Borders Group officially starts its going out of business sales at some stores Friday after a U.S. Bankruptcy Court judge approved its liquidation plan in Manhattan today.
The 40-year-old Ann Arbor-based retailer spent five months in Chapter 11 bankruptcy protection, but was forced to liquidate after a bid fell through last week from a private equity firm. A team of liquidators led by Hilco Merchant Resources and Gordon Brothers Group will sell off its assets.
About 30 to 35 of the stores could be sold to rival chain Books-a-Million, but the two companies are still in talks, the Associated Press reported. Books-a-Million, based in Birmingham, Ala., will become the second-largest U.S. bookseller after Borders liquidates. It operates more than 200 stores in 23 states and the District of Columbia, but none in Michigan.
That doesn’t mean the chain won’t be interested in buying some here, said Michael Lippitt, co-owner of Landmark Commercial Real Estate Services in Farmington Hills.
“Books-a-Million has put their toe in the water in Michigan as far as some locations. It wouldn’t surprise me if they nab a couple of locations here,” Lippitt said.
Borders operates 399 stores and employs about 10,700 workers. It has 408 employees at its Ann Arbor headquarters and 473 at its 26 Michigan stores. It closed more than 200 stores in bankruptcy. Liquidating the remaining stores is expected to conclude in September.
Lippitt said there’s been a lot of conversation among retail real estate professionals in the past week about the store locations that are up for grabs.
“People are really starting to lock and load on specific locations,” he said. “I think universally, real estate professionals think Borders’ problems were never a real estate issue. From a real estate perspective, they did everything right.”
Joan Primo, a Sylvan Lake-based retail real estate consultant, said that many retailers could take Borders spaces including Barnes Noble, Dick’s Sporting Goods, electronics stores and supermarkets. “That’s a lot of redevelopment opportunity. That’s what it boils down to,” she said.
Books-a-Million’s offer for up to 35 stores might be the only leases that get taken at this stage, Lippitt said. This is because despite concessions, Borders rents are still higher than the current market will bear. And depending on how the concessions were written, the rents could go back to full price if the lease is transferred.
“The vast majority will go back to landlords. That is my personal opinion,” Lippitt said. “It is very hard to walk in under someone else’s lease.”
The liquidation will be difficult for landlords who relied on Borders to make their loan payments and jumped through hoops to help the chain with rent concessions that were no longer needed to save the nation’s second-largest bookseller, said Paul Magy, a Southfield-based attorney who represents 28 landlords with Borders stores and its headquarters.
DJM Realty started marketing 259 Borders store leases including 13 in Michigan, earlier this week. That represents the larger superstore formats. The smaller mall stores and airport stores would likely just revert to the landlords, Magy said.
Lippitt has the listing on Borders’ Ann Arbor headquarters and its two Ann Arbor stores. He said the goal for the downtown store is to bring in a unique retailer that would fit in with the area.
“Our goal is not to break it up,” he said.
Contact Greta Guest: 313-223-4192 or gguest@freepress.com . The Associated Press contributed to this report.
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