_______________________________________________________________ _______________________________________________________________ Report Information from ProQuest July 14 2017 11:11 _______________________________________________________________ 14 July 2017 ProQuest Table of contents 1. Retailers Tap Consultants to Wiggle Out of Mall Leases; Store owners facing unpredictable sales, margins seek more favorable terms from landlords........................................................................................ 14 July 2017 ii 1 ProQuest Document 1 of 1 Retailers Tap Consultants to Wiggle Out of Mall Leases; Store owners facing unpredictable sales, margins seek more favorable terms from landlords Author: Fung, Esther Publication info: Wall Street Journal (Online) ; New York, N.Y. [New York, N.Y]11 July 2017: n/a. ProQuest document link Links: Check Full Text Finder for Full Text Full text: Consultants who help store owners wring concessions from landlords are seeing brisk business these days, another ripple of the shifting retail landscape across the U.S. economy. The rise of online shopping and changing consumer preferences are forcing retailers to rethink virtually all aspects of their operations. First on the list for many is real estate, which is typically the second-biggest cost, after payroll. As store owners scrutinize their store footprints, they are turning increasingly to professionals who can help them get better deals from landlords. A growing roster of retailers, including Bebe Stores Inc. and Pacific Sunwear of California Inc., are tapping lease-consulting firms to get landlords to agree to take less money. "The C-suite, as well as the company's board, are more engaged in real estate than ever before," said Andrew Grasier, co-president of A&G Realty Partners, a real-estate advisory firm that has worked with hundreds of retailers on restructuring leases and shrinking store fleets. "Sales trends and margins aren't as predictable as in the past, which puts more pressure on getting occupancy costs more in line with a store's performance." Landlords say they will make their own assessment by studying the tenant sales at the store, its rent-to-sale ratio and how that compares to the retailer's national average and the national average of the industry. Sometimes, the retailers might be the ones trying to bully the landlord to accept their terms, asking for as much as zero dollars in gross rent. "Some retailers we're working with, some a little less, and others, we'd politely say go ahead and order the moving truck," said Ami Ziff, director of national retail for Time Equities Inc., a real-estate firm with a portfolio that includes malls and open-air shopping centers across the country. Landlords of weaker shopping centers that don't attract alternative tenants are more likely to amend leases, while owners of stronger malls say they can ignore such requests from retailers that aren't on the brink of bankruptcy or buy out the lease from a struggling tenant and replace it with a higher-paying tenant. When a tenant is a highly leveraged retailer facing pressure from creditors to restructure or terminate leases outright, landlords can feel pressure to make a deal. Last week, jeans maker True Religion Apparel Inc. filed for bankruptcy protection , following in the footsteps of retailers Rue21 Inc., Wet Seal LLC, and Gymboree Corp. in recent months. True Religion said it plans to use bankruptcy laws to close or consolidate underperforming stores and renegotiate leases. A bankruptcy filing makes it more difficult for landlords to pursue and collect the full amount of rent, since the bankruptcy code effectively halts legal action against a company. "You want to reset the table before a bankruptcy filing," said Michael Sirota, a lawyer at Cole Schotz who works with retailers and landlords in lease negotiations. Sometimes landlords are at the mercy of tenants. Spirit Realty Capital, a real-estate investment trust that owns free-standing buildings that it leases to single tenants such as electronic stores, fast-food restaurants and convenience stores, said during its first quarter earnings call it suffered a "perfect storm" when some tenants stopped paying rents. Appliance seller Hhgregg Inc., outdoor-gear retailer Gander Mountain Co. and home dcor and apparel chain 14 July 2017 Page 1 of 3 ProQuest Gordmans Stores Inc. filed for bankruptcy protection in March, while a movie-theater operator and two casualdining operators defaulted on rent payments. In April alone, the REIT failed to collect $4 million in rent and subsequently had to pause its earlier plans to acquire more real-estate assets. Spirit Realty suffered a "black eye, bloody nose and broken limbs," said Green Street Advisors in a recent research note. Spirit Realty declined to comment. Real-estate consultants advise clients looking to cut costs to explain to landlords that the failure to cooperate could end up hurting them more. They counsel tenants with regional or national profiles to negotiate with landlords on a combined-portfolio basis rather than on an individual-store basis. Landlords "rarely agree to rent reductions out of the goodness of the heart. Landlords are out there trying to make money , too," said Gregory Apter, president of Hilco Global, a real-estate services firm that has seen a rise in demand from retailers in lease-restructuring negotiations. Rents are rising in metropolitan areas, especially in locations that are densely populated and where landlords are putting in more effort to spruce up their properties. One other reason is also vacancy rates for many of the stronger centers and malls are still low, which is providing some support to rents. Still, the last thing both sides want to see is a default, Mr. Apter said. For tenants, that means a blow to their credit profile and for landlords, lost revenue and higher costs. "We need to provide a compelling story that is true and articulate that a rent reduction would provide critical runway for the retailer," said Mr. Apter. Write to Esther Fung at esther.fung@wsj.com Property Report * Startups Turn Apartments Into Hotel Rooms * U.K. Counties Pile Into Real-Estate Investments Read More * Brick-and-Mortar Stores Are Shuttering at a Record Pace * The Internet Isn't Killing Shopping Malls--Other Malls Are * Mall Landlords Lure Medical Providers As Retailers Bolt Credit: By Esther Fung Subject: Shopping centers; Costs; Sales; Leases; Tenants; Retail stores; Location: United States--US Company / organization: Name: True Religion Apparel Inc; NAICS: 315210; Name: Gymboree Corp; NAICS: 448130, 533110, 713990; Name: Pacific Sunwear of California Inc; NAICS: 448190; Name: Bebe Stores Inc; NAICS: 448120; Name: Time Equities Inc; NAICS: 531130; Publication title: Wall Street Journal (Online); New York, N.Y. Pages: n/a Publication year: 2017 Publication date: Jul 11, 2017 Section: Markets Publisher: Dow Jones & Company Inc Place of publication: New York, N.Y. Country of publication: United States 14 July 2017 Page 2 of 3 ProQuest Publication subject: Business And Economics Source type: Newspapers Language of publication: English Document type: News ProQuest document ID: 1917663657 Document URL: https://login.ezproxy.chaminade.edu/login?url=https://search.proquest.com/docview/1917663657?accountid=28 738 Copyright: (c) 2017 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission. Last updated: 2017-07-12 Database: The Wall Street Journal _______________________________________________________________ Contact ProQuest Copyright 2017 ProQuest LLC. All rights reserved. - Terms and Conditions 14 July 2017 Page 3 of 3 ProQuest