The Real Deal National

US landlords say Topshop owner is freezing them out amid bankruptcy

Arcadia Group's U.S. subsidiary filed for bankruptcy last month
June 17, 2019 01:24PM

From left: Topshop and Topman stores at 478 Broadway, Arcadia Group CEO Philip Green, and Vornado CEO Steven Roth (Credit: Getty Images and Google Maps)

From left: Topshop and Topman stores at 478 Broadway, Arcadia Group CEO Philip Green, and Vornado CEO Steven Roth (Credit: Getty Images and Google Maps)

An obscure UK process known as “company voluntary arrangement” is the heart of a legal dispute involving a group of U.S. landlords and UK-based Arcadia Group, which last month decided to fold its U.S. operations.

Vornado, Brookfield and other landlords filed papers in bankruptcy court on June 4 in opposition to Arcadia’s decision to put subsidiary Arcadia USA, which operates 11 Topshop stores in the U.S., into receivership overseen by an administrator.

The filing accuses Arcadia of “engaging in a convoluted scheme to deprive the […] US landlords of their bargained-for contractual rights by manipulating and exploiting a private, little-used out-of-court process in the UK known as a company voluntary arrangement [or CVA],” the Financial Times reported, noting that the court filings were first reported by The Sunday Times.

Arcadia escaped collapse last week when its unsecured creditors – including landlords, suppliers, the UK tax authority and Arcadia’s pension scheme – voted to approve a CVA to restructure the company by reducing rents and closing some stores. A 75 percent supermajority was needed to approve the plan.

The use of CVAs has proven controversial in the UK as well, and the decision faced opposition from British landlords such as Intu Properties, a shopping center real estate investment trust.

Meanwhile, the U.S. landlords say they were “frozen out” of the proceedings, and that they are likely to be impacted negatively by the decision. Los Angeles-based Caruso said that it “is concerned that the group is engaging in a scheme to exploit areas of UK insolvency law that limit due process and disclosure to creditors.”

Fast-fashion brand Topshop first entered the U.S. market in 2009, and now has stores in New York, Miami, Los Angeles, Chicago, Las Vegas and Houston. Both New York stores, at 608 Fifth Avenue in Midtown and 478 Broadway in Soho, are owned by Vornado. [FT] — Kevin Sun