Maxfield: Unprecedented Times Call For Unrivaled Economic Compassion


City Creek Center has been closed for almost a moth. Opinion writer Lynda Maxfield asks why tenants still have to pay their full lease. (Courtesy Wikimedia Commons)

By Lynda Maxfield


City Creek Center first closed on March 12 for cleaning after mall officials learned that someone on the property had tested positive for COVID-19. On March 20, it was closed again and will remain shut down until the risks related to transmitting and catching the virus subside.

Five days after this announcement, merchants received notice from The Taubman Company that they are still required to make monthly rent payments despite the mall being closed. Taubman helped develop City Creek and still manages the mall — though The Church of Jesus Christ of Latter-day Saints owns the property.

In the impassive March 25 letter, Taubman ignored the acute financial crisis many of its merchants are facing. Instead of offering flexibility, creativity or compassion, the nationally operating company took the opportunity to reiterate expectations. Taubman may expect tenants “to meet their lease obligations,” but that doesn’t change the reality — these tenants are locked out by pandemic-related mall closures.


Humanitarian Aid Needed At Home

The church needs to intervene on behalf of City Creek Center tenants by advocating for them with Taubman. If legal agreements bar them from requiring Taubman to back down and waive all rents due during the COVID-19 closure, the church must consider taking steps to terminate their contract with the merciless leasing company.

While Taubman’s payment demands span malls across the nation, City Creek Center is a Utah concern. The church both owns the property and has the financial resources to act. It can buffer merchants from the immediate financial strains caused by this pandemic. Not only would stepping in be the right choice, failing to act will damage the church’s global brand, which centers, in part, on caring for the poor and needy.

To sit idly by, while a $2.87 billion company demands its lessees make uninterrupted rent payments on closed properties, is to neglect and abandon those in need. Such inaction will leave a lasting stain on our city. What is the point of having a $100 billion rainy day fund if not to employ it during this turbulent storm?


A Force Majeure Event?

A force majeure is a legal term that permits “a party to suspend or discontinue performance of its contractual obligations” under extraordinary, qualifying circumstances. Depending on a contract’s legal language, force majeure events may include pandemics and governmental acts or regulations — such as forced business closures.

Part of Taubman’s letter is indisputably accurate — we are clearly in “unprecedented times.” Who could have guessed that after closing down all but two malls, a financially buffered company would insist on taking money from its tenants, calling rents demands the “right decision for our shoppers, retailers, employees and these communities?”

Given merchants’ inability to operate and Taubman’s ability to seek grants and loans, these rent demands might be fairly labeled as stealing. The right decision would be to excuse lessee payments while malls remain closed.

By email, I asked Taubman’s City Creek Center leasing agent for information regarding force majeure clauses included within its contracts. Within twenty minutes came the “our contract terms with tenants are proprietary, so we will not comment on the specifics” reply.

“The tenant memo does not replace our willingness to talk to each tenant about their respective challenges and help them chart an appropriate course for the future,” said the email. “In fact, we’ve had numerous calls with our long-standing tenants and most fully understand our position as it is a challenging time for all involved. Naturally, the environment is much harder for smaller, less-established temporary occupants that may only be operating in one center.”

Taubman’s “willingness to talk” is a poor substitute for the essential economic give-and-take needed to weather this global crisis. Instead of being givers, they appear to be takers.


Federal Aid Limitations

Qualifying merchants can apply for both Economic Injury Disaster Loans and Paycheck Protection Program Loans. Either of these loans can be used towards rent. However, at least 75% of any PPP monies must go towards payroll-related costs. Only 25% of forgivable amounts may apply towards rent and other operating expenses. And, PPP loan forgiveness amounts are affected by any reductions in numbers of employees and decreased wages — over their 2019 salaries. However, businesses “cannot receive both the Employee Retention Payroll Tax Credit and a PPP loan.”

While it is helpful that businesses may apply for financial assistance to pay overhead costs related to an inoperable or semi-functioning business, aid amounts per company are limited, as are the total federal dollars available. Currently, sole proprietors and small businesses can apply for PPP, which sits at “$349 billion in forgivable loans.” Both self-employed workers and independent contractors can apply for loans as of April 10.


Pay Wages, Not Leases

Taubman’s rent demands prioritize their financial concerns over all others. Over 99% of all American companies (including Taubman) are small businesses with less than 500 employees — meaning Taubman can apply for federal relief instead of taking money from tenants.

While it is legal for Taubman to accept lease payments from companies using federal grants or loan money, it is also wrong. Prioritizing lease payments on empty buildings will create a trickle-down effect where small businesses will have less money to pay employees. These employees will have less money to buy food and pay for utilities, rent or mortgages on occupied residences.

A more reasonable approach would be for Taubman to pause its overhead costs by either accepting federal grant money directly or invoking force majeure clauses, temporarily excusing lending payment obligations.


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