Ben Ashkenazy jacked up the rent to $30M. Now Barneys is weighing another bankruptcy
Barneys has brought on law firm Kirkland & Ellis, consultants MII Partners and Houlihan Lokey
Barneys, a symbol of New York City luxury fashion, is reportedly weighing a second bankruptcy, after the retailer’s $16 million annual rent jumped to $30 million at its Madison Avenue flagship. The move comes after a city arbitrator decided last year to allow Ben Ashkenazy to nearly double the rent on the 275,000-square-foot flagship store at 660 Madison Avenue. About one-third of Barneys’ revenues comes from that store.
The company has hired law firm Kirkland & Ellis, consultants MII Partners and investment bank Houlihan Lokey, to consider either bankruptcy, renegotiating leases, or bringing in a strategic advisor, the New York Times reported.
“Our board and management are actively evaluating opportunities to strengthen our balance sheet and ensure the sustainable, long-term growth and success of our business,” Barneys said in a statement.
Barneys has been planning to open its first flagship store in the Southeast at Bal Harbour Shops in South Florida, which is undergoing a $400 million expansion.
Barneys’ 20-year commercial lease on Madison Avenue, which expired in January, contained a clause that allowed Ashkenazy to raise the rent to fair market value. While Barneys balks at the new sum, things could have been worse. Ashkenazy, who acquired 660 Madison in the previous Barneys bankruptcy, had originally asked for $60 million.
In March, Barneys was reportedly in talks to give up several of its floors in order to cut back on the $30 million in rent. Barneys claimed the story was false.
Peter Marino, the architect behind the Madison Avenue flagship, said that a new tenant is not likely to replace Barneys. “It’s crazy to double the rent; half of Madison Avenue is empty,” he told the Times.
The news comes at a difficult time for brick-and-mortar retail: Lord & Taylor, Calvin Klein and Saks Fifth Avenue have also closed stores. [NYT] — Georgia Kromrei