stats
globeinteractive.com: Making the Business of Life Easier

   Finance globeinvestor   Careers globecareers.workopolis Subscribe to The Globe
The Globe and Mail /globeandmail.com
Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space


Search

space
  This site         Tips

  
space
  The Web Google
space
   space



space

  Where to Find It


Breaking News
  Home Page

  Report on Business

  Sports

  Technology

space
Subscribe to The Globe

Shop at our Globe Store


Print Edition
  Front Page

  Report on Business

  National

  International

  Sports

  Arts & Entertainment

  Editorials

  Columnists

   Headline Index

 Other Sections
  Appointments

  Births & Deaths

  Books

  Classifieds

  Comment

  Education

  Environment

  Facts & Arguments

  Focus

  Health

  Obituaries

  Real Estate

  Review

  Science

  Style

  Technology

  Travel

  Wheels

 Leisure
  Cartoon

  Crosswords

  Food & Dining

  Golf

  Horoscopes

  Movies

  Online Personals

  TV Listings/News

 Specials & Series
  All Reports...

space

Services
   Where to Find It
 A quick guide to what's available on the site

 Newspaper
  Advertise

  Corrections

  Customer Service

  Help & Contact Us

  Reprints

  Subscriptions

 Web Site
  Advertise

  E-Mail Newsletters

  Free Headlines

  Globe Store New

  Help & Contact Us

  Make Us Home

  Mobile New

  Press Room

  Privacy Policy

  Terms & Conditions


GiveLife.ca

    

PRINT EDITION
Major retail tenants in malls with failed Sears stores seek rent concessions
space
space
By MARINA STRAUSS
  
  

Email this article Print this article
Monday, September 17, 2018 – Page B1

As many landlords of the failed Sears Canada Inc.

struggle to fill the retailer's empty stores in their malls, the property operators now face another potential headache.

Two major U.S.-owned retail tenants - clothiers Gap Inc., which owns its namesake, Old Navy and Banana Republic, and Children's Place Inc. - want to be able to invoke their co-tenancy rights, which would allow them to get rent breaks or even leave a mall in some situations as a result of Sears closing its stores.

Those co-tenancy rights were suspended when Sears got court protection from its creditors in June of last year and closed all of its 255 stores by January. The shutdown left many shopping centres across the country with big vacant spaces, giving consumers less reason to visit the malls. Now Gap and Children's Place want the court to lift the cotenancy ban so they can essentially try to get financial relief from their landlords.

The co-tenancy fight, which is expected to be heard in Ontario Superior Court next month, could put more pressure on some landlords who already are scrambling to find new tenants to replace Sears. Other retailers could push to invoke their co-tenancy rights, observers say.

Co-tenancy rights in retailer leases allow chains such as Gap and Children's Place to get rent reductions or even exit a mall when an anchor tenant - Sears in this case - falters. The provision, whose terms differ from lease to lease, is based on the view that the closing results in fewer shoppers coming to a mall and thus hurts co-tenants' businesses.

Gap and Children's Place argue the temporary ban on co-tenancy rights during Sears's insolvency proceedings should be lifted because the Sears leases have been sold or handed back to the landlords, according to court documents filed this month. They say the suspension of the rights no longer provides a benefit for Sears.

"Gap has always intended to assert all available co-tenancy rights against its landlords in the cases of co-tenancy failures," Matthew Irwin, associate general counsel for Gap in San Francisco, said in a sworn statement filed in court this month.

The Sears closings came at a difficult time for many landlords that were already grappling with the shutdowns of a string of other failed retailers, including Target Canada. The U.S.-based discount chain got court protection from its creditors in January of 2015, shutting all 133 of its stores here and leaving vacancies in malls.

James Smerdon, vicepresident of retail consulting at real estate specialist Colliers, said other retailers probably are looking at invoking co-tenancy rights in the Sears case as well. But he added any move by Gap and Children's Place to invoke their co-tenancy clauses as a result of Sears closures "will be seen by landlords as desperate, or worse vindictive and mean-spirited.

"It has probably been a decade or more since Sears generated spin-off traffic that supported the likes of Gap and Children's Place," Mr. Smerdon said.

"These retailers are likely trying to cut costs as their earnings have been hammered by competition from online retailers as well as hyper-competitive stores like Uniqlo."

He and other real estate experts didn't have an estimate of how many Sears stores are still empty although some are being torn down and redeveloped into other uses such as condominiums while still others are being divided up into multiple stores.

As for Target, 27 of its stores - 20 per cent of the total - were still completely vacant as of April, he said.

In Target's insolvency proceedings, Gap and TJX Cos., another large U.S.-based retailer whose chains include Winners, HomeSense and Marshalls, also fought to overturn a ban on their co-tenancy rights. Ultimately, TJX settled out of court with most of its landlords and withdrew its suspension request, said lawyer Lou Brzezinski of Blaney McMurtry LLP, whose law firm represented some Target creditors (although not those involved with the co-tenancy matter). Gap's lawyer would not comment.

Mr. Brzezinski, whose firm now represents some Sears creditors, said he expects some landlords will oppose the latest move by Gap and Children's Place, although none have come forward yet. Lawyers for key landlords involved, such as Ivanhoé Cambridge and OPB Realty, did not comment, nor did one for Children's Place.

Associated Graphic

People walk past a Gap store in Pittsburgh in August, 2017. The company wants to be able to invoke its co-tenancy rights, which would allow the retailer to get rent breaks, or even leave a mall in some situations, as a result of Sears closing its stores.

GENE PUSKAR/ASSOCIATED PRESS


Huh? How did I get here?
Return to Main Lysiane_Gagnon Page
Subscribe to
The Globe and Mail
 

Email this article Print this article

space  Advertisement
space

Need CPR for your RSP? Check your portfolio’s pulse and lower yours by improving the overall health of your investments. Click here.

Advertisement

7-Day Site Search
    

Breaking News



Today's Weather


Inside

Rick Salutin
Merrily marching
off to war
Roy MacGregor
Duct tape might hold
when panic strikes


Editorial
Where Manley is going with his first budget




space

Columnists



For a columnist's most recent stories, click on their name below.

 National


Roy MacGregor arrow
This Country
space
Jeffrey Simpson arrow
The Nation
space
Margaret Wente arrow
Counterpoint
space
Hugh Winsor  arrow
The Power Game
space
 Business


Rob Carrick arrow
Personal Finance
space
Drew Fagan arrow
The Big Picture
space
Mathew Ingram arrow
space
Brent Jang arrow
Business West
space
Brian Milner arrow
Taking Stock
space
Eric Reguly arrow
To The Point
space
Andrew Willis arrow
Streetwise
space
 Sports


Stephen Brunt arrow
The Game
space
Eric Duhatschek arrow
space
Allan Maki arrow
space
William Houston arrow
Truth & Rumours
space
Lorne Rubenstein arrow
Golf
space
 The Arts


John Doyle arrow
Television
space
John MacLachlan Gray arrow
Gray's Anatomy
space
David Macfarlane arrow
Cheap Seats
space
Johanna Schneller arrow
Moviegoer
space
 Comment


Murray Campbell arrow
Ontario Politics
space
Lysiane Gagnon arrow
Inside Quebec
space
Marcus Gee arrow
The World
space
William Johnson arrow
Pit Bill
space
Paul Knox arrow
Worldbeat
space
Heather Mallick arrow
As If
space
Leah McLaren arrow
Generation Why
space
Rex Murphy arrow
Japes of Wrath
space
Rick Salutin arrow
On The Other Hand
space
Paul Sullivan arrow
The West
space
William Thorsell arrow
space





Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space

© 2003 Bell Globemedia Interactive Inc. All Rights Reserved.
Help & Contact Us | Back to the top of this page