This obscure legal clause is holding back US malls. Simon Property Group got Saks Global to forfeit it.

Core Viewpoint - The ongoing decline of department stores is impacting the retail model that malls have relied on for decades, as evidenced by Saks Global's bankruptcy and the challenges faced by Simon Property Group in managing its investments and properties [15]. Group 1: Investment and Financial Implications - Simon Property Group has a significant portfolio, with 57 malls housing Saks Fifth Avenue and Neiman Marcus stores, and Saks Global is a tenant at 75 Simon locations [2]. - The company made a $100 million investment in Saks Global to facilitate the acquisition of Neiman Marcus, which has led to a write-off of that investment following Saks Global's bankruptcy [3][4]. - The cost of waiving reciprocal easement agreements (REAs) at 57 malls amounts to under $2 million per mall, which is considered a bargain given the historical difficulty of altering such agreements [11]. Group 2: Legal and Operational Challenges - REAs and covenants from the mid-20th century grant anchor tenants veto power over renovations, hindering necessary updates to malls [5][7]. - Simon Property Group has managed to eliminate these legal provisions at nearly 60 shopping centers, allowing for more flexibility in property management [6]. - The negotiations to alter REAs are complex and often painful, with retailers reluctant to give up their leverage in negotiations [10]. Group 3: Market Trends and Future Outlook - The decline of department stores, as illustrated by Saks Global's situation, poses a significant challenge for Simon Property Group and the broader retail landscape [15]. - The ability to negotiate waivers of REA rights is seen as valuable, but the reluctance of department stores to forfeit their advantages complicates the situation [9][12]. - The ongoing issues with Saks Global's leases and intellectual property rights may lead to further legal disputes, indicating potential instability in the partnership [14].