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Untuckit taps real estate restructuring firm to renegotiate deals during coronavirus

Shoppers browse clothing inside an Untuckit store at the King of Prussia mall in King of Prussia, Pennsylvania, Oct. 20, 2018.

Jeenah Moon | Bloomberg | Getty Images

Apparel retailer Untuckit has tapped real estate advisory firm RCS to help it evaluate its stores and leases with landlords as the economy reels from the coronavirus pandemic, CNBC has learned. 

The move comes as a number of retailers are looking to renegotiate deals with their landlords, or shut stores entirely, as the Covid-19 pandemic has forced doors temporarily shut to try to curb the spread of the virus. Executives of companies ranging from Dick’s Sporting Goods to Bed Bath & Beyond have been vocal recently about trying to restructure their leases, as they look to cut costs. 

With $0 in sales coming from their bricks-and-mortar locations, a number of tenants including apparel maker Gap, office supply chain Staples and fitness operator Equinox have also not paid rent, dealing their landlords another headache. 

Vornado Realty Trust, one of the biggest commercial landlords in Manhattan, said Monday when it reported first-quarter earnings that it collected only 53{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of April rents from its retail tenants. 

U.S. mall owners with a higher proportion of so-called nonessential tenants had collected just around 10{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} to 25{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of rents by mid-April, after payments were due, according to estimates from commercial real estate services firm Marcus & Millichap. 

RCS confirmed it is working with Untuckit. A spokesperson from Untuckit declined to comment. 

Untuckit, which started selling men’s shirts online in 2011 before opening its first shop four years later, now has more than 80 locations throughout the U.S. and Canada, including in high-end shopping malls such as Westfield Garden State Plaza in New Jersey and the Mall of America in Minnesota. 

Now, as many more department stores will likely be shut permanently, some retailers in malls could be looking to use their cotenancy clauses to renegotiate deals, too, CNBC previously reported. 

Broadly, the clauses will say something along the lines of: If less than 80{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of space is occupied at a property at any given time, or if a major, anchor tenant like a department store goes dark there, the tenant is allowed a break in rent. Or the tenant is given the ability to terminate a lease early. The clauses are meant to protect tenants, such as Untuckit, when circumstances happen that are outside of their control. 

“Retailers are going to exercise this, there is no question about it,” Steven Silverman, senior vice president of Investment Advisory & Brokerage Services at Friedman Real Estate, said about the clauses. “That could be the saving grace for a lot of retailers on the brink.” 

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