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March 24 , 2005

Toy retailer’s sites could be up for grabs

March 24th, 2005 - Eleven D-FW Toys ‘R’ Us stores may be sold, retooled Sandra Zaragoza Senior Writer Realty experts are pondering the fate of Dallas-Fort Worth’s 11 Toys “R” Us stores now that the national toy retailer is under new ownership. An investment group consisting of Kohlberg Kravis Roberts & Co., Bain Capital L.L.C and Vornado Realty Trust recently bought the struggling, New Jersey-based retailer for $6.6 billion. The possibility exists that some D-FW stores may be put on the market, though the investment group could also decide to revamp the chain with a new format. “I think they will be canvassing retailer interest for the next several months,” said Steve Lieberman, CEO of Dallas-based The Retail Connection, a full service retail brokerage, investment and development company. “I clearly think that the first phase will be an operational play,” Lieberman said. “I don’t see them dumping a number of stores immediately.” Vaughn Miller, president of Henry S. Miller Commercial’s retail division, says the retailer’s new ownership also might usher in some news of expansion in the market. The 11 North Texas Toys “R” us stores are said to be performing well, he added. There are also six Babies “R” us stores – considered the jewel of the chain – in Dallas-Fort Worth. “We hear that they want to roll out the chain offering a differing format to compete with Wal-Mart and Super Target,” Miller said, “It will be interesting to see what happens.” Choice Locations From a real estate perspective, Toys “R” Us has some choice local sites, including stores in Frisco, South Arlington and Lewisville. “The Toys “R” Us stores are a good size – from 25,000 square feet to 40,000 square feet - which puts them in the sweet spot for most of the lifestyle-retail chains,” Lieberman said. One long-term strategy for the new owners may be to exploit their prime real estate. “We are seeing that evolution take place with a number of mature retailers,” Lieberman said. “This follows in the footsteps of Kmart, which is as much a holding company as a retailer. I think this is the type of evolution that we are going to continue to see in the retail space with older formats.” If Toys “R” Us does eventually sell or lease its stores, it would allow a retailer to quickly penetrate a specific market. And the opportunity to negotiate a package of stores is especially attractive to retailers, Lieberman said. With an active retail marketplace, the Metroplex has seen its share of retail chain shutterings, most recently with Kmart and Winn Dixie. Depending on the locations, it has taken years for the market to absorb leftover space.
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