Sears Holdings – Landlords Objects to Store Closing Sales, Citing Sears Request for Blanket Invalidation of Lease Terms

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October 22, 2018 – Brixmor Property Group, C. E. Johns Company, Centennial Real Estate Co., S-Tract and The Macerich Company (together, “the Landlords”) filed an objection to Sears Holdings’ store closing sales and its assumption of a liquidation consulting agreement [Docket No. 23]. The objection [Docket No. 228] asserts, “Landlords do not seek to deny the Debtors’ ability to conduct reasonable sales of its inventory. The Landlords do object to the Store Closing Motion’s request for a blanket invalidation of lease terms and local laws that restrict such sales. This blanket denial of reasonable restrictions on store-closing activities, as specifically negotiated in the Leases and as permitted under state law, is unnecessary, inappropriate, and inconsistent with Sections 363 and 365. Pending finalizing any side agreement with the Consultant, the Store Closing Motion and Consultant Agreement contain provisions that are objectionable to Landlords, requiring Landlords to object to the Store Closing Motion, Consultant Agreement, and proposed sale guidelines (the ‘Sale Guidelines’), and request that this Court incorporate the protections and modifications….There is a clear policy to preserve the rights of Landlords under their Leases, and Debtors do not need to render legitimate provisions of the Leases unenforceable to conduct closing sales. Until such time as the Landlords can negotiate appropriate agreements with Consultant for the conduct of the closing sales, Landlords object to the Store Closing Motion, Sale Guidelines and Consultant Agreement….It is critical for Landlords to maintain the proper use and product balance required under the Leases. Introduction of non-debtor inventory potentially violates the use clauses and exclusivity provisions in the Leases, as well as other leases in the Center. Even if the Debtors and Consultant represent that the goods will be of ‘like kind and quality,’ augmentation potentially violates the Leases and state consumer protections laws.  Landlords should not bear the risk of such violations.”

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