The locally based Garden Ridge's retail and distribution locations represent more than seven million sf of leased space. The popular discounter also leases its headquarters at 19411 Atrium Place in far west Houston.
To date, the court has rejected 11 of 47 disputed leases--10 stores and a 750,000-sf distribution center in North Carolina. In contrast, the chain has reached amended agreements at four locations: Greenville, SC, O'Fallon, IL and Round Rock and Grand Prairie, TX. A Sunrise, FL, store is facing shutdown if concessions aren't granted, according to a Garden Ridge release issued this week about the restructuring.
Garden Ridge's chief restructuring officer, Don Martin, isn't discussing the terms of the amended pacts, but did say agreements were altered from 15- to 20-year terms to five years with options to shutter locations if they are under-performing or extend if sales improved. Martin tells GlobeSt.com that Garden Ridge is renegotiating leases originally signed at $3 per sf to $9 per sf for 15 to 20 years. Stores average 150,000 sf.
The leases "were as much as double the market rate," CEO Jack Lewis says in the release. "A discount retailer cannot be viable with a rent structure like that when it's competing with so many other retailers who are paying no more than fair market rents ... . We are committed to getting our rents in line with the market and will negotiate to achieve those rents or relocate out of those locations."
Jay Krasoff of Chiron Financial Group Inc. and John Brannon of the Thompson & Knight law firm are leading the charge for 38 to 40 building owners, a mix of retirees, private investment groups as well as Home Depot and Wal-Mart. Of the 11 court-rejected leases, the average claim is $3 million. The Houston-based duo filed a motion with bankruptcy court to set up a special committee after Garden Ridge's corporate chiefs refused to negotiate damages with the group as a whole.
Garden Ridge says the tact doesn't allow for market variables as is possible with case-by-case negotiations. In the release, Garden Ridge claims "the landlords are competitors and their refusal to deal ... except upon jointly agreed terms is akin to price fixing." The discounter has vowed to sue for antitrust violations after it completes the restructuring.
"I have never witnessed a debtor resort to such blatant actions to disguise its own shortcomings and shift blame," Brannon tells GlobeSt.com. "It is easy to sling allegations around as if they were true, but they are not true and are an effort to intimidate the landlord committee and their professionals from pursuing legitimate interests in this case."
Garden Ridge, a privately held chain with 36 stores in 13 states filed Chapter 11 bankruptcy Feb. 2. When it filed bankruptcy, the chain's leased inventory consisted of 47 stores and two distribution centers, including a 592,000-sf lease signed in February 2001 for Pinnacle Park near Dallas.
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