Retail landlord Simon Properties and luxury retailer Saks Global on Monday wrangled over the wording of a 2024 investment agreement as they asked a Texas bankruptcy judge to determine the fate of the leases of two Saks locations.

Counsel for the parties made their closing arguments to U.S. Bankruptcy Judge Alfredo R. Perez after three days of hearings on Simon's request for a ruling that it can terminate the leases without the notice periods in the leases themselves.

The parties are disputing whether a letter agreement Simon and Saks entered into when Simon invested $100 million in Saks in 2024 allows Simon to terminate the leases of a Saks location in Woodbury, New York, and a Neiman Marcus store in Palo Alto, California, effective Jan. 8, six days before Saks declared bankruptcy and a stay on contract terminations went into effect.

Both parties acknowledged that the agreement granted Simon the right to terminate the Palo Alto lease and one other lease for "failure to perform" on either lease and that Saks had overdue lease payments, but they disagreed on whether the letter overrode notice of default and cure period provisions in the leases that would have given Saks 30 days from its Jan. 8 notice to make up the payments.

At Monday's hearing, Simon counsel Robert Velevis argued the default provisions in the leases were not relevant, saying the agreement specifically allowed termination for "failure to perform" and not "default."

"The letter agreement does not give a cure period," it said.

Saks counsel Allyson Smith argued the letter agreement doesn't define "failure to perform" but the leases do, and that definition includes cure rights. The sole purpose of the clause in the letter agreement was to give Simon the right to terminate the leases for a default on a different lease, she argued.

She also argued calling a default on the leases was a break with the parties' standard relationship. She said Simon had always accepted late payments, for example when Saks disputed a particular charge and delayed payment until the dispute was reconciled.

"There has always been an amount technically outstanding," she said.

Velevis argued this only meant that Simon had the right to terminate the leases anytime after the agreement was signed, and only invoked it now for "its own reasons."

Smith claimed Simon learned of Saks' plans to file and "manufactured a default" in order to seize the leases and prevent Saks from selling them in its Chapter 11.

Judge Perez reserved decisions on the issue.

Simon Property Group is represented by Duston K. McFaul, Robert S. Velevis, Jeri Leigh Miller and Maegan Quejada of Sidley Austin LLP.

Saks is represented by Kelli S. Norfleet, Kenric D. Kattner, Arsalan Muhammad, Kourtney P. Lyda and David Trausch of Haynes Boone and Debra M. Sinclair, Robin Spigel, Allyson B. Smith, Betsy L. Feldman, Jessica D. Graber, Jennifer J. Hardy, Ryan B. Bennett, Stuart R. Lombardi and Nathaniel G. Ward of Willkie Farr & Gallagher LLP.

The case is In re: Saks Global Enterprises LLC et al., case number 4:26-bk-90103, in the U.S. Bankruptcy Court for the Southern District of Texas.