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Neiman Marcus says Copley Place owner owes it $50 million for failed skyscraper plan

Neiman Marcus today sued Copley Place owner Simon Properties for the tens of millions of dollars it says it's owed for agreeing to move into cramped, inferior quarters to make way for a 52-story residential tower Simon planned to build, then abruptly canceled in 2016.

In a suit filed in Suffolk Superior Court, the retail chain says it's been forced to remain in the crappy space for more than six years now and that Simon lied when it said it canceled the proposal because it couldn't win approval from MassDOT for a project in the middle of what was once part of a turnpike exit, not because it couldn't make the finances work.

The difference could be critical to the suit, because Simon had promised Neiman Marcus $27 million to fit out its new space in the new tower - but with a clause that would let the mall owner void the contract if it couldn't win regulatory approval - Neiman Marcus claims.

In addition to wanting to be paid that money, Neiman Marcus claims it's also owed lost revenue from all the years it's been in its current space - and money it will no longer make in the larger spaces it had been promised once Simon sunk the support columns needed to hold up 542 residential units and built out the new space.

Neiman Marcus understood that contracting the store and placing it in a temporary, subpar condition would negatively impact sales and the customer experience, and would cause it to lose profits in the short term. Neiman Marcus, however, was willing to suffer this temporary negative impact in exchange for obtaining a larger, fully renovated store and new lease terms, which [Simon] promised to provide.

The retailer continued it's not its fault Simon couldn't judge the residential-skyscraper market correctly - and that Simon should be held to account for trying to weasel out of a deal it had signed just ten months earlier:

Simon Property's claim that it was unable to obtain all necessary approvals, however, was contradicted by its own statements made a week later. On October 26, 2016, SPG's Chief Executive Officer advised stock analysts, in an earnings call in which SPG was obligated by securities laws to provide materially accurate disclosures, that Simon Property would likely "postpone the construction of the Copley Residential Tower due to the rapidly rising construction cost and our beginning concerns around supply and demand in the Boston residential market" and that the Tower Project may be reinstated "as market conditions warrant." In explaining why Simon Property was considering postponement, he stressed that Simon Property "would encourage everybody to study what's going on in construction cost and what's going on in supply and demand there . . . the reality is when we started seeing the construction cost, it just – not the right time to do it, with all the supply and the cost there . . . . In the case of Copley, I got nervous about it. I'd be the first to admit." Rather than assert that Simon Property cancelled the Tower Project because it was "unable to obtain all necessary Approvals," he asserted that Simon Property would exercise "the right judgment . . . when to pull the plug on Copley and when not."

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Comments

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12

n/t

doesn't feel cramped to me. What I would have complained about was the smell of cheap fake-Parmesan cheese that wafted into the place from the nearby (now defunct) Au Bon Pain. That was gross.

If they lost a fair amount of floor space but don't want to change the experience of customers, they likely had to cut out certain areas and/or reduce the amount of space areas had, and therefore the variety of items offered. Less floor space means less revenue.

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37

For example primark which chopped off several floors and now tries to squish everything together in two

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10

because everything they sell is slim fit.

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23

Yeah what's up with that...

The whole point of that store was so it was huge and multi floor. Now its just two floors. It sucks.. for men's clothes. Its such an abysmal selection for men now.

Last time I went in there, I was so disappointed at how everything is so squished down now.

What are they going to do with the other floors? rent it as office/lab? (like everything else)

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12

It's how you use it, etc etc

floor space envy