"Wave of retail bankruptcies may sink landlords" by Katherine Doherty and Jeremy Hill Bloomberg News, August 6, 2020
With the pandemic intensifying the plight of US retailers, companies from J. Crew to the owner of Ann Taylor are using Chapter 11 bankruptcy filings to quickly get out of costly, long-term leases and shutter thousands of stores.
By seeking court protection, firms like Neiman Marcus and the parent company of Men’s Wearhouse avoid the headache of protracted negotiations with individual landlords, but the moves threaten to upend huge swaths of the real estate market and the half-trillion dollar market for commercial mortgage-backed securities.
“This is now black-letter law — a debtor can cram down a landlord,” said Melanie Cyganowski, a former bankruptcy judge who’s now a partner at law firm Otterbourg PC. “If this becomes a tsunami of retailers rejecting their leases, it’s going to trigger another part of the sea change — the mortgages held by the landlords.”
As bankrupt firms like J.C. Penney and Brooks Brothers look to jettison leases, landlords are already feeling the consequences. At least 25 major retailers have filed for bankruptcy this year, according to data compiled by Bloomberg.
The most recent additions include Tailored Brands Inc., owner of Men’s Wearhouse and Jos. A. Bank, which is seeking to close about a third of its more than 1,200 stores, and Lord & Taylor parent company Le Tote, which said it could shut down all of the department store’s remaining locations.
“It’s economical, it’s efficient, and it allows retailers to rationalize their footprint quickly,” said Fred Ringel, co-chair of the business finance and restructuring practice at the law firm Robinson Brog Leinwand Greene Genovese & Gluck P.C. Ringel, who works for landlords, said he’s busier than ever renegotiating leases and in some cases persuading tenants to forgo cancellations and stay under modified terms.
Take vitamin retailer GNC Holdings Inc. It operates hundreds of stores across the country, mostly in strip malls. Since filing for bankruptcy in June, GNC has asked to reject at least 500 leases, along with more than 50 franchise agreements and subleases, according to court records.
Meanwhile, CEC Entertainment Inc., the parent company of Chuck E. Cheese, is negotiating with its landlords after its June bankruptcy filing. It won court approval this week to defer rent payments as it evaluates which locations it wants to keep open, and the US unit of Spanish retailer Desigual said it was forced to file after struggling to get rent abatements from its landlords. “Unfortunately, DUSA had little success in getting landlords to realize the new reality that most tenants — especially those in retail — cannot afford to pay pre-COVID-19 rent,” a representative for the firm said in court papers.
Landlords, in turn, have their own mortgages to worry about, which were also underwritten with pre-pandemic assumptions about rent collections. Amid the stress, Barry Sternlicht’s Starwood Capital Group missed payments on securitized debt linked to five shopping malls, and Saks owner Hudson’s Bay Co. also skipped interest due on certain CMBS. Delinquencies on retail mortgages bundled into bonds climbed to 16 percent in July, from 3.8 percent in January, according to Trepp.
Some retailers can work out rent abatements and other lease modifications including terminations without filing for bankruptcy; however, negotiating hundreds of deals outside of a court process can be challenging, especially for big retail chains that may have hundreds of landlords to deal with, said Navin Nagrani, an executive vice president at Hilco Real Estate.
Bankruptcy flips the power from landlords to tenants. Retailers can legally reject a swath of leases in court, sometimes leaving building owners to collect just pennies on the dollar.
Firms can also sell off favorable contracts to other parties to help repay creditors.
“Sometimes a bankruptcy is the most advantageous way to get out of those leases,” Nagrani said.
As many as 25,000 stores are expected to close in the US in 2020, mostly in shopping malls, according to Coresight Research. Department stores and fashion boutiques are seen as the most endangered.
More than half of mall department stores could close for good by the end of 2021, according to an April report from real estate research firm Green Street Advisors. J.C. Penney said last month that it would shutter more than 150 locations, while Neiman Marcus plans to pull out of New York’s Hudson Yards development and close three other US locations.
The closures so far are “just the tip of the iceberg,” said Garrick Brown, head of Americas retail research for Cushman & Wakefield. Over the next two years, at least 1.2 billion of square feet — 10 percent of already-occupied store real estate — will go vacant, he said. “Worst-case scenario, that could double.”
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The malls (and colleges) are to be repurposed as COVID extermination camps.
Think about it. The stores already have metal gates on them. They are perfect spaces for COVID camps, and how long would it take our wonderful military to fence in college property, huh?
A day?
Two?
Related:
The Death Knell For Department Stores
And the rest of us.
Also see:
315,000 in Mass. not confident about making August rent
Mass evictions, just like in the Soviet Union 90+ years ago.
Two people rescued from apartment building fire in Everett
Also a form of eviction, and can anyone discount arson at this point?
At lea$t the $hip is $teady:
"Stocks perked higher on Wall Street Thursday after a report showed the pace of layoffs across the country is slowing, though it remains incredibly high. The S&P 500 rose 0.6 percent as investors waited for Congress and the White House to reach a hoped-for deal on more aid for the economy. It was the fifth straight gain for the index, which now hangs just 1.1 percent below its record set in February. The Dow Jones average climbed 0.7 percent; the Nasdaq, or 1 percent, to set another record. Nearly 1.2 million workers applied for unemployment benefits last week, an astounding number before the coronavirus pandemic leveled the economy, but it’s a slight slowdown from the prior week’s tally, and it was also not as bad as economists were expecting. “The market is searching for footholds of good news,” said Nela Richardson, investment strategist at Edward Jones.
That is where I clipped my print copy.
“The fact that nearly 1.2 million jobless claims in a single week is considered good news shows you how far we’ve deteriorated in the labor market.’’ It was also the first drop in jobless claims following two weeks of increases, and economists called it an encouraging step, but the threat of more business closures due to the continuing pandemic means the path remains treacherous. Investors have been pushing stocks higher despite such worries, in part on expectations that Washington will work through partisan disagreements and strike a deal on more assistance for out-of-work Americans, along with other measures. Investors say it’s crucial that the aid comes, and quickly. The economy has shown signs of improvement since the spring, but it’s still hobbling, and worries are high that it may backtrack amid a resurgence in coronavirus counts. Democrats and Republicans traded criticism of each other on Thursday, following a Wednesday session that produced no progress. Negotiations are continuing, and both sides have set a goal of reaching a deal by week’s end, even if that increasingly appears to be out of reach. Richardson said the possibility of President Trump using his executive authority to extend coronavirus relief if Congress fails to reach a deal may have helped lift the market Thursday. Despite the market’s gains, slightly more stocks fell in the S&P 500 than rose. Gains for Apple helped to lift the market. The iPhone maker reported blowout profits for the spring a week ago, and its stock has climbed every day since then. The gains have been so strong that it may become the country’s first company to be worth $2 trillion. Some analysts have been concerned about the stock market, which has rallied back toward record heights. Even though the stock market is not the economy — it’s increasingly dominated by a handful of Big Tech companies that can profit even during a pandemic, and profit is what drives stock prices in the long run — critics say the degree of the gap between them is concerning....."
Remember when the "coronavirus crisis" was about flattening the curve so hospitals wouldn't be overrun?
Now it is all about the fraudulent case counts from lying authority and pre$$.
Never mind the economic disconnect as tho$e preaching we are all in thi$ together get famously wealthy while your livelihood has been destroyed.
Related:
White House and GOP don’t give ‘a damn’ about unemployed during relief talks, Pelosi says
In an interview on CNBC on Thursday, Pelosi said Republicans’ refusal to recognize the needs that exist in the country is standing in the way of getting an agreement. ‘‘Perhaps you mistook them for somebody who gives a damn,’’ Pelosi said. ‘‘That’s the problem. See, the thing is, they don’t believe in governance.’’
Have you seen the Democratic-run cities lately, $cum?
A model in governance!
Also see:
Amid slow jobs recovery, all eyes on July report
This what they are talking about over at the BG:
Capital One to pay $80m fine over hack last year
Chief investment officer for nation’s largest public pension leaves abruptly
H & M suspends employees over racist name for hat
ECB said it had no role in determining Wirecard was not a financial holding company
Most ticket holders for canceled concerts don’t want a refund; they want a concert
Toyota bucks a pandemic trend and posts a profit
Nintendo’s profit soars as those stuck at home play
Rates fall to a record low again
Hilton’s occupancy rates inch up
Adidas’ sales return with surge in sandals and yoga pants
Cheap cars disappear, relegating entry-level buyers to used
That is so your means of free, independent transportion is removed as we convert to a Soviet-style $y$tem.
All autos will be automated in the future. You will have no choice.
Automated driving systems frequently fail
Our leaders, who are protecting us from the planned $camdemic fraud, don't care. It's not a problem they will have to worry about.
Let the games end!
"With the St. Louis Cardinals sidelined by a raft of positive coronavirus tests — and the Miami Marlins playing with a reconstructed roster after their own outbreak caused the league to reshuffle schedules in late July — Major League Baseball has again tightened its health protocols in an effort to safely navigate the rest of its shortened season. In a six-page memo sent to teams and players Wednesday, MLB added new areas in which players must wear masks, restricted the places players can visit outside the ballpark, and said players who do not abide by the rules would be subjected to discipline....."
The best thing players can do at this point is opt out of the $ea$on and let $port$ $ink into oblivion.
