winner.

Elsewhere in Florida, Saks has stores in Miami’s Dadeland Mall, Boca Raton, Palm Beach, Palm Beach Gardens, Sarasota and Naples.

“We always understood that Saks in Bal Harbour Shops has been among their top five stores,” said Lazenby.

Saks opened at Bal Harbour Shops in 1976, becoming the center’s second anchor tenant, following Neiman Marcus, which opened there five years before.

According to Lazenby, the last payment received by Saks covered charges prior to the center closing temporarily in mid-March, not rent or percent sales.

“Saks is one of about 110 tenants here,” said Lazenby. “Each has been impacted by COVID-19, but we worked out some kind of solutions with them, not always perfect. Only a handful have taken a very firm position — not paying anything at all. Unfortunately, Saks took that position.

“We would like to believe that they will cure it. We gave them months to cure it, but they took a firm position of not paying anything,” Lazenby added. “I am hopeful this is a temporary blip and that Saks comes due on its rent and we all live happily ever after. If that doesn’t happen, we are prepared to pivot and come up with a plan that’s just as good, if not better.”

Florida law requires that when there is an eviction proceeding, the past due rent needs to be paid to the court registry until the case is adjudicated.

Bal Harbour Shops has been able to continue with construction for the expansion during the health crisis because Dade County deemed construction to be essential. But some of the required city and county reviews of construction jobs for the project have been delayed by the pandemic. “We’re ahead on early phases of the expansion, and behind on phases being planned,” explained Lazenby.

The ceo said a new entrance on the north side of the shopping center is expected to be completed in September. Construction of a garage on the south side will follow and require about a year to complete. Then the old garage will be demolished to make way for where the expansion goes up. It’s expected to be ready to take in tenants toward the end of the first quarter or beginning of the second quarter of 2024.

Barneys New York was intending to open a three-level, 53,000-square-foot store in the new wing, but the luxury store went bankrupt and was liquidated. Bal Harbour Shops expects to largely fill that void with restaurants and by relocating certain designer shops to larger spaces.

Lazenby’s grandfather, the late Stanley Whitman, founded Bal Harbour Shops in 1965 as the first all-luxury fashion center in America. Whitman was also the first to land Neiman’s and Saks in the same center. Previously, the retailers had a gentleman’s agreement not to situate in the same center. Whitman’s resolve to also lure designer boutiques that previously could only be found along the Champs-Elysées in Paris or on New York City’s Fifth Avenue was also a factor in the center’s success.

“Bal Harbour Shops values its long-standing relationships with the businesses, large and small, that tenant its buildings,” said Lazenby. “The unprecedented effects of COVID-19 have severely impacted us and each of our stores — and we have worked in good faith to help where and as we can — as we really are all in this together. But through this, three distinct groups of tenants have emerged: those that honor their obligations to the best of their ability and then ask for help after doing so, those that engage in productive discussions and then faithfully honor their revised obligations, and those that make a choice — often driven not by necessity but by a carefully calculated strategy — to intentionally default on their lease commitments and to seek to use the pandemic as a convenient excuse to evade their financial obligations. Regrettably, Saks Fifth Avenue seems to be such a tenant.”

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