Borders liquidator expects strong interest in auction for leases, including downtown Ann Arbor store
Lizzy Alfs | AnnArbor.com
The auction process is complex and fairly unpredictable, and questions remain about the future of the flagship store in downtown Ann Arbor and the superstore on Lohr Road in Pittsfield Township.
Both stores will be closed by September at the latest, leaving landlords with vacancies. But Andy Graiser — president of DJM Realty, a unit of Borders asset liquidator Gordon Brothers Group LLC — said he expects to receive plenty of interest from retailers in the remaining 399 Borders leases, which average 25,000 square feet in size.
“It’s early to say,” he said. “But there’s going to be certainly a number of them that we’re going to have interest in, and a lot of retailers have already expressed interest.”
The auction process
After filing for Chapter 11 bankruptcy in February, Ann Arbor-based Borders Group Inc. announced July 18 that it would close the rest of its stores. Although there were talks of 30 store leases being sold to Books-A-Million Inc., the deal collapsed Monday night, meaning that 399 of the remaining Borders locations will close long before the original store leases were set to expire.
Locally, the lease for the flagship store on Liberty and Maynard streets in downtown Ann Arbor was signed through 2025, according to a DJM listing. The lease for the Lohr Road location was set to expire in 2019.
These long leases were common for Borders stores. In fact, as of January 2010, 369 Borders leases went past 2017.
Now that all of the stores are closing, the remaining leases will be auctioned off in a complicated process that could result in several different outcomes for properties occupied by Borders, Graiser said.
He said that there are various steps in the auctioning process:
— First, DJM Realty will accept bids from interested tenants. DJM analysts will then examine the bids to determine the locations that will go to auction.
— Next, the Borders leases that received bids will be auctioned off for the interested tenants in a process that will be completed by the end of September.
— The leases then may be adjusted between the new tenant and the landlord, Graiser said.
However, complicating the situation further is the role of landlords and commercial listing agents that are currently marketing Borders properties.
Graiser said that it’s possible for landlords to bid on their own leases with Borders so that they can “control their own destiny.”
“They may have a replacement tenant they have locked up and would prefer to go with that than have it go to auction,” he said. “Landlords are going to be playing an integral part here. They’re going to be - not in all cases, but in many - showing flexibility during this process so they can get a replacement tenant quickly.”
However, Tom Goldberg, an owner of the Waters Place Shopping Center on Lohr Road, said he’s “doubtful” that many landlords will bid on their own Borders leases due to the uncertainty in the real estate market.
“The bottom line is most of the landlords would be very excited to have someone to come and assume the lease,” Goldberg said. “So that’s why I’m thinking there aren’t going to be a lot of landlords bidding on the spaces.”
If no offers are made on a Borders lease, Graiser said the lease will be terminated and landlords will begin seeking tenants to start a brand new lease.
Future of the Ann Arbor area Borders properties
Although DJM has not yet set a bid deadline or an official auction date, Graiser said inquiries have been coming in from a “fairly wide range” of interested retailers.
“You can expect to see supermarket and specialty stores, pet guys, office guys, dollar guys,” Graiser said. “You know, the big boxes that you see in big shopping centers are going to show interest in these properties.”
He said that because the Borders properties range in size - from about 10,000 to 41,000 square feet - the retailers are somewhat diverse.
At the flagship store in downtown Ann Arbor, Graiser said there is a “real need for retail” in that location.
“We are expecting people to express interest in it,” he said. “Whether they can afford the rent is another question, but we do expect people to express interest in that location.”
According to the DJM listing, the annual asking price for the 39,876-square-foot downtown store is $20.55 per square foot.
The retail building has multiple ownership entities, including a family trust and Agree Realty Corp., which has controlled the property after a complex series of leases and land leases.
They are marketing the property as a “landmark location” with the “largest available footprint of any retail building in the corridor,” according to the listing.
The annual asking price for the 28,500-square-foot Lohr Road location is $18.75 per square foot, according to DJM.
Although disappointed in the Borders closing, Goldberg expressed optimism about the future of his Borders space.
“We’ve had multiple inquiries from prominent national retailers who have submitted letters of intent for the space on Lohr Road,” he said. “I think the same is true for the other location. I don’t think Ann Arbor is going to be left in the dark for a long time as it relates to those particular spaces.”
In the spring, Borders closed its Arborland Center store in Ann Arbor as part of its Chapter 11 bankruptcy reorganization efforts. Brokers are actively trying to find a tenant for that space, as well.
The 22,941-square-foot location in Arborland has an annual asking price of $14 per square foot, according to the listing by Landmark Commercial Services.
Borders’ liquidation means that 10,700 employees throughout the U.S. will lose their jobs, including 400 at the company’s headquarters in Ann Arbor.