A&G to Auction 700 Party City Leases
Leases in more than 40 states will be sold off, pending approval from a bankruptcy court.
The party is ending — and soon. A total of 695 leases on Party City stores in 44 states will go to auction, likely in early February, pending the approval of a bankruptcy court. A&G Real Estate Partners, advisers to Party City Holdco Inc., announced the step on Jan. 3.
A&G characterized the leases as representing a large, diverse portfolio of stores, often in high-traffic locations, in urban and suburban retail markets. In addition, the leases are for both freestanding stores and locations in power centers, strip centers and city street locations. A&G noted that no fee-owned properties will be included in the auction.
The company further asserted that with box sizes ranging approximately from 7,000 to 46,000 square feet, the spaces’ suitable uses may include gyms and entertainment tenants, dollar stores, local specialty retailers, furniture stores and medical offices.
States with the most Party City locations are Arizona (15), California (82), Colorado (13), Connecticut (12), Florida (59), Georgia (27), Illinois (37), Indiana (16), Massachusetts (20), Maryland (20), Michigan (20), Missouri (12), North Carolina (21), New Jersey (26), New York (46), Ohio (23), Pennsylvania (25), Tennessee (14), Texas (72), Virginia (19), Washington (16), and Wisconsin (10).
Going-out-of-business sales are now under way at those retail locations whose leases will be auctioned. Party City Holdco is retaining more than 95 percent of its 12,000 employees for an unspecified period to assist with the winding-down process.
The nearly 40-year-old retailer’s owner, PCHI, as well as certain of its subsidiaries, voluntarily filed Chapter 11 in the U.S. Bankruptcy Court on Dec. 21. At that time, PCHI cited “an immensely challenging environment driven by inflationary pressures on costs and consumer spending, among other factors.”
The bid deadline and auction likely will be in early February. The auction is slated to take place at the Manhattan office of PCHI’s legal counsel Paul, Weiss, Rifkind, Wharton & Garrison LLP.
Not a bad time
As part of a restructuring effort, PCHI tapped Newmark’s Excess Space Retail Services Inc. in March 2024 to oversee site selection and lease renewals and optimize the retail locations.
That followed a Chapter 11 proceeding filed in early 2023. By that October, the restructuring process eliminated nearly $1 billion in debt, accompanied by a $562 million lending facility.
A&G has substantial experience with preparing for the mass auction of retail leases. In 2023, the firm was selected to handle the process for hundreds of Bed Bath & Beyond and buybuy Baby stores.
And there could be worse times to put the Party City leases up for auction. As participants in ICSC’s annual New York City event told CPE in December, a shortage of available space is constraining absorption in the retail sector. That trend is pushing some retailers to consider space sizes or locations different from what they usually seek.
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