Macy’s, Nordstrom ask Palm Beach Gardens to reverse sublease rule

Amid Sears’ long-running battle with The Gardens Mall and the city of Palm Beach Gardens, two other department store chains are asking the city council to revoke a rule requiring public approval of subleases.

The back story: Sears wants to sublease the second floor of its space at The Gardens Mall to Dick’s Sporting Goods. The mall’s owner declined. The city council sided with the landlord, passing a resolution requiring mall anchors to win approval for subleases from both the landlord and the city.

In a letter this week to city officials, Macy’s and Bloomingdale’s Vice President Charles DiGiovanna and Nordstrom Vice President John Dolson asked the city to revoke the rule, enacted in 2012.

“This resolution is bad public policy because it retroactively invalidates commercial contractual matters that were negotiated at arms-length by sophisticated parties,” the letter says.

It’s just the latest salvo in a long-running battle at the 1.4 million-square-foot mall, one that’s playing out against a larger backdrop of a shifting retail landscape that’s squeezing mall anchors.

Cincinnati-based Macy’s, which also owns the Bloomingdale’s chain, has a particularly large stake in this fight. In response to shrinking sales, the merchant has been shuttering stores, including the one at CityPlace in West Palm Beach.

At Gardens Mall, Macy’s operates massive stores built for the pre-Amazon era. The Macy’s location at Gardens Mall encompasses a cavernous 342,450 square feet, according to property records. The Bloomie‘s space is 228,084 square feet.

In their letter, the retailers don’t mention the retail industry’s struggles or hint at any plans to market their space. Instead, they focus on what they consider government overreach into private relationships.

“Any retailer, or any other business for that matter, should be concerned about doing business in Palm Beach Gardens,” the letter says. “This is not the way to attract business and revenue to the city of Palm Beach Gardens and does a disservice to both the city’s business community and its citizens.”

UPDATE: In a response to the retailers, City Attorney Max Lohman wrote that Palm Beach Gardens’ resolution has been upheld in court, and he said the 2012 resolution “does not address subleasing.” Lohman also disputed the merchants’ assertion that they weren’t allowed to weigh in on the matter before it passed.

Sears, a struggling merchant saddled with too much space in malls, has launched a nationwide strategy to sublease space at its big department stores. In malls across the country, Sears has found other companies, such as Dick’s, the big-box sporting goods retailer, eager to sublease space at its prime mall locations.

Sears hoped to do the same in Palm Beach Gardens, but its landlord, Forbes/Cohen Florida Properties LP, declined. Sears sued, and last summer a judge ruled against the retailer.

Now the fight has shifted to an appellate court, to the state House of Representatives and to the ballot box for the March 14 City Council election.

Sears says its leases give it the right to sublease its space. In 2014, Sears tried to beat Forbes through the courts. The retailer sued the mall (and later the city) to win the right to do the Dick’s second-floor sublease.

But a Palm Beach County Circuit Court judge ruled against Sears in June in a complete victory for both the mall owner and the city. After the judge ruled against Sears last year, the company appealed the decision. On April 25, the 4th District Court of Appeal will hear oral arguments.

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