A Study of Suburban Mall Redevelopment: the White Flint Mall

A year ago we reported on the planned redevelopment of the 37-year old, 850,000 square foot, indoor shopping mall in White Flint, Maryland. The mall’s planned redevelopment into a 5.2 million square foot, walkable, mixed-use destination with access to an existing station stop on the Metro’s Red Line appeared to be part of a trend of mall conversions in the DC metro area.

However, shortly after the entitlements process for the redevelopment got underway, White Flint, L.P., the owners of the White Flint Mall (“White Flint”), faced its first serious legal challenge: Lord & Taylor, an anchor tenant, filed suit in federal court and sought to block White Flint’s redevelopment plans. Lord & Taylor alleged that the mall redevelopment violated a reciprocal easement agreement among the mall owner and the White Flint Mall’s anchor tenants and sought an injunction that could block the mall redevelopment for decades. Since our post last summer, White Flint has received some initially favorable results in its challenge from Lord & Taylor and has faced down additional opposition from another tenant thanks to sophisticated lease provisions.

Injunction Denied, Redevelopment Plans Continuing, Lord & Taylor Now Seeks Damages

So far, White Flint has successfully fended off Lord & Taylor’s attempt to stop the mall conversion. In December 2013, a federal judge sided with White Flint and ordered a denial of Lord & Taylor’s request to halt demolition of the mall. Lord & Taylor subsequently appealed that order to the Fourth Circuit Court of Appeals, and with demolition of the mall underway, Lord & Taylor sought a temporary injunction pending appeal. In March 2014, in another win for White Flint, a panel of judges from the Fourth Circuit denied Lord & Taylor’s temporary injunction request. However, the matter of the denied permanent injunction remains before the Fourth Circuit. Following its unsuccessful attempt to halt the mall redevelopment via injunction, in May 2014, Lord & Taylor amended its complaint and seeks an unspecified amount in money damages.

Sophisticated Understanding of Lease Advances White Flint’s Plans Despite Tenant Opposition

White Flint’s redevelopment plans received a strong boost in July of this year when a dispute with a tenant revealed that landlord-favorable lease terms gave the landlord considerable flexibility. Following Lord & Taylor’s suit, Dave & Busters, another mall tenant opposing the redevelopment plans, sued White Flint, alleging that the redevelopment plans violated the lease between the mall owner and the arcade-themed restaurant. White Flint responded that Dave & Busters, which opened at the mall in 1995 under a 35-year lease term, was in violation of the so-called radius restriction clause of its lease. (A radius-restriction clause prevents a chain retailer or restaurant from opening another store within a certain distance.) When its plans for the redevelopment were coming together in 2012, White Flint pointed out to Dave & Busters that another Dave & Busters location had opened in 2006 within the restricted area and that as a result the tenant was in violation of its lease. This violation proved to be the leverage White Flint needed to get Dave & Busters out of its space so that the redevelopment could proceed. When Dave & Busters sued and argued that the redevelopment violated the lease, White Flint raised the radius restriction violation. A federal judge agreed with White Flint, and ordered Dave & Busters to vacate its space within 30 days.

The plans for the White Flint Mall are an example of a mall owner responding to the changing retail landscape. White Flint’s experience with Dave & Busters illustrates that a landlord can find leverage through careful scrutiny of seemingly unrelated landlord-favorable lease provisions. Understanding these key points of leverage with anchor tenants and in-line tenants may become an essential component of refreshing or redeveloping decades-old suburban single-use malls.

Related topics: Development, Real Estate, Retail