Fifth Avenue Filene’s Is Dead on Arrival

In case you were still, misguidedly, holding out hope that a Filene’s Basement/Syms store was making its way to Midtown Manhattan, rest assured that your dream is dead.

We’re talking to you, bargain shopper who didn’t get the message when the Fifth Avenue store failed to open its doors earlier this year, despite signs cheerily indicating the contrary. You, who refused to believe that Syms Corp. really would follow through on that whole liquidation thing in Chapter 11. (Don’t you read Bankruptcy Beat?)

Syms Wednesday filed a motion with the Wilmington, Del., bankruptcy court seeking permission to dole out $2.6 million to the property’s landlord, 530 Fifth Acquisitions LLC. The so-called “termination payment”—already in escrow and ready to be handed over—enables Syms to walk away from the lease without having to reject it in bankruptcy, a process that could cost it millions in potential damages.

Syms struck the lease deal back in August 2010 and heralded its expected opening this year on a strip of Fifth Avenue close to Rockefeller Center. But the high-profile location—34,000 square feet spread over three floors, according to Crain’s New York Business—was not to be for Syms, which purchased Filene’s out of bankruptcy two years ago.

Syms had expected to see synergies from the acquisition but instead fell into financial trouble, suffering “significant” operating losses as the marriage of the two brands went south, according to initial court papers in the case. This was all bad news for New York shoppers.

“Following the deterioration of its business and economic condition…Syms determined that opening a new store in the leased space would not be in the best interests of Syms or its stakeholders,” the company said in court papers.

By August 2011, while signs in the property’s windows dangled the promise of discount deals to come, a different story was playing out behind the scenes. Syms was negotiating with the landlord to try to sever the deal, with arguments between the pair centered on whether Syms had defaulted. The landlord continued to claim Syms  defaulted, and Syms continued to deny it, but both parties somehow struck a settlement deal on Oct. 27. A few days later, Syms was in bankruptcy.

With its going-out-of-business sales now playing out in the background, Syms is urging a judge to sign off on the lease-termination settlement. It said the deal provides it with “certainty” about the cost of unloading the lease, a peace of mind that rejecting it in bankruptcy wouldn’t provide. The latter option could give way to up to $8.4 million in rejection damages that the landlord would potentially assert, Syms said.

A hearing on the matter has been set for Dec. 28.