Winn-Dixie Withholding Rent of Closed Stores: Report

Jacksonville, Fla. - Winn-Dixie Stores here is reportedly refusing to pay rent on some shuttered locations unless landlords agree to lease buyouts.

John B. Levy, a commercial mortgage banker based in Richmond, VA., told SN he has spoken to several Winn-Dixie landlords in three Southeastern states who said the company has stopped rental payments at approximately 50 locations, most of which are in strip shopping centers and all of which have been previously closed.

"Winn-Dixie has asked landlords to negotiate buyouts of remaining lease terms," Levy said. "Landlords who won't agree to negotiate buyouts are not receiving further rent."

Winn-Dixie officials declined to comment on the report when contacted last week by SN.

Levy has written a monthly column on commercial real estate issues for Barron's for the past 15 years.

He told SN Winn-Dixie adopted its new approach late last fall. "The company seems to have a new strategy: playing hardball. If landlords won't let it out of leases, the company stops paying rent, which is a big concern to landlords as well as developers."

Levy said leaseholders usually have three options. "They can operate stores and pay rent; close the stores and continue to pay rent; or negotiate a buyout price with the landlord to close the store and stop paying rent.

"So it was rather startling to me to learn what an old-line grocery company like Winn-Dixie, which is highly respected, is doing."

Based on his discussions with landlords, Levy said some have reached buyout agreements with the retailer while others have not. He said he was not aware if any had filed suit against Winn-Dixie.