When CompUSA announced its liquidation, creditors were panicked.
As the landlord on their 200,000 square-foot headquarters lease with almost ten years remaining, we faced a substantial loss. The tenant boldly told us that they would vacate the building gradually and stop paying rent long before their lease matured. They offered a nominal settlement. The country was in a recession, tenants had negotiating leverage, and they assumed that we had no choice.
But we did have a choice. We could give in, or we could fight. We chose to fight. As the largest landlord, we were a prominent creditor. We used our position to rally other creditors and push back hard on the company’s meager offer. We also pushed back at the property level. Although CompUSA was current on base rent, they were delinquent on HVAC excess usage charges. After sending proper notice, we placed the tenant in default and moved to evict them. CompUSA’s lawyers screamed that a court would never evict a large tenant over a relatively minor default. And we countered that their brash, public announcements might offend a Texas judge.
Armed with an understanding of CompUSA’s businesses, we knew that they had to operate on several floors for at least a few more months to protect their liquidation value. We bet that they were unwilling to risk eviction. Our strategy allowed us to negotiate a much bigger settlement than what we would have received without the fight.
And as it turned out, the settlement funds were essential to pay for the building improvements that we needed to land a new 90,000 square-foot lease to re-anchor the building.
