Tesla's closing of stores could actually get really expensive:
Tesla may face some stiff termination fees from malls and other landlords as it pursues a strategy outlined last week of shutting down many of its U.S. stores to cut costs and earn profits on a $35,000 electric car. Tesla plans to move to an online-only sales model.
“We believe Taubman’s Friday selloff, along with fellow A Mall REITs, is an overreaction to the headlines that Tesla may do away with their physical stores in favor of an online model,” wrote Alexander Goldfarb, a REIT analyst with Sandler O’Neill+ Partners in a client note on Monday. Goldfarb wrote that “retailers do not have a unilateral right to self-terminate” leases outside of bankruptcy. He noted that Simon won a settlement with Starbucks after the retailer shut its Teavana locations. Mall lease terms often run for 10 years. Goldfarb didn’t estimate the potential amount of lease termination fees.
Taubman has eight Tesla stores among its roughly 25 malls including one in its valuable and high-end Short Hills, NJ mall. Simon has 21 Tesla stores in its U.S. malls, which total around 120.
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