The not so giant retailer, KB Toys, filed for bankruptcy last week. So what's the estimated real estate bottom line impact?
How about an estimated annual rental loss of $39 Million and a potential income value loss to property owners of $$2.3 Billion?
According to published reports,( WSJ, NYT), this one firm had 277 mall based stores, 40 stores in "strip malls" and 114 outlet stores for a total of 431 retail locations.
According to the 2007 Retail Tenant Directory the retail stores they operated were in the 3,000 SF to 5,000 SF range. Not very large.
If the average stores was 4,500 SF and the estimated "average rental rate" was $20.00* psf, NNNN this would equal $90,000 per store, per year. For the total 431 stores this equals $38,790,000 or roughly $39 million in rent!!
Lease rental payments that are no longer being paid.
The big question today is now how will this space, 431 stores x 4,500 SF or 1,939,500 SF (or 44 acres of floor space), now be absorbed? And by whom? And when?
A retail income stream of $39 million, NNNN, at an estimated cap rate of .06% equals $2,340,000,000 in loss of "income value" to the property owners. $2.3 Billion.
Will the US Bankruptcy Court now be successful is liquidating the former " lease assets" of KB Toys? Many leases were probably signed years ago and may have favorable terms and conditions. But who is going to step up to the plate and purchase the lease assets in these capital-short times?
It's going to be a bleak Christmas season for many mall and strip center owners and investors. More headaches for Wall Street.
* This is a very low and conservative number. Prime mall space in great locations can be as high as $65.psf nnn.
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