Who's Replacing Bed Bath & Beyond's Closed Stores?
Bed Bath & Beyond has identified the winning bidders for 109 of its store leases, with Burlington Stores set to secure the majority.
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Moving on to the day's issue. We're discussing the home goods giant, Bed Bath & Beyond, which has recently auctioned its leases as part of its bankruptcy proceedings. The results are in, and we'll delve into why this matters.
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BANKRUPT BUT VALUABLE
Here’s Who is Moving into Bed Bath & Beyond's Shuttered Stores
As part of its bankruptcy process, Bed Bath & Beyond has auctioned off its leases, paving the way for Burlington Stores, among other businesses, to occupy these locations across the US, according to court documents.
Auction outcome: Auction results: Following last week's auction, Bed Bath & Beyond selected winning bids for 109 leases. Burlington, the off-price retailer, secured the most, acquiring 44 locations for $12M and an additional six leases for $1.53M independently, totaling 50 sites for $13.53M. Other winners included Michael's with nine leases for $2.55M, Haverty with four for $468,334, and notable victors Macy's and Barnes & Noble.
Lease details: Landlords, aside from these companies, won the next largest portion of leases (37) after Burlington. This allows them to find their own tenants, potentially yielding a higher rent price than the auction. Leases extend to both Bed Bath & Beyond and Buy Buy Baby locations. The store sizes of the sold leases vary from 14,000 SF to 92,000 SF. The auction generated $24.41M in revenue for Bed Bath & Beyond, part of which is expected to settle unpaid rents at the locations.
Premium locations: Bed Bath & Beyond's auctioned locations have been characterized as "prime real estate" by Bill Read, Executive Vice President of Retail Specialists. As per Read, these premium spots offer emerging retailers a rare chance to obtain leases amid a lack of high-quality commercial real estate. These sites, often in large community centers with Target and other desirable tenants, are some of the best available, as stated by Read in a CNBC interview.
Bankruptcy background: Bed Bath & Beyond succumbed to bankruptcy in April following a challenging business period and an unsuccessful attempt at transitioning to e-commerce. The retailer's situation was worsened by its emergence as a "meme stock" and ensuing store closures. Overstock.com recently purchased its brand name, intellectual property, and e-commerce platform for $21.5M, subsequent to U.S. bankruptcy court approval.
➥ THE TAKEAWAY
Why it matters: The shift in retail dynamics represents both a risk and a strategic opportunity. With shopping center vacancies hitting an all-time low of 5.6% in Q1 this year, retail bankruptcies such as Bed Bath & Beyond's provide unique opportunities for businesses to acquire previously unattainable spaces. Burlington, for example, has leveraged these circumstances for expansion, planning to open 70-80 new stores in fiscal 2023 and even more in the following years.
CEO Michael O’Sullivan believes such retail bankruptcies will strengthen their store pipeline. However, while such aggressive growth strategies can offer lucrative prospects, they must be carefully evaluated for their potential impact and risks in the evolving business landscape.
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