Bed Bath & Beyond store locations bought by Burlington Stores

A Burlington and a Bed Bath & Beyond store.

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Bed Bath & Beyond locations across America will soon get replaced by Burlington Stores outposts and a spread of other businesses, after the failed home goods retailer auctioned off its leases as a part of its bankruptcy proceedings, court records show. 

The doomed big-box store chosen bidders for 109 of its leases after a Monday auction. Off-price giant Burlington agreed to take over 44 of the locations for $12 million, the biggest share of the leases, records filed late Tuesday show. 

Burlington secured six more leases for $1.53 million outside the auction process, bringing the full variety of locations to 50 for $13.53 million, records show. 

Lots of the locations are considered “top notch,” said Bill Read, executive vice chairman of business real estate firm Retail Specialists. The firm provides retailers in growth mode a possibility to snag leases in prime locations amid a dearth of quality industrial real estate.

“In aggregate, the Bed Bath & Beyond locations were a few of the very best that I’ve seen change into available. They’re normally in large community centers with Goal as an anchor and multiple other desirable anchor tenants within the shopping mall,” Read told CNBC. 

“These are generally in well-established, mature markets which have a proven track record of generating high sales,” he continued.

Several other retailers snatched up the leases. Here’s a listing of the highest winners: 

• Burlington Coat Factory: 50 leases for a complete price of $13.53 million.
• Michael’s: Nine leases for $2.55 million.
• Haverty: 4 leases for $468,334.

The opposite winners include grocers, premium furniture stores and discounters. Macy’s paid $1.2 million for a lease in ritzy Winter Park, Florida, for a possible Bloomingdale’s location, and Barnes & Noble secured a lease in Concord, North Carolina, for $129,015. 

Landlords other than those corporations won 37 of the leases, the next-largest portion after Burlington. Those landlords can now find their very own tenants and potentially get a better rent price than they’d find a way to inside the auction process.

The leases are for each Bed Bath & Beyond and Buy Buy Baby locations. Leases for the Buy Buy Baby outposts may very well be clawed back depending on what happens at an auction for the chain’s assets, Bed Bath & Beyond said in a court filing. 

The leases sold are for stores that range in size from 14,000 square feet all of the option to 92,000 square feet. 

Bed Bath & Beyond raked in $24.41 million from the lease auction. A portion of those proceeds will likely go to unpaid rents on the locations and the remainder will go to Bed Bath & Beyond to pay the retailer’s many creditors. 

When Bed Bath & Beyond filed for bankruptcy in late April, the retailer had 468 leases to its name, and 153 of them were dropped at auction earlier this week, records show. Successful bids went through for less than 109 of them.

The retailer had said in court filings that one other wave of lease auctions could happen. It’s unclear if that process is underway or what’s going to occur to the extra leases that weren’t auctioned off this week. 

Retail bankruptcies and off-price expansion

The influx of accessible stores comes as emptiness rates for shopping centers fell to five.6% in the primary quarter of this yr, the bottom level since industrial real estate firm Cushman & Wakefield began tracking in 2007.

During a call with analysts, CEO Michael O’Sullivan said the corporate had its eye on “retail bankruptcies.”

“We predict these bankruptcies are prone to have a major impact on the supply of attractive recent store locations … we’re confident that these bankruptcies will strengthen our recent store pipeline,” said O’Sullivan. 

“We hope in 2024 and 2025, a number of the availability that we’re seeing from retail bankruptcies will give us the chance to open more,” he added.

Burlington’s decision to purchase Bed Bath & Beyond’s leases wasn’t its first foray into bankruptcy-run lease auctions, the chief executive said on the decision. 

“We have now a really strong real estate team that has a variety of experience coping with retail bankruptcies. Lots of our most successful and productive stores today were once upon a time Circuit City, Toys R Us, Sports Authority, Linens ‘N Things,” said O’Sullivan, rattling off a series of other failed retailers that got here before Bed Bath & Beyond. 

“A few of our greatest stores were created from carved-up Kmart or Sears locations,” he added.

Read, the manager vice chairman with Retail Specialists, said it’s “no surprise” Burlington was the highest bidder for Bed Bath & Beyond’s leases. 

“Burlington is in aggressive growth mode, these are implausible locations and so they’re getting a variety of value for his or her dollar,” Read said. “Corporations like Ross and TJX have already got enough stores of their fleet that they didn’t should be as aggressive in an auction to get recent stores, however it’s perfectly reasonable for Burlington to be aggressive to achieve their store count desires.”

Read added, “They’re getting reasonable rents, they’re getting great locations, they’re getting great co-tenancy and so they’d probably be in a bidding war with other retailers at higher rents for these locations if it was outside of an auction.”