Retail · Backfill demand
Party City Put 695 Leases on the Market. Here Is Who Took Them
The Party City liquidation auctioned nearly 700 leases in 44 states. The bidders tell you more about retail demand than the closure did.
Party City filed for Chapter 11 in January 2023, emerged that September with less debt and a smaller footprint, and filed again on 21 December 2024 in the Southern District of Texas. The second time it wound down. By February 2025 the stores were closed.
What happened next is the part worth reading. A&G Real Estate Partners took roughly 695 leases across 44 states to auction, in sizes from about 7,000 to 46,000 square feet across freestanding pads, power centers, strip centers and street retail. Nearly 8.4 million square feet hit the market at once.
It did not sit
Five Below acquired designation rights on 44 leases in February 2025, reported at $2 million upfront plus about $70,000 per lease, and used them to enter the Pacific Northwest, opening eight of them in November 2025. Dollar Tree took designation rights on 148. Burlington, Barnes & Noble, Books-A-Million, Rack Room Shoes and La-Z-Boy took others. The intellectual property and wholesale business went separately to New Amscan, an Ad Populum affiliate, for $20 million.
Read the bidder list again. Every one of those names is a stronger credit than the tenant that vacated. That is the mechanism people miss when they read a closure headline: bankruptcy does not remove demand for the space, it transfers well-located real estate from a weak covenant to a stronger one, usually at a higher rent.
The rent reset is the whole story
Landlords who lived through the Bed Bath & Beyond wave reported the same thing. Kimco disclosed a blended spread in the low forties percent on its Bed Bath backfill book. Brixmor talked openly on earnings calls about bankruptcy being an opportunity, with rent growth on recaptured space running far above the expiring rate.
The reason is simple arithmetic. A lease signed in 2013 and extended through options is below market by 2025. Recapturing it resets to today's rent, and the incoming tenant pays it because well-located neighborhood retail is genuinely scarce, new supply has been minimal for a decade.
What this means when you underwrite
Two things. First, a co-tenancy scare in a center with good bones is often an entry point rather than a problem, provided you can carry the downtime and fund the allowance. Second, and less comfortable: if you own the center, your below-market leases are worth more recaptured than renewed, and your rollover schedule is an opportunity list as much as a risk list.
Neither conclusion survives if the fundamentals are weak. The bidders in the Party City auction were selective, the phrase used across the coverage was "where it's well-located and not cannibalising the existing footprint." Poorly located space did not clear.
Model the rollover: Strip Plaza underwriting, up to 20 tenants, staggered expiries, TI and commissions, and what renewal probability costs you.
Related notes
How to read this. These are working notes. Figures come from public reporting and from the models on this site, and market conditions change, check anything time-sensitive against the source before you rely on it. Nothing here is investment, tax or legal advice, and no note is a substitute for diligence on a specific property.
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