Sep 30, 2009

U.S. retail landlords less willing to negotiateBy Emily ChasanReuters.com

New York, NY – While retailers are likely to face another tough holiday season, it may be much more difficult for them to extract any concessions from their landlords to help ease the ride, a top restructuring expert said on Tuesday.

“We’re seeing now that landlords have pulled back some from negotiating,” Kenneth Frieze, who heads the business development and marketing groups at asset recovery firm Gordon Brothers Group, said at the Reuters Restructuring Summit in New York.

Earlier this year, as some retailers were on the cusp of bankruptcy, many demanded that landlords reduce their rent, saying they could not survive without such concessions.

“It was a symbiotic relationship, so the landlord didn’t end up with a dark store,” said Frieze, whose firm advises retailers on troubled real estate.

“At first landlords were very willing to work with the retailers,” Frieze continued. “There were many situations where if an anchor retailer went out of business it affected all the leases in that entire mall.”

But now, if landlords are going to offer a rent reduction, they want to see something in it for them, Frieze said.

“They’ve gotten a little tougher, now that we’ve been through this period in time,” Frieze said. “Landlords will work constructively with those retailers that also have something to offer back.”

For example, Frieze said, landlords want to see retailers extend their lease or give them some ability to share in an upside later. Otherwise they are more willing to say “a contract is a contract,” Frieze said.

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