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CFO Dive: Bankruptcy a Tactical Tool to Win Rent Concessions

September 13, 2020

O’Melveny restructuring partner Steve Warren and real estate partner Michael Hamilton are quoted in this CFO Dive article, which discussed negotiating rent relief for retail tenants amid the pandemic.

“The world has changed,” Warren said. “It’s no longer 1% of your tenants who are in a position to credibly threaten bankruptcy. Landlords, looking at someone who’s threatening bankruptcy, [will say] it doesn't matter; everybody’s threatening bankruptcy. So, the threat doesn't really work. To get traction, you actually have to be in bankruptcy.”

This year, over two dozen retail companies have filed for bankruptcy, the publication noted. “Compared to other commercial real estate asset classes, retail, including restaurants and entertainment venues, are in a rent-payment crisis,” Hamilton said. “Rent collections in the sector have plummeted to between 30% and 40%, and, among some portfolios, have dropped to below 20%.”

Read the full article here.