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While recent retail bankruptcies have left mall owners, REITs and landlords scrambling to fill empty stores, others are finding opportunity by charging higher rents to new tenants.
When grocery chain A&P filed for bankruptcy in July, Brixmor Property Group bought back three leases in the bankruptcy auction. The grocer was paying $6.59 per SF, but Brixmor will now charge up to $30 per SF—a whopping 355% increase.
"It's a good thing in small doses," Brixmor CEO Michael Carroll says of the recent string of stores closing. "You don't want to see 500 to 1,000 stores of 25k SF come back onto the market." He doubts it'll happen anyway.
Don Wood of Federal Realty called it a "calculated gamble" to buy the lease instead of letting a new retailer—who can pay rent immediately—do it.
While this risk could pay off, the plan really only works in highly coveted markets. "If you own good real estate, someone else is going to want that box," Kimco CEO David Henry says. [WSJ]
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