A Burlington and a Bed Bath & Beyond store.
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bed bath beyond Locations across America will soon be replaced by Burlington shops Outpost and a host of other businesses after the failed homewares retailer auctioned off its leases as part of its bankruptcy proceedings, court filings show.
The doomed wholesale market selected bidders for 109 of its leases after an auction on Monday. Off-price giant Burlington agreed to take over 44 of the sites for $12 million, most of the leases, according to filings filed late Tuesday.
Burlington secured six additional leases outside of the auction process for $1.53 million, bringing the total number of locations to 50 for $13.53 million, according to records.
Many of the locations are considered “prime,” said Bill Read, executive vice president of commercial real estate firm Retail Specialists. Bed Bath’s rental auction offered grow-mode retailers an opportunity to grab space in prime locations despite the lack of quality commercial real estate.
“Overall, the Bed Bath & Beyond locations were some of the best I’ve seen. They’re typically located in large community centers with Target as the anchor and several other desirable anchor tenants in the mall,” Read told CNBC.
“This generally happens in established, mature markets that have a proven track record of generating high revenues,” he continued.
Several other retailers snapped up the leases. Here is a list of the top winners:
- Burlington Coat Factory: 50 leases for a total cost of $13.53 million.
- Michael’s: Nine leases for $2.55 million.
- Haverty: Four leases for $468,334.
Other winners include grocers, premium furniture stores and discounters. Macy’s paid $1.2 million for a lease in chic Winter Park, Fla. for a potential Bloomingdale’s location, and Barnes & Noble secured a lease in Concord, North Carolina for $129,015.
Landlords other than these companies won 37 of the leases, the second largest percentage after Burlington. These landlords can now find their own tenants and potentially fetch a higher rental price than they could through the auction process.
The leases apply to both the Bed Bath & Beyond and Buy Buy Baby locations. The leases on Buy Buy Baby’s outposts could be repossessed depending on what happens at an auction for the chain’s assets, Bed Bath & Beyond said in a court filing.
The leases sold relate to stores ranging in size from 14,000 to 92,000 square meters.
Bed Bath & Beyond raised $24.41 million at rental auction. A portion of these proceeds will likely be used to pay unpaid rent at the locations and the remainder will go to Bed Bath & Beyond to pay the retailer’s numerous creditors.
When Bed Bath & Beyond filed for bankruptcy in late April, the retailer had 468 leases, 153 of which were auctioned off earlier this week, records show. Only 109 of these were successfully advertised.
The retailer had said in court filings that there could be another wave of rental auctions. It’s unclear if that process is underway or what will happen to the additional leases that were not auctioned off this week.
Personal bankruptcies and off-price expansion
The influx of available stores comes as the shopping center vacancy rate fell to 5.6% in the first quarter of this year, the lowest since commercial real estate firm Cushman & Wakefield began tracking it in 2007.
The lack of available retail space can hinder businesses looking to expand. But retail bankruptcies can present a unique opportunity to secure space they otherwise would not have access to.
When Burlington reported results for the three months ended April 29, the company said it plans to open 70 to 80 net new stores in fiscal 2023. The plan is to open even more in the years to come.
During a call with analysts, CEO Michael O’Sullivan said the company was keeping an eye on “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 strengthen our new store pipeline,” O’Sullivan said.
“Our hope is that in 2024 and 2025 some of the availability we’re seeing from personal bankruptcies will give us the opportunity to open more,” he added.
Burlington’s decision to buy the Bed Bath & Beyond leases wasn’t its first foray into insolvent lease auctions, the chief executive said on the conference call.
“We have a very strong real estate team that has a lot of experience in dealing with private client insolvencies. Many of our most successful and productive businesses were once Circuit City, Toys R Us, Sports Authority, Linens ‘N Things,” said O’Sullivan, listing a number of other failed retailers that came before Bed Bath & Beyond.
“Some of our best stores have come out of forked Kmart or Sears locations,” he added.
Read, executive vice president at Retail Specialists, said it was “no surprise” that Burlington was the lead bidder for the Bed Bath & Beyond leases.
“Burlington is in aggressive growth mode, these are fantastic locations and they’re getting good value for money,” Read said. “Companies like Ross and TJX already have enough stores in their fleet that they didn’t have to be as aggressive in an auction to acquire new stores, but it makes sense for Burlington to be aggressive in trying to meet their desires for the number of stores branches to fulfill.”
Read added, “They’re getting reasonable rents, they’re getting great locations, they’re getting great tenant relationships, and they’d probably be in a bidding war with other retailers for higher rents for those locations if they were outside of an auction.”