Borders’ real estate position: A Q&A with DJM Realty

On Feb. 17, Borders Group announced that it had retained Melville, N.Y.-based DJM Realty, a Gordon Bros. Group Co., to manage the disposition project of the 200 stores that would be shuttered as a result of the bookseller’s just-reported Chapter 11 bankruptcy filing.

Chain Store Age talked with Andy Graiser, co-president of DJM Realty, about the assignment, and how a better Borders might emerge from the process.

Tell me about the Borders assignment, including your timeline and strategy for disposition.
We are currently marketing the 200-plus stores that are closing in a variety of markets, from Alaska to Hawaii, Massachusetts to Montana and all points in between. These stores are in some terrific markets, including 35 stores in California that we’re closing. We will be marketing the stores over the next eight weeks; the liquidators have begun their going-out-of-business sales which will be occurring as we continue to market and liquidate.

Plenty of interest being generated?
We have already received a lot of interest in the locations. So, the next step is exchanging information with the interested retailers, as they begin to gather lease data and terms and run their internal models to see if the locations could work for them. And this all has to be done in a very short timeframe. These retailers have to make decisions in the next 8 weeks for stores that average 25,000 sq. ft. 

What types of retailers are interested in the Borders stores?
While we can’t identify the specific chains, I can tell you that we are getting interest from all categories of retailers, from supermarkets to furniture stores to gyms to apparel. Borders competitors aren’t in the mix yet, but I’m sure they’ll be there. From a marketing standpoint, the rumors about Borders’ impending bankruptcy have been swirling for a while, so retailers have had a chance to do some homework on the various sites and now it’s a matter of collecting specific data.  This will speed the process.

What happens at the end of the eight-week period?
Any site that does not have a completed transaction will go back to the landlord.  Borders’ bankruptcy relieves them of the liability for those locations so it becomes the landlords’ responsibility to market and fill the spaces.

The sites range from freestanding buildings, in-line locations, power center sites, urban locales, multiple-floor stores -- so it’s a mix of real estate that will lend itself to a variety of retailer types.

I understand another 75 stores could potentially be added to the assignment? 
Yes, that’s right. There could be at least another 70 to 75 stores to liquidate over the next 30 days. We are currently working with a number of landlords to renegotiate the leases; during the next 30 days we will save some stores and others will go into the next round of closings.

This is a very common procedure, as retailers in bankruptcy typically go through more than one round of store closings.

What does all this mean for Borders in the future?
Borders is being aggressive and fast in right-sizing their business. And that is exactly the right thing to do.  I look at it as a company that has come to the realization of what the industry is about and becoming proactive in managing their business. The fact that Borders is being quick with their decisions is half the battle toward coming out of bankruptcy.