The anticipated bankruptcy of Neiman Marcus could throw Related and Oxford Properties’ Hudson Yards mall into peril.
The parent company of the department-store chain is reportedly planning to file for bankruptcy protection within the week. The move would put Related and Oxford Properties in the precarious position of possibly having to renegotiate the retailer’s lease at the luxury Hudson Yards mall — and enter into conversations with other retailers whose lease agreements are tied to Neiman’s presence.
“Losing Neiman would be a major setback for the Hudson Yards project,” Matthew Seigel of Lantern Real Estate told Business Insider. “Right now, Neiman has the leverage and the landlords are in the less enviable position.”
The retailer came into the project on extremely favorable terms: According to the publication, Related and Oxford footed most of the bill for building the store’s interior, and reached an agreement to take 5 percent of sales instead of rent in the initial three years, and 8 percent in the following two years. The parties were reportedly planning to enter into a traditional rent arrangement starting in the sixth year of the lease.
The brand was considered such a significant selling point that several other stores in the mall reached agreements in their leases that allowed for rent discounts or lease exits if Neiman were to go and an equal replacement was not found — meaning the stakes are even higher in the current climate.
Neiman’s stores are closed at the moment because of the pandemic. The company is hoping to restructure its $4.7 billion debt load and reopen most of its stores after the crisis subsides.
Many retailers were struggling long before the global health crisis, thanks to pressure from e-commerce and changing consumer habits. Department stores have not been immune: Barneys filed for bankruptcy last year. In February, Macy’s announced it would close 125 stores over the next three years.
[Business Insider] — Sylvia Varnham O’Regan