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Toys ‘R’ Us Didn’t Have to Die

bloomberg.com

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Re: Toys ‘R’ Us Didn’t Have to Die

#191

Post by jwlato »

bjl wrote: post #136
jwlato wrote: post #50

Earlier quoted context omitted.

You're missing the key piece: Toys R Us didn't go into debt for any good business reason, it was bought by a private equity firm and loaded with debt it didn't need. This is how private equity works: 1. A PE firm uses a combination of other people's money (limited partners a.k.a investors) and debt to buy a company. 2. The PE transfers the debt to the company's books. This way, if the company goes bankrupt the PE fun…

I don't understand why people keep repeating this story. Bain Capital had to provide huge amounts of collateral (upwards of a billion dollars), all of which was lost in the bankruptcy. Do people really believe that PE firms will write of a loss of hundreds of millions in order to make a few million in management fees?

The PE fund's capital is partly other people's money too. In particular, fund limited partners (the fund investors) put up most of the initial money. The PE firm itself also puts in money but not nearly that much. This makes it easier for the fund managers to make a profit themselves quickly, even if the fund investors end up losing.

Re: Toys ‘R’ Us Didn’t Have to Die

#192

Post by wmil »

rtkwe wrote: post #169
oliwarner wrote: post #78

Earlier quoted context omitted.

At least in the UK, they're more likely to get permission to convert to residential if it's long abandoned. Housing demand in cities is much higher than the normal available space on the boundaries. Carving a big box into 300 apartments more than justifies a couple of years of doing nothing with the place.

That might make sense for older downtown department store and street store fronts but doesn't make sense for malls and big box stores here in the US. I don't really see any way to meet code requirements like bedrooms requiring windows in those buildings.

You rip the big box down and start over. There isn't any value in the existing building

Re: Toys ‘R’ Us Didn’t Have to Die

#193

Post by jwlato »

voidmain wrote: post #187
jwlato wrote: post #50

Earlier quoted context omitted.

You're missing the key piece: Toys R Us didn't go into debt for any good business reason, it was bought by a private equity firm and loaded with debt it didn't need. This is how private equity works: 1. A PE firm uses a combination of other people's money (limited partners a.k.a investors) and debt to buy a company. 2. The PE transfers the debt to the company's books. This way, if the company goes bankrupt the PE fun…

I'm familiar with this narrative, I'm saying that the evidence in the article, though the article is written by someone sympathetic to this point of view, contradicts it. The PE firms, despite their huge fees, lost a boatload of money. No one wanted to buy the business out of bankruptcy for more than it was worth piecemeal. There are easily identifiable reasons (Walmart, Amazon) why the competitive landscape is much…

The financials aren't publicly available, but I'd expect PE firms still made money here. The funds probably lost money, but funds are an investment vehicle separate from the managing entity.

I disagree that profitable businesses can continue no matter the capital structure. You're assuming that there's a liquid market for businesses, or parts of them. For a huge retailer that's almost certainly not true. Additionally, the current owners have to actually want the business to continue. I would believe there's more value to a short-term owner in liquidating assets than accruing profits over a relatively short timeframe.

Re: Toys ‘R’ Us Didn’t Have to Die

#194

Post by taurath »

rtkwe wrote: post #169
oliwarner wrote: post #78

Earlier quoted context omitted.

At least in the UK, they're more likely to get permission to convert to residential if it's long abandoned. Housing demand in cities is much higher than the normal available space on the boundaries. Carving a big box into 300 apartments more than justifies a couple of years of doing nothing with the place.

That might make sense for older downtown department store and street store fronts but doesn't make sense for malls and big box stores here in the US. I don't really see any way to meet code requirements like bedrooms requiring windows in those buildings.

Honestly a planned community around an abandoned mall is a great idea. You can tear up the parking lots and put a bunch of apartment buildings. Have the mall be the "town square" with a grocery store, restaurants and other shops. Build some transit there while you're at it. I'd love to live in a place like that, and it'd be much preferable over private single family homes. Of course, being new buildings it wouldn't be affordable sadly.

Re: Toys ‘R’ Us Didn’t Have to Die

#195

Post by randomsearch »

seanmcdirmid wrote: post #162
randomsearch wrote: post #141

Earlier quoted context omitted.

> They have a flat charge, so if you buy a lot it can work. They don't, at least in the UK. You pay a variable charge depending on what is shipping.

Sorry, I met the USA. Other countries will be diffferent of course, like China where deliveries are expected and rediculously cheap even including assembly.

According to their US site:

Shipping rates are approximate and calculated by weight/volume & retail value of the order.

https://www.ikea.com/us/en/store/homeshopping/shipping_calcu...

Maybe it's changed, or that info is wrong.

Re: Toys ‘R’ Us Didn’t Have to Die

#196

Post by simonebrunozzi »

thisisit wrote: post #8

Retailing seems to be dying in US irrespective of the company: https://www.bloomberg.com/news/articles/2018-04-17/retail-st... Couple of years ago, one of my friends bought a store at a strip mall. The store was making a loss. And the previously owners were an elderly couple. So my friends thesis was that they weren't exactly tuned into the digital presence business and it was still entirely possible to run a store i…

Sorry to be pedantic, but there's (almost) always a buyer at the right price. "there are no buyers" means "there are no buyers at the price he wants to sell".

Makes sense?

Re: Toys ‘R’ Us Didn’t Have to Die

#197

Post by sgerenser »

ataturk wrote: post #133
duxup wrote: post #53

Earlier quoted context omitted.

Maybe. It's just strange as I've seen large % of commercial areas stay empty, they keep up the place, but almost nothing in the spaces, for years.

RTP in Durham, NC--there are so many office parks that were just 80-90% empty after 2001. I have a hard time imagining that any of them have any decent occupancy even now. That whole area must be commercial RE hell for some investors somewhere. When Nortel tanked they took down a good portion of the local economy. Sad.

Can't imagine there are still many mostly empty office parks left in RTP. I'm not a commercial real estate expert, but I'd expect if that were the case you wouldn't see so many brand new office-park type buildings going up. E.g. new buildings like this one that Microsoft moved into within the past couple years: https://goo.gl/maps/VRVCHMccD1S2

There's dozens of buildings like these either recently built or under construction in or near RTP.

Re: Toys ‘R’ Us Didn’t Have to Die

#198

Post by yourapostasy »

raverbashing wrote: post #82
yourapostasy wrote: post #54

Earlier quoted context omitted.

> Is it really worth the property owners keeping them empty? Yes. It's a tax dodge. [1] [2] The owners "...hold out for higher rents to increase the worth of their properties because value is based on future income stream...They can afford to forego current rental income, waiting for higher-paying tenants because they claim big business losses. Landlords get a tax loss from negative rental income when no rent comes i…

Sounds they're being 'penny-wise pound-foolish' Nothing guarantees the higher rent will come eventually Also "According to Plasky, landlords who wait for their ideal tenant are generally approached by small businesses but reject them because they want a national chain—like TD Bank, CVS or Starbucks—and a corporate guarantor... But this leads to a vicious cycle, into which the entire retail corridor is sucked. When a…

> Nothing guarantees the higher rent will come eventually

People in real estate are pretty satisfied with the current global monetary configuration that guarantees asset appreciation of most real estate over long enough (decades) time spans, over positions spread geographically wide enough (tens of millions of square feet/meters). At large enough capitalization scales, real estate starts to behave like passive indexing when set within our current monetary and legislative backdrop.

Re: Toys ‘R’ Us Didn’t Have to Die

#199

Post by rtkwe »

taurath wrote: post #194
rtkwe wrote: post #169

Earlier quoted context omitted.

That might make sense for older downtown department store and street store fronts but doesn't make sense for malls and big box stores here in the US. I don't really see any way to meet code requirements like bedrooms requiring windows in those buildings.

Honestly a planned community around an abandoned mall is a great idea. You can tear up the parking lots and put a bunch of apartment buildings. Have the mall be the "town square" with a grocery store, restaurants and other shops. Build some transit there while you're at it. I'd love to live in a place like that, and it'd be much preferable over private single family homes. Of course, being new buildings it wouldn't b…

It'd be a neat idea if done well, most attempts at intentionally planned communities like that wind up being pretty fragile.

It'd also ideally need a ton of parking though which brings a hard compromise between making a nice walkable pleasant park area and having enough parking that your reinvigorated area doesn't become too congested. On top of that most malls are way too large even for that, it'd be hard to build out enough shops to make the mall not feel super empty.

Re: Toys ‘R’ Us Didn’t Have to Die

#200

Post by rtkwe »

wmil wrote: post #192
rtkwe wrote: post #169

Earlier quoted context omitted.

That might make sense for older downtown department store and street store fronts but doesn't make sense for malls and big box stores here in the US. I don't really see any way to meet code requirements like bedrooms requiring windows in those buildings.

You rip the big box down and start over. There isn't any value in the existing building

Maybe, not what I think of when I read 'convert to residential' though.
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