Can lease renewal be used to predict if a Kmart will be closing? Not sure if this is applicable to Sears, but I see more people responding here. Thank you.
7 replies (most recent on top)
a lease can be busted up anytime !!
One other issue re: leases. Some leases require a set percentage of gross revenues from the store to be payable as additional rent. This was primarily in exchange for low base rent. So, it may be more cost effective for the company to simply close a store and just pay the base rent, as long as there was no provision requiring the space to be used for retail purposes for the duration of the lease.
Leases don't mean a thing in bankruptcy. Do you still not get it?
My store lease was not up until Feb 2018, and they closed the store in March 2017. They are still paying the lease.
I am not aware of any leases being renewed in years. Close the store nd cut your loss is the strategy
My store's lease is up sometime this year and it is on the list of stores closing in September.
It's not a true indicator. If a store renews its lease, then that contract can be discharged in bankruptcy. A good landlord knows that, and if they feel the risk of extending another lease is outweighed by a likely loss of income, as well as court costs, and other factors, they may make the rent prohibitively expensive in order to get rid of the problem tenant. Or if they have another potential client for that space, they may do the same. But if the property is in a bad market, the landlord might just take the risk and extend the lease for as long as SHC is willing to pay them, knowing that the real estate is going to sit dormant, potentially for years.
I hear that SHC is in a lot of cases, extending one or two year leases. So even then, they might not be willing to commit to a long contract. Again, the landlord might accept that just to keep money coming in as long as possible.
So in a nutshell, don't count on it.