Do Bankrupt Retailers Deserve More Time?

Now that all of the Circuit City’s 560 stores are dark, landlords are trying to fill the spaces left behind. Some are finding success, like one firm we recently spoke with, the Blue Bell, PA-based Goldenberg Group, which leased a former Circuit City location to furniture chain Raymour & Flanigan in a Philadelphia shopping center.

We’re not sure if there are a lot of stories like that across the country, but it’s not difficult to guess that the process of filling these vacancies is tough, given that virtually every large retailer has cut back its expansion plans.

But what if Circuit City had more time to try to find a buyer or restructure?

The National Retail Federation would like to make that possible and scratch a 210-day limit that retailers now have to cancel a lease after filing. This 2005 amendment to the bankruptcy law was created, in part, so that landlords wouldn’t have to wait for an extended period of time while a bankrupt retailer reorganized, often leaving a large chunk of a shopping center dark.

The NRF argues that retailers need more time – in some cases a year or more – to reorganize their finances and see if underperforming stores can turn around. The organization says that the current system, which holds a company to a lease or allows a landlord to terminate the agreement doesn’t give stores enough time.

Obviously, most landlords are going to fundamentally disagree with allowing the retailers more time. They want control over their shopping centers. But has the recession, which will surely bring more retailer bankruptcies this year, changed the playing field?

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14 Responses to “Do Bankrupt Retailers Deserve More Time?”


  1. 1 James March 12, 2009 at 8:54 am

    The recession should serve to shorten the time to accept or reject the lease, it is less likely than ever that some miracle will rescue the retailer in Bankruptcy. Someone should analyse the performance pressures put on the retailer by Wall Street when they go public, time after time we have seen that Wall Street’s expectations can only be met by rapid (and I would say excessive and unmanageble) store growth. Soon the retailer loses site of its core business as it struggles to manage a far flung real estate expansion, a very much more complex task than selling widgets at a profit. Then its finances are over whelmed by cash demands that have nothing to do with putting widgets on the shelf. Then the CFO finally admits he has lost control of what is going on, etc, etc, etc., a familiar story driven by greed that has repeated itself far too often.

  2. 2 kin powell March 12, 2009 at 9:45 am

    Ian, you should remember that most of the Myrvyn’s space was quickly absorbed & so will Curcuit City’s because it is well located!

  3. 3 Norman March 12, 2009 at 9:56 am

    Ian,
    With your ICSC background, you know the necessity of Landlord’s being able to quickly find new tenants for bankrupt space. Remember when McCrory’s kept stores vacant and dark for nearly two years trying to find buyers? They were soon joined by other vacancies in those centers because of the image empty stores have on customers.
    I’ll email you a Letter to the Editor is sent this week to the Wall Street Journal.
    Regards,
    Norman M. Kranzdorf

  4. 4 BanksATanking March 12, 2009 at 10:18 am

    This recession/depression, whatever you’d like to call it, is by no means like previous dips. The banks and landlords cannot have their portfolios at bay while they wait for retailers to get their acts together and sit on vacant spaces. Given the circumstances of today’s marketplace, it is unreasonable to go back to the good old days way of doing business.

  5. 5 Hank March 12, 2009 at 10:20 am

    We have to hope that the 210 day rule does not get extended. Extending the 210 day rule will have a negative impact of recovery of the capital markets as more and more retail property become impossible for underwriters to value.

    It unlikely that judges will pressure attorneys but my hope would be that the 210 day time get reduced in some cases – or at least harder to qualify for so that Landlord’s get their monet or their property back sooner.

    Remember that what we want is an economic turn around and vultures produce the fastest most effective turn around – not lawyers.

  6. 6 Edward A Eickhoff March 12, 2009 at 10:37 am

    The 210 day time limit to accept or reject a lease should not be modified. The current bankruptcy law provides that a retailer may be granted additional time by the Landlord upon request. Circuit City did not ask our company for any extensions. The rejection of their leases with us occured prior to the expiration of the 210 day time period. The true problem here lies in the lack of credit not the time frame within which to accept or reject a lease.

  7. 7 Alex March 12, 2009 at 11:04 am

    Norman – you site an example of a retailer going dark/vacant while trying to find buyers – but what about retailers that are open and operating and under bankruptcy protection? Can we amend the law to say that if the tenant is open and asking for rent relief or is past due on payments for x amount of days, then they can have extra time to reorg – more than the 210 days? There should also be an amendment to say that if the retailer goes dark, the landlord has a right to find a new tenant – i agree with you there, but what about if the tenant is open and operating but under bankruptcy protection?

  8. 9 BanksATanking March 13, 2009 at 1:32 am

    Consumer bankruptcy laws and bankruptcy laws regarding landlords and tenants were all changed around 2005 in anticipation of the very calamity we’re living through, and the main interests that were successfully lobbied for are the banks. Powerful people rigged the rules ahead of time, and not to protect consumers, or retailers. It’s audacious the way the same leaders get up in front of the media and said “We never saw it coming.” People running the FED, too. Greenspan, who was once hailed as a genious, is completely eating crow, baffled and acting like Mr. Magoo.

  9. 10 James March 13, 2009 at 4:21 pm

    He is Mister Magoo, thick glasses and all, I love it, how could he think that the dominate rulers of human behavior, fear and greed, would be suspended while his “economic theories” worked themselves out for the trickle down benefit of all mankind! It is clear what has trickled down, did you get your share?? And the top tier thinkers in this country bought that crap?? Banks have carte blanche immunity from the consitution when it comes to bankruptcy, centuries of buying political favor have them in a postion now where they can act as the cruel Black Count and rape and pillage their way through bankruptcy court. Watch out if you are a vendor or an employee. Executory Contract indeed.

  10. 11 DeathAtWill March 16, 2009 at 9:30 pm

    To James: Executory Contract…. more like Execution Contract, and I don’t mean a real estate execution contract, we talking about the kind where the employees and vendors are being blindfolded for the Firing Squad.

  11. 12 AlJolson March 17, 2009 at 11:19 am

    Sung to the tune of the 1920’s 1930’s hit “Ain’t We Got Fun”…
    “… and the Rich Get Rich and the Poor Get Laid Off, In the Morning, In the Evening, Ain’t We Got Fun.”

  12. 13 MrMagooandGreenspanToo March 17, 2009 at 2:04 pm

    Check out Mr. Magoo on You Tube, an episode involving “House Thieves,” if we had only watched more of these cartoons when we were little, we might avoided the Greenspan Years.

  13. 14 David Jefferys April 10, 2009 at 3:00 pm

    I have a 22,000 SF Circuit City for lease in metro Buffalo, NY. Any ideas?


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