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Burlington Store and Bath and Beyond Bed.
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bed bath behind Sites across america will soon be replaced by Burlington Stores outposts and a host of other businesses, after the failed home goods retailer auctioned off its leases as part of bankruptcy proceedings, court records show.
The doomed superstore selected bidders for 109 of its leases after Monday’s auction. Non-price giant Burlington agreed to acquire 44 sites for $12 million, records filed late Tuesday showed, the largest share of the leases.
Records showed that Burlington secured six more leases for $1.53 million outside of the auction process, bringing the total number of locations to 50 for $13.53 million.
Bill Reid, executive vice president of commercial real estate firm Retail Specialists, said many of the locations are considered “first class”. The company provides growth-mode retailers with the opportunity to lease in prime locations amidst a dearth of quality commercial real estate.
“All in all, the Bed Bath & Beyond locations were some of the best I’ve seen available. They’re usually in large community centers with Target as the anchor and many other desirable shopping center tenants,” Reed said. CNBC.
“These are generally in well-established, mature markets that have a proven track record of achieving high sales,” he continued.
Several other retailers have grabbed the leases. Here is a list of the top winners:
- Burlington Coat Factory: 50 leases, total price of $13.53 million.
- Michael: Nine leases worth $2.55 million.
- Haverty: Four leases in the amount of $468,334.
Other winners include grocery and luxury furniture stores and discounts. Messi It paid $1.2 million for a lease in Winter Park, Florida, for a potential Bloomingdale’s location, and Barnes & Noble secured a lease in Concord, North Carolina, for $129,015.
Owners excluding those companies won 37 of the leases, the next largest share after Burlington. Landlords can now find their tenants and potentially get a higher rental price than they could in the auction process.
Rentals are for both Bed Bath & Beyond and Buy Buy Buy locations. Bed Bath and Beyond said in a lawsuit that the Buy Buy Baby outpost leases could be restored depending on what happens at an auction of the chain’s assets.
Leases sold for stores ranging from 14,000 square feet up to 92,000 square feet.
Bed Bath & Beyond took home $24.41 million from the rental auction. Part of that proceeds will likely go to unpaid rents at the sites and the remainder will go to Bed Bath & Beyond to pay its many retail creditors.
When Bed Bath & Beyond filed for bankruptcy in late April, the retailer had 468 leases to its name, and 153 of them were put up for auction earlier this week, records show. Only 109 of them passed successful bids.
The retailer said in court filings that another wave of rental auctions could occur. It’s unclear if that process is underway or what will happen to the additional leases that weren’t auctioned this week.
Retail bankruptcy and out-of-price expansion
An influx of available stores comes Mall vacancy rates fell to 5.6% in the first quarter of this year, the lowest since commercial real estate firm Cushman & Wakefield began tracking in 2007.
A lack of retail space can deter companies looking to expand. But retail bankruptcies can provide a unique opportunity to carve out space they wouldn’t have access to otherwise.
When Burlington reported its earnings for the three months ending April 29, the company indicated that it plans to open 70 to 80 new stores in fiscal 2023. It aims to open more in the coming years.
During a call with analysts, CEO Michael O’Sullivan said the company is watching “retail bankruptcies.”
“We believe these bankruptcies are likely to have a significant impact on the availability of attractive new store locations … We are confident that these bankruptcies will boost our product line of new stores,” said O’Sullivan.
“Hopefully in 2024 and 2025, some of the availability we’re seeing from retail bankruptcies will give us the opportunity to open more,” he added.
The CEO said on the call that Burlington’s decision to buy the Bed Bath & Beyond leases wasn’t its first foray into lease auctions managed by bankruptcy.
“We have a very strong real estate team with a lot of experience handling retail bankruptcies. Many of our most successful and productive stores today were once in Circuit City, Toys R Us, Sports Authority and Linens ‘N Things,” said O’Sullivan, Rattling a string of other failed retailers that came before Bed Bath & Beyond.
“Some of our best stores are built out of carved out Kmart or Sears sites,” he added.
It’s “no surprise” that Burlington is the largest bidder for Bed Bath & Beyond leases, said Reid, executive vice president of Retail Professionals.
“Burlington is in a strong growth position, these are great locations and they get a lot of value for their dollar,” Reed said. “Companies like Ross and TJX have enough stores in their fleet that they don’t have to be audacious in an auction to get new stores, but it’s entirely plausible that Burlington would be serious about reaching their store count wishes.”
Added: “They get reasonable rents, they get great locations, they get a great joint rent, and they’re probably in a bidding war with other retailers at higher rents for these locations if they’re out of auction.”
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