Dollar Tree Corners Market on Party City Spaces

Streamers and banners are coming down at Party City locations across the country, but opportunity is blooming for Dollar Tree and other retailers.

At a bankruptcy auction, Virginia-based Dollar Tree successfully bid on 148 leases owned by Party City, CoStar reported. That easily topped other parties trying to jump on the vacant retail spaces, as there were roughly 250 successful bids overall.

Five Below was also a major player in the bankruptcy auction, successfully bidding on 44 Party City leases. Other bidders coming away with leases include Barnes & Noble, La-Z-Boy and Burlington Stores. The landlords in the deals also successfully won the bidding for more than a dozen of the leases.

Dollar Tree was similarly prominent in the recent bankruptcy auction for 99 Cents Only sites in California.

The bidding process was for “designation rights,” according to Retail Specialists executive Bill Read. That type of opaque transaction gives the buyer more leeway to renegotiate leases, empowering the purchaser to sell or reject the lease if it can’t agree on a path forward with the landlord.

Court approval is needed for the bidding process to be finalized. A hearing is set for the end of the month.

The lease-auction process resulted in about $14.5 million in gross proceeds, Party City announced. There’s still a long way to go, however, as A&G Real Estate Partners — which is advising Party City in its Chapter 11 bankruptcy case — put almost 700 leases up for auction.

Party City’s struggle to find bidders for more than half of its leases is emblematic of how the retail industry continues to grapple with changing consumer behavior and the effects of the pandemic. The large-format spaces common in Party City’s portfolio is an added complication.

Outside of the physical footprint, Party City has found a buyer for its intellectual property and related wholesale operating intangible assets. New Amscam, an affiliate of manufacturer Ad Populum, emerged as the winning bidder with a $20 million net value bid, including $16 million in cash and additional consideration.

— Holden Walter-Warner