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Steve & Barry's, the discount-clothing chain that collapsed last week, depended heavily on bargain-hunting shoppers and attention-getting celebrity endorsers. But its biggest boosters were the nation's struggling mall owners.

Desperate to fill empty department-store spaces, mall owners courted the retailer with fat payments to outfit its cavernous stores. Those checks, not clothing profits, fueled the company's runaway growth, according to people familiar with the company's finances. When the payments slowed, Steve & Barry's collapsed.


Cullinan Properties Ltd. of Peoria, Ill., leased space to Steve & Barry's at one of its dozen retail centers. Frank Natanek, Cullinan's president of real estate and marketing, declines to discuss details of that lease. "Most of the time," he says, deals with Steve & Barry's "are loss leaders. You might get $3 to $8 rent [per square foot per year], and pay them $30 to $60 in tenant allowance, so it's kind of a wash. You would not normally do a deal like that, but you'd do it as a traffic generator," or to keep from having to give other tenants rent breaks because of the vacancy.

On some deals, the upfront payment exceeded the total rent to be paid on the life of the lease, according to one executive at the retailer.


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