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Town Sports International Inc, the owner of New York Sports Clubs, filed for chapter 11 protection today after the coronavirus pandemic forced its gyms to close and caused revenue to dry up, Reuters reported. The company’s assets and liabilities were in the range of $500 million to $1 billion, according to a court filing in the U.S. Bankruptcy Court in Delaware. Gym operators have suffered as the pandemic deprived them of the monthly membership and personal training fees that generate much of their revenue. Gold’s Gym International Inc. filed for bankruptcy protection in May, followed by 24 Hour Fitness Worldwide Inc in June. As of March 31, Town Sports operated 185 fitness centers, including 99 New York Sports Clubs, with about 580,000 members. Its brands also include gyms in Boston, Philadelphia and Washington, D.C. named for those cities, as well as Lucille Roberts and Total Woman Gym and Spa. 

Chuck E. Cheese is looking for two more months to negotiate with its landlords over deferred rent, while it also proposes paying part of the full amount due, Bloomberg News reported. CEC Entertainment Inc., parent of Chuck E. Cheese and Peter Piper Pizza, asked to pay reduced rent depending on the status of its operations, rather than forgoing payments in full, attorney Alfredo Perez of Weil Gotshal & Manges, said at a status conference yesterday. The company reached an agreement with the unsecured creditors' committee that provides a sixty-day holdout period for CEC to pay landlords a portion of rent for restaurants that are either closed, open for takeout, or open with limited capacity, Perez said. Judge Marvin P. Isgur of the U.S. Bankruptcy Court for the Southern District of Texas to set hearings for next week for further objections on the matter. CEC earlier asked the court’s permission to put off paying rent for 141 locations that were closed for in-person dining as a result of government measures aimed at preventing the spread of the coronavirus. After getting Judge Isgur’s approval earlier this month to defer rent payments for roughly 21 days on top of the two-month deferral already allowed, CEC reached initial agreements with landlords at 40 of the locations. An additional 10 landlords have signed on to the settlements as of yesterday, while others are in various stages of “getting done,” Perez said.

An upscale Miami-area shopping mall is moving to evict Saks Fifth Avenue, saying the retailer hasn’t paid rent since March 16 and owes about $1.9 million, Bloomberg News reported. Saks told its landlord, Bal Harbour Shops LLC, this month that it couldn’t make lease payments on its three-level retail store due to the effects of the Covid-19 pandemic, according to a lawsuit filed in state court. But the mall owner said that Saks is currently open and was still generating revenue even when non-essential businesses were closed to in-store customers. Bal Harbour said that the store generated more revenue in June 2020 than it did in the same month the previous year. Saks Fifth Avenue, owned by Canadian parent Hudson’s Bay Co., is among a broad group of businesses that have been hurt by economic lockdowns and a rapid change of consumer tendencies amid the global pandemic. In a statement, Saks Fifth Avenue said that the owners of Bal Harbour “have not acted in good faith,” unlike “the majority of our landlord partners.” Read more. 

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store.

Retail landlords are including pandemic language in new leases, a previously rare feature as tenants seek protection after the first government-mandated coronavirus shutdowns in March complicated their negotiations for rent relief, the Wall Street Journal reported. Because many insurance policies didn’t cover pandemic-related losses, landlords have offered various concessions to attract and retain tenants, including allowing them to defer part of their rent if another shutdown is ordered. Both sides get breathing room: Tenants are able to lower expenses while landlords are still able to collect some money for overhead and their mortgage. “You have to provide the tenant an easy decision. If you make it complicated, you’re not going to get this done,” said Philippe Lanier, principal at EastBanc, a property developer, owner and manager of 25 open-air retail properties in Washington, D.C.’s Georgetown neighborhood. Lanier has offered to cut the minimum base rent to 50 percent if the District of Columbia prohibits tenants from operating their business again because of the coronavirus, and for the tenant to repay the difference in six equal monthly installments on the first day after reopening. He also is open to leases structured on a percentage of the retailer’s sales—“percentage rents”—which would limit tenants’ expenses if their sales decline. He said he had signed amended leases with around 30 retail tenants, with an additional 15 still in the works. Real-estate brokers said that landlords have to contend with a glut of stores and social-distancing measures that have forced many retailers to shrink the number of stores. The trend puts more bargaining power in the hands of tenants such as restaurants, apparel retailers, grocery stores and discount stores that are still expanding. “We have begun to clarify and strengthen some of our force majeure language to more clearly define governmental shutdown, et cetera, which could happen for a multitude of reasons,” said Josh Goldstein, director of real estate and store development at Pet Supplies Plus, referring to “act of God” clauses that allow tenants to terminate leases or reduce rents in extraordinary circumstances. Questions remain about how long Covid-19 will persist, and some businesses are wary about the recent resurgence in infections in California, Texas and Florida. Landlords have extended more relief to tenants such as small local and regional apparel retailers, salons and restaurants that have felt the most pain. They also said they anticipate more tenant bankruptcies.