files to download: [ Homelife PDF ]
Distressed property expert Hilco Real Estate LLC hopes to raise as much as $100 million for creditors of retailer Homelife Corp., which is liquidating in Bankruptcy Court.
The Northbrook-based company will auction off Homelife's 128 properties and leases in approximately two months, as part of a deal approved by the Bankruptcy Court in Delaware last week.
Although most of the stores are in prime locations, they won't be easy to unload in this lackluster retail market.
The most likely buyers "are conspicuously absent (from the market)," says David Bossy, president of Mid-America Real Estate Corp. in Oakbrook Terrace. "They are on the sidelines today."
The properties range from a 6,000-square-foot warehouse in Delaware to a 125,000-square-foot distribution center in North Carolina. But most are 30,000 to 45,000 square feet, best suited to a large chain drugstore, apparel discounter or other specialty store. Many national "category killers," such as Office Depot Inc., OfficeMax Inc. and Petsmart Inc., are not currently in the market, Mr. Bossy says.
Indeed, Hilco must contend with a surplus of retail space following the liquidation of Montgomery Ward & amp; Co. and store closings by chains including Ames Department Stores Inc. and J. C. Penney Co.
Hilco Real Estate, which is sharing the assignment with New York-based Newmark Retail Financial Advisors LLC, is nonetheless optimistic about the value of the property and the potential return to creditors.
"The possibilities are endless," says President and CEO Mitchell Kahn."It can go from electronics stores to bookstores to drug stores."
As a furniture retailer geared to middle-to-lower-income households, & nbsp;Homelife & nbsp;did not fare well. The Hoffman Estates-based company struggled with logistical problems stemming from its separation from its former parent, Sears, Roebuck and Co., and from its far-flung store network. After multiple cash infusions, company officials were unable to secure emergency financing this summer and filed for bankruptcy July 16.
At the time of the filing, Homelife listed its assets and liabilities at more than $100 million each.
Hilco parent gets boost
Hilco Real Estate's sister company, Hilco Merchant Resources LLC, has been liquidating Homelife's inventory, a process expected to take another 3½ months. Hilco Merchant Resources also handled the liquidation of Montgomery Wards merchandise in the wake of its December bankruptcy filing.
The added assignment of disposing of the real estate gives a boost to the privately held parent company, Hilco Trading Co., whose projected 2001 sales are $600 million to $700 million, according to Chief Financial Officer Mark Smiley.
Terms of the deal
The firm beat out New Hyde Park, N.Y.-based real estate giant Kimco Realty Corp, which handled disposal of the Wards properties, and Chicago-based Klaff Realty L.P. Both firms offered to buy the rights to directly dispose of Homelife's real estate, says Sydney Platzer, a New York lawyer who represents the Homelife creditors committee. He says both companies offered about $68 million for the property and sale rights; the money would have only satisfied the secured debts.
In contrast, Hilco will serve only as an agent for Homelife, taking a 2.5% commission on the property and lease sales. Hilco also agreed to provide Homelife a $7-million advance on sales, which the company will use to finance its operations during the liquidation, if necessary. Hilco officials say they hope to generate an estimated $100 million before their commission.
Mr. Platzer says the creditors believe the Hilco deal will provide the highest return to creditors, although he says he can't predict the precise amount.
A Kimco spokesman declined to comment, and an official at Klaff Realty was unavailable.
Hilco plans to hold a Chicago auction in about two months and may turn to Northbrook-based Grubb & amp; Ellis Co. or Chicago real estate firm Jones Lang LaSalle Inc. for local market expertise or assistance selling slow-moving properties, Mr. Kahn says.
But he doesn't foresee much difficulty: "We expect the great majority of (the properties) to be spoken for by the end of the year."
©2001 by Crain Communications Inc.
[ Go back < ]