In Toys “R” Us Bankruptcy, A Rare Opportunity

Large-scale retail bankruptcies and liquidations mean large-scale business disruption, of course. However, they can also present opportunities for both investors and retailers. A prime example is presented by the collapse of Toys “R” Us.

Specifically, A&G Real Estate Partners will conduct an auction of 123 owned and ground-leased Toys “R” Us and Babies “R” Us properties in 29 states on August 13 and 14. The auction will be conducted at the Midtown Manhattan offices of Kirkland & Ellis LLP, the debtors’ counsel. The deadline for bids is this Tuesday, August 7.

“This latest auction presents a rare opportunity for buyers to advance their real estate strategies with well-located, high-visibility big-box sites that can work for single-users or be subdivided,” said Emilio Amendola, co-president of Melville, NY-based A&G Realty, which has already auctioned off more than 130 Toys “R’ Us locations.

“Rarely do these many prime retail properties become available all at once,” Amendola continued. “As with our prior, well-attended auctions for Toys ‘R’ Us sites, we anticipate a robust response to this group of properties.”

The properties include standalone Toys “R” Us and Babies “R” Us locations, as well as side-by-side or combined stores featuring both nameplates. Some of the sites are freestanding, while others are located in shopping centers. They include 112 owned and 11 ground-leased properties, ranging in size from 20,000 to 65,000 square feet.

For A&G, the Toys “R” Us assignment was the second large-scale retail-related disposition it has handled in the past three months. In early May, the brokerage announced that it had been retained to dispose of all of the real estate assets of The Bon-Ton Stores Inc., on behalf of a joint venture between Great American Group, Tiger Capital Group, and Bon-Ton’s second lien noteholders.

The assignment included 230 owned, ground-leased and leased Bon-Ton locations under various nameplates, five office properties and four distribution centers.

The examples set by these liquidations don’t apply only to retail real estate. Writing this past June in the Journal of Corporate Renewal, the official publication of the Turnaround Management Association, A&G principal Jon Graub pointed to other sectors as well.

“Disruptive change certainly is afoot not only among mall specialty stores, junior anchor tenants, and department stores, but also in sectors as diverse as hospitals, higher education, and grocery,” wrote Graub. “A Venn diagram charting the forces of change in all of these areas would show considerable overlap.”

From the standpoint of a turnaround professional, he continued, the appropriate response is “often quite similar to what has occurred in retail. Along with other measures, it requires an unrelenting focus on optimizing the value and productivity of the client’s real estate portfolio.”

For comments, questions or concerns, please contact Paul Bubny