No Turn On Red

The deal is done, Federated has sold Lord & Taylor for $1.2b. Coverage from the New York Times, Forbes, Forbes (again) and Commercial Property News.

The details, from Forbes:

Federated Department Stores Inc. announced a deal Thursday to sell its Lord & Taylor department store chain for about $1.2 billion in cash to Purchase, N.Y.-based NRDC Equity Partners LLC, which will be putting its business under a microscope. NRDC is a partnership between principals of Apollo Real Estate Advisors L.P. and principals of National Realty & Development Corp.

Federated said its board has approved the sale, and the deal is expected to close in the third quarter, pending regulatory approvals.

The $1.195 billion deal includes 48 Lord & Taylor stores, including the Fifth Avenue flagship in Manhattan, as well as a distribution center in Wilkes-Barre, Pa. Aside from New York, other locations, predominantly in the Northeast, are in New Jersey, Illinois, Massachusetts, Connecticut, Maryland, Virginia, Michigan, Pennsylvania and District of Columbia.

Speculation is that Federated was not looking for someone who was just looking for the real estate. But instead looking for someone who would operate the chain for some time before divesting property. Federated did not want key properties going to competitors in the short-term. Rumor has it that one of the prospective bidders was Vornado Realty Trust, who quietly sank due to their lack of partnership with a retail management company.

Again, from Forbes:

It will be business as usual,” said Richard Baker, president of NRDC, reached by phone, noting its intention to keep Lord & Taylor as an ongoing specialty department store. “We are going to do a lot of high-level and granular analysis in order to determine the most efficient way to operate each store.”

Baker declined to give details, but said that NRDC is studying all of its options, including size and locations of each store. NRDC, for example, will be figuring out whether it makes sense to have a slimmer flagship in Manhattan. The flagship is about 600,000 square feet, but could be slashed in half, Baker said.

It doesn’t take much to see that a good part of the game plan involves maximizing profits through dumping property. However, realize that although NRDC has a realty background, the principals behind NRDC are currently spearheading the turnaround of Linens ‘N Things, after being outbid in their attempts to aquire both Toys R Us and Pathmark.

Commercial Property News says:

Richard Baker’s previous comments on the Linens ‘n Things transaction may shed some light on the investors’ thinking about Lord & Taylor. During a Nov. 2005 discussion of Linens ‘n Things, Baker told CPN ,“That could have been more of a real estate transaction, but in the end (the chain) was bought to be operated.” He said of the Linens ‘n Things stores, “We think they’re good locations in very good markets, and they should be very competitive in the industry.”

This is not just a real estate deal - at the surface, it looks like Lord & Taylor, in some consolidated form, will exist for the foreseeable future. But, I won’t get too attatched to the Lord & Taylor in my local mall. It probably won’t be here much longer.

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