As some aging retailers continue to struggle to adapt to the fierce pace of change, 2018 is continuing the trend of high levels of retailer bankruptcy activity, most notably with Toys”R”Us and Bon-Ton. In many cases, the real estate and spaces they leave behind can still be viable or even irreplaceable. When those opportunities present themselves, the retailers who are prepared to take advantage will create immediate value by acquiring the space at a discount. But, as with any “deal,” there are nuances and complexities lurking in the shadows that must be discovered and evaluated carefully.
We sat down with Chris Routledge, senior vice president in our Atlanta office, to discuss how his team has helped their clients discover opportunity where others see despair by helping them navigate the murky waters of retailer bankruptcy auctions.
What strategies are you using to help your clients take advantage of retail bankruptcy auctions?
We are actively working retailer bankruptcies to our client’s advantage by evaluating the real estate that may be coming available, taking into consideration any monetary defaults that would have to be cured, and looking for those discounted rents in an otherwise healthy shopping center and market.
What are the possible pitfalls that you have helped your clients navigate?
The purchasing of leaseholds (the rights to property by means of a lease) can be a risky endeavor, as you have to put up non-refundable deposits, should you win the auction. Therefore, doing enough due diligence on the front end, including flying out to visit sites ahead of time and becoming deeply familiar with the lease that is in place is crucial in order to understand what it is you’re buying or inheriting.
How do you help your retailer clients evaluate the opportunities against their current strategies?
The research begins with basic mapping of existing stores and potential acquisitions, looking for those sites that align with the retailer’s expansion strategy. Deeper analysis is conducted when we evaluate each possible match, looking at retailer sales in the area as well as a customized demographic and psychographic analysis of each trade area, all of which is housed in a web-based dashboard to give our client the full picture of each site’s viability.
What advice would you give to retailers exploring the idea of bankruptcy auctions as a way to add value to their portfolio?
Now is the time to get your team of expert advisors and a bankruptcy fund in place. When chasing sought after real estate at a discount, having your local and experienced retail real estate broker, bankruptcy attorney, and retail attorney all in sync is essential, as time is absolutely of the essence in these scenarios.
For more information on how to capitalize on retail bankruptcy auctions, contact Chris Routledge.
About Chris Routledge
Chris Routledge, senior vice president in SRS' Atlanta office, focuses on regional and national platform expansions for retailers and is a well-regarded top producer in the Atlanta retail real estate industry.