Starbucks Denied Consent to Close Teavana Locations in Simon Property Group Malls

Teavana

Starbucks (NASDAQ:SBUX) has been denied permission to close its Teavana stores in any Simon Property Group (NYSE:SPG) malls. The mall operator claims that this would hurt its business too much, and the judge agreed.

If Starbucks were to close its Teavana locations, which would have been closed before the leases were even up, Simon would have to find other tenants who would “only agree to less desirable lease terms, and/or a shorter-term lease.”

Starbucks had been planning on closing its 379 Teavana stores, due to the fact that they “have been persistently underperforming.” The company was able to do so in other businesses where the Teavana stores were located, but at a cost of a $153 million impairment charge. That put Starbucks at a $38 million loss for the year.

The Teavana closures would have cost Simon Property Group $15 million in lost rent. Despite the fact that this is lower than the amount Starbucks would have lost had it been able to go through with the closures, it was decided that Starbucks could better absorb the costs than Simon. Starbucks was therefore denied consent by the judge to close the 77 locations in question.

This could have a massive impact on the brick-and-mortar retail industry, with other mall operators potentially using the ruling to prevent other tenants from closing locations they can’t afford to keep open.

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