Kathryn McGlynn
Partner & Managing Director, New York
Rent has presented a complicated puzzle during the pandemic for numerous landlords and tenants, and the solutions—inside and outside of Chapter 11—have been unconventional.
As foot traffic evaporated due to restrictions prompted by health and safety regulations, and revenue fell precipitously as demand declined, consumer-facing storefront businesses struggled to make rent payments as early as April, the first full month of closures in several U.S. states. Retailers, restaurants, gyms, and similar establishments have, of course, been the worst hit. According to a National Retail Federation survey,1 less than one-third of retailers paid at least 75% of June rent. Although 73% of retailers are expecting to pay back at least half of what they owe, more than one in three are seeking some sort of assistance to cover the June-to-August period.
The negotiations between landlord and tenant are complicated. Rent deferrals or abatements cause ripple effects in the finances of not only the landlord but also in those of the landlord’s lenders and investors, and the specter of Chapter 11 only complicates matters. Indeed, a number of deals cut before a bankruptcy filing may be revisited or completely abandoned in Bankruptcy Courts over the next few months.
Download the November/December issue of TMA’s Journal of Corporate Renewal to read the full article from AlixPartners Managing Director Kate McGlynn and Director Rob Winning analyzing how landlords and tenants have navigated rent obligations in bankruptcy during the COVID-19 pandemic.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of AlixPartners, LLP, its affiliates, or any of its or their respective other professionals or clients. This article regarding Why rent is such a contentious issue in bankruptcy during the pandemic (“Article”) was prepared by AlixPartners, LLP (“AlixPartners”) for general information and distribution on a strictly confidential and non-reliance basis. No one in possession of this Article may rely on any portion of this Article. This Article may be based, in whole or in part, on projections or forecasts of future events. A forecast, by its nature, is speculative and includes estimates and assumptions which may prove to be wrong. Actual results may, and frequently do, differ from those projected or forecast. The information in this Article reflects conditions and our views as of this date, all of which are subject to change. We undertake no obligation to update or provide any revisions to the Article. This article is the property of AlixPartners, and neither the article nor any of its contents may be copied, used, or distributed to any third party without the prior written consent of AlixPartners.