Judge Forces Unprofitable Business to Stay Open

The owner of the Teavana franchise discovered it was an unprofitable business, but 77 of the stores must stay open anyway.

I can understand forcing an unprofitable business to honor a lease agreement to some extent. If a poor renter can get in trouble for breaking a lease, what not Starbucks. But commercial real estate has always been a risky business. This judge has changed the rules. If this ruling stands, commercial real estate is going to find it harder to attract retail businesses. We might see them have to offer no-lease arrangements.

The New York Post reports, “Judge bars Starbucks from closing 77 failing Teavana stores.”

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An Indiana judge has taken an unusual step and temporarily barred Starbucks from closing 77 failing Teavana stores in Simon Property Group malls because the real estate giant was less able to handle the financial pain.

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The retail failures have left landlords scrambling to find new tenants and retailers in the difficult position of breaking their leases.

Still, it is rare that a judge orders a retailer to keep stores open, retail experts said.

“I’m somewhat shocked by the ruling,” said real estate lawyer Joshua Stein. Welch “catalogues every possible detriment to Simon as a result of having vacant space,” Stein said, adding, “That’s part of a job description of owning real estate. You deal with it and don’t get injunctions to have your tenant continuing to operate.”

Read the entire New York Post story.

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