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The only thing more dangerous for US shopping centers than a series of bankruptcies in clothing chains is when problems are affecting department stores.
Retailers such as JC Penney and Macy's are "anchors". stores that guard shopping malls buzz and pedestrian traffic flowing. They are so important to the ecosystem that smaller tenants might refuse to settle without the promise that the anchors will remain: Many leases include "roommates" clauses that let them cut and run or pay less if these
Now, many homeowners are pushing to eliminate or restrict escape clauses as a result of massive closings of department stores. This means less flexibility for the remaining tenants.
"Most retailers based in a mall live or die on an anchor," said Andy Graiser, co-chair of A & G Realty Partners, a commercial real estate advisor. "Some retailers will run a risk if some anchors disappear."
The last few years have been marked by hundreds of store closures. The big closures are the result of liquidations (Gordmans and Bon-Ton Stores), restructurings by distressed channels (Sears and JC Penney) and withdrawals of relatively healthy operators seeking to reduce their presence in stores (Macy & # 39; s that closes underperforming stores).
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Although retailers are still flocking to high-income malls, lower-tier properties often struggle to replace lost merchants, sometimes turning to non-traditional tenants such as shopping centers. urgent care. Today, homeowners are systematically striving to remove roommates when leases need to be renewed, said Ivan Friedman, director of RCS Real Estate Advisors, a New York consulting firm. This was not the case a few years ago.
This will have consequences, such as reducing the number of lease renewals, said Kent Percy, general manager of the consulting firm AlixPartners
. inside the mall, "he said.Percy and others have noted that even robust colocation clauses offer limited protection to renters; homeowners are inclined to repel any breach of legal lease , and the cost of fighting them can be prohibitive.
Many of these tenants have already suffered, resulting in bankruptcies, as with Gymboree and Rue21, who reorganized themselves with fewer stores. Other Dealers – Coldwater Creek, for example – did not survive.
Ron Marshall, CEO of Claire & s Stores Inc., specifically mentioned the colocation clauses in June 2017. The chain filed for bankruptcy in March.
"We have a limited number of colocation clauses, but not at the level we would like," he said, in response to a question about whether the channel could use the provisions to close the shops. Other options: They negotiate for shorter leases and reduced rents. As a last resort, they can declare bankruptcy, which allows them to leave the leases without penalty.
They could also sign contracts stipulating an exit only if some anchors leave, Graiser said.
"The retailer can say" yes, I'm fine if Bon-Ton share, I'm fine if Sears is gone, but I do not agree if Macy's, Dillard's Neiman Marcus or Nordstrom are gone, "he said
. a key tenant has also changed. In some cases, it could be a dominant retailer, such as a big box store or a high-performance specialty chain.
Still, homeowners will remain under pressure, said Friedman of RCS. "By closing stores, everyone gets lower rents when they renew," he said.
And with the American excess of detail estimated at 25%, even after the first declines, "it will continue."
[19659024]
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