Mall owner Simon Property Group backed out of a deal to buy rival Taubman Centers for $3.6 billion, citing the fallout from the global coronavirus pandemic.
Indianapolis-based Simon said in a statement Wednesday that it was exercising its contractual right to terminate the merger agreement, which “specifically gave Simon the right to terminate the transaction in the event that a pandemic disproportionately hurt Taubman.”
In February, Simon announced that it had agreed to purchase an 80 percent interest in Taubman’s 26-mall portfolio which includes properties like the Beverly Center in Los Angeles. Back then, the move was lauded as timed to perfection, as Commercial Observer reported. In March, those centers, along with most malls across the country, including Simon’s own centers, were closed per government mandate in order to slow the spread of the coronavirus.
“Taubman’s significant proportion of enclosed retail properties located in densely populated major metropolitan areas, dependence on both domestic and international tourism at many of its properties, and its focus on high-end shopping have combined to impact Taubman’s business disproportionately due to the COVID-19 pandemic when compared to the rest of the retail real estate industry,” the Simon statement said.
Simon also filed a complaint against Taubman in a Michigan court requesting a declaration that Taubman had suffered a “material adverse event”, and that Taubman had breached its contract by closing its malls and failing to properly mitigate the effects of the coronavirus pandemic, per its statement.
Several similar cases, where a deal has fallen through because of pandemic-impacted performance, are currently moving through the courts, which have yet to rule on whether claims of breach of contract are valid under the circumstances.