Mall of America has lost its attempt to have the U.S. Supreme Court scrap a $10-a-year Sears lease at the massive Minnesota retail center.
The nation's highest court opted not to hear a case brought by property owner Triple Five Group, identified as MOAC Mall Holdings in the legal action. The landlord was seeking to have the Supreme Court reverse a ruling by the Second Circuit Court of Appeals in December that let the 100-year-long lease stand, with a liquidating trust for Sears retaining ownership of it.
There has been roughly five years of litigation over the lease for the former Sears anchor at Mall of America at 60 E. Broadway in Bloomington, Minnesota. The case was sparked by, and complicated by, Sears filing for bankruptcy in 2018. The lease was signed in 1991, when Sears was given discounted rent because it was then a powerhouse department store chain that would draw foot traffic to the mall. The property at the center of the controversy is about 160,000 square feet and three stories tall.
The dispute represents a now-bygone era when department store anchors were crucial to a mall's success.
"In the 1970s and 1980s, mall developers gave super-cheap and sometimes rent-free leases to department stores for several reasons," Rudy Milian, president and CEO of retail consultant Woodcliff Realty Advisors, said in an email to CoStar News.
"Mall of America opened in 1992 with Nordstrom, Macy's, Bloomingdale's and Sears, which was a coup for Melvin Simon and Associates, a predecessor of Simon Property Group, who together with Triple Five Group developed the gigantic mall," Milian said.
He said "Simon had the U.S. department store and U.S. specialty store expertise and connections, and Triple Five had the entertainment expertise, which back then was in its infancy in the U.S. For them to bring in unique and powerful department stores that were not already at Southdale Center, the nearest competition, was a feat back then. Southdale then had Marshall Field's, Carson Pirie Scott and J.C. Penney."
After the Sears Chapter 11 filing, former Sears Holdings Chairman Eddie Lampert and his fund ESL Investments acquired the retailer's assets for $5.2 billion in 2019. A new company, Transform Holdco, was created for the real estate.
That company got the lease for the vacant Sears at Mall of America as part of the deal. Mall of America appealed the lease transfer, leading to the case going before various courts that sometimes sided with Transform and the Sears liquidating trust and other times coming down in favor of the mall.
Attorneys representing Transform, the liquidating trustee and Mall of America didn't respond to emails from CoStar News seeking comment Tuesday, nor did officials at the mall itself or Transform.