(Excerpted from “Retail Bankruptcies – Protections for Landlords,” Practical Law Journal, May 2018, by Lars Fuller)
Due to increasing competition from online sellers, recent years have seen a dramatic uptick in Chapter 11 bankruptcy filings by multistate brick-and-mortar retailers – some that have dozens, or even hundreds, of storefronts. These bankruptcies create challenges for the commercial landlords that own the shopping centers, malls and other establishments that those retailers rented.
A major issue in most retail bankruptcies is which of the retailer’s stores will close and which stores, if any, will be retained or sold to another tenant through an asset sale. Debtor-tenants are usually burdened by unsustainable rent obligations that can weigh down a Chapter 11 case, increasing operational deficits that threaten administrative insolvency and create urgent demands for payment from commercial landlords.