Retail Ventures CND Inc. has been retained by Bed Bath & Beyond Canada LP and Alvarez & Marsal Canada Inc. (court monitor), to facilitate the sale of leases or other property rights for 54 leases of Bed Bath & Beyond and the 11 leases of Buy Buy Baby across the country.
Sam Winberg, Principal/Broker of Retail Ventures CND, said the brokerage is working under the direction of Dave Rosenblatt, Partner at Osler, Hoskin & Harcourt, LLP in Toronto, in the process that will conclude on March 31.
“Interested parties can purchase the lease and have the courts endorse the assignment,” said Winberg, who was an original founder of Northwest Atlantic Canada in 1991, which was sold to JLL in 2018.
Retail Ventures CND specializes in tenant representation and has partnered with world class retailers including TJX, Indigo, ULTA Beauty, Nordstrom, Whole Foods and Sporting Life.
“When Bed Bath & Beyond filed (under the Companies’ Creditors Arrangement Act), the Monitor reached out to us because we had experience doing this and have asked us to help them in trying to create value from the 65 leases that Bed Bath & Beyond and Buy Buy Baby have.
“During (court) filings, the Monitor’s job is to try to create value to pay debts of the filing company.”
One way is to do an in-store liquidation. The other way would be seeing if there is value in any of a company’s leased properties.
“In other words, would third-parties, retailers or landlords, look at the assets that they own, assets being leases, and do they have value? Are they under market? Do they have lots of term left? Maybe they have certain rights or restrictions on a property that a landlord or a tenant may find of value? It would be the value of the lease,” explained Winberg.
“So our job is to generate interest in the leases. We’ve already had about 15 or 16 companies contact us. They would receive a confidential spreadsheet after they sign an NDA (nondisclosure agreement) which would detail the square footage, the size of the premises, the length of the lease, the rent, fixed options. And then they would notify us of any properties that they had interest in acquiring and then we would get them access to the data room. And the data room would contain the actual leases, waivers, those sorts of things. And then have only until the end of this month to then send us something that satisfies the Monitor, that they’re prepared to pay some remuneration for the assignment of that lease and then prior to the leases that have no interest being disclaimed, the Monitor and the courts would assign leases to interested parties.”
Winberg said in the retail sector not all leases are attractive.
“But we happen to be in an environment now where we’re coming out of COVID and interest rates are going up. There’s not a lot of new development, especially in the larger format. There’s a lot of condominium development where there’s ground floor retail units but if you’re a larger format retailer there’s really been no new stock being built in the last couple of years,” he said. “Construction costs over the last year have gone silly, interest rates are high.
“So if you’re a retailer and can’t find vacant real estate or new built real estate they may very well be interested as part of their growth.”
He said Bed Bath & Beyond and Buy Buy Baby may have some leases with rents below market which would be attractive for retailers who may want to grow.
Winberg said the stores are between 20,000 and 30,000 square feet located primarily in the better power centres across the country in every province.
“Bed Bath was a sophisticated retailer that made good real estate transactions. Unfortunately from an operations perspective they didn’t survive but their leases could live on,” he added.
“Those that have interest should contact Emma at our office emma@retailcnd.com and she will send out an information package with a NDA and once the NDA is executed by the party they will be sent this confidential spread sheet and it will detail what the process is. The time frame on this particular mandate is very short.”
Court documents filed in the Ontario Superior Court of Justice on February 10 under the Companies’ Creditors Arrangement Act indicated that the Bed Bath & Beyond Group has been in financial difficulty for the past several years, suffering significant net losses since 2018.
“Over this period, BBB Canada itself has seen dramatic declines in revenues. In an effort to improve the Bed Bath & Beyond Group’s financial performance, former management embarked on a series of initiatives designed to transform the business. Unfortunately, the COVID-19 pandemic and the broader economic downturn significantly disrupted the Bed Bath & Beyond Group’s operations, putting further financial strain on the entire enterprise, including BBB Canada, and hindering the transformational efforts of management,” said the documents.
“The Bed Bath & Beyond Group’s situation significantly worsened throughout 2022, with declining year-over-year sales in both the United States and Canada, multiple credit rating downgrades, cash flow constraints, and significant inventory reductions. Cash constraints caused delays and stoppages of merchandise shipments to BBB Canada’s stores, causing inventory levels to decrease dramatically.”
As of January 31, BBB LP employed approximately 387 full-time employees and 1,038 part-time employees in connection with its retail operations across Canada.
“The North American retail industry has experienced a period of rapid change and shifting consumer demands over the past number of years. Even prior to the COVID-19 pandemic, retailers like the Bed Bath & Beyond Group faced dramatic declines in retail foot traffic as consumers shifted their spending to online platforms like Amazon and Wayfair. The rapid changes resulted in a surge of retail bankruptcy filings,” said the court documents. “The Bed Bath & Beyond Group was not immune to the foregoing challenges. By 2018, its revenues were declining and it was reporting significant net losses. Recognizing the need to quickly adapt, the Bed Bath & Beyond Group’s former management developed a comprehensive plan to transform its business and position itself for long-term success.
“Unfortunately, the Bed Bath & Beyond Group’s efforts to restructure its operations was interrupted in its early stages by the global COVID-19 pandemic in March 2020. The impact of the COVID-19 pandemic extended beyond the immediate effect of store closures and resulted in global supply chain disruptions and persistent inflation. Ultimately, the Bed Bath & Beyond Group’s liquidity constraints resulted in a significant number of key suppliers either tightening or revoking the ability of the Bed Bath & Beyond Group to access inventory on credit.
“In 2022, the Bed Bath & Beyond Group announced that it had taken steps to address its liquidity constraints and improve its balance sheet and cash flows. The process of remedying the Bed Bath & Beyond Group’s business and financial decline, however, continued to be complex and challenging throughout the Fall of 2022. While the Bed Bath & Beyond Group successfully reduced its accounts payable, raised gross proceeds of approximately US $75 million through an at-the-market offering program, and cleared out a significant portion of its excess private-label goods, inventory issues continued to plague the Bed Bath & Beyond Group through the 2022 holiday season.”
