Playtime Is Over; Toys R Us Closes Its Remaining 735 Stores Nationwide
Beloved by kids and landlords, but largely shunned by consumers this past holiday shopping season, Toys R Us has officially announced it is winding down operations and closing 735 stores, encompassing an estimated 29.3 million square feet of mostly big-box retail space.
The Wayne, NJ-based toy retailer already had closed or had planned to close 8.5 million square feet of its brick-and-mortar stores as part of the Ch. 11 bankruptcy reorganization it initiated last September. This latest move by a major player in the commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – impacts nearly 33,000 employees.
It also wipes out about $1 billion in value of U.S. and Philadelphia commercial real estate properties, according to Toys R Us estimates of the difference in value of 791 occupied vs unoccupied stores. The appraised value of the stores unoccupied was listed at $1.55 billion. Toys R Us owns 273 of those stores and either leases or ground leases the other locations.
“I am very disappointed with the result, but we no longer have the financial support to continue the company’s U.S. operations,” said Dave Brandon, chairman and CEO of Toys R Us, in announcing an “orderly process to shutter” its U.S. operations.
This CoStar report on the Toys R Us closing and its effect on national and Philadelphia commercial properties is being offered through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Despite the closing announcement, there still is a chance up to 200 U.S. stores among the firm’s national and Philadelphia commercial real estate listings could remain open. Toys R Us is negotiating a deal for its Canadian operations and the bidder is reported to be interested in a transaction that could combine up to 200 of the top performing U.S. stores with the retailer’s Canadian operations.
A spokesperson for Van Nuys, CA-based toymaker MGA Entertainment recently confirmed CEO Isaac Larian and affiliated investors have made a bid for the retailer’s Canada operations.
“If there is no Toys R Us, I don’t think there is a toy business,” Larian said in a statement. “Toys R Us Canada is a good business. They run it efficiently and have good leadership. At the right price, it makes economic sense.”
While discussions continue involving this major development in the U.S. commercial real estate market, including Philly office space, Philly retail space and Philly industrial space, Toys R Us is seeking court approval to implement the liquidation of inventory in all the U.S. stores, subject to a right to recall any stores included in the proposed Canadian transaction.
Although Toys R Us officials said they did not foresee this outcome dealing with its U.S. and Philadelphia commercial real estate listings when it initially filed for bankruptcy reorganization last fall, the timing of the bankruptcy heading into this past holiday shopping season appeared to contribute to a negative perception among shoppers regarding the retailer’s viability.
The retailer reported dramatically lower than expected holiday sales at its stores in its U.S. and Philadelphia commercial real estate properties, a factor on which the company had been counting to bolster support among its creditors, the company detailed in the bankruptcy court filing.
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