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Summit News

Distressed retailers' assets can be hard sell

NEW YORK (Reuters) - As tightening credit and slow consumer spending fuel a rise in the number of U.S. retailers liquidating their assets, distressed chains are now finding that even their real estate can be a hard sell.

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Right now is “probably the most active” period in about 15 years for Jim Schaye, chief executive of Hudson Capital Partners, a professional liquidator that buys, and then sells, the assets of retailers who are going out of business, or closing or relocating stores.

“The interesting thing is that it’s very, very, very big projects,” Schaye said on Wednesday at the Reuters Consumer and Retail Summit, citing the recent bankruptcy filings of retailers including Linens ‘n Things, Sharper Image Inc, Wickes Furniture, Levitz Furniture and Goody’s Family Clothing Inc.

“It’s really just one right after the other ... $100 million-plus deals,” Schaye said. “And I suspect what I’m seeing will continue on at least in the near future. Will it be a year? Could be. The asset-based lenders are tightening up like crazy.”

In this tough climate, where retail spaces seem to be coming on the market all the time, Schaye said finding buyers for these assets “is a real challenge.”

“As time goes on, you look at the portfolios of Linens, there just (aren’t) buyers for that real estate. A couple years ago the 40,000 to 44,000 square foot box was in great demand ... now there just isn’t a lot of demand for it,” Schaye said, adding that many specialty retailers already had so many stores and are looking for smaller spaces.

“It’s either they want 60 or they want 20 (thousand square feet of space),” he added, noting that grocery stores were often interested in the largest spaces.

With gasoline topping $4 a gallon, the housing market sagging and access to credit tight, U.S. consumers have become reluctant to spend, often doing without discretionary items and bargain-hunting for necessities.

The weak economy has even led companies without liquidity problems, such as Pacific Sunwear of California Inc PSUN.O, Starbucks Corp SBUX.O, AnnTaylor Stores Corp ANN.N, J.C. Penney Co Inc JCP.N, Cost Plus Inc CPWM.O, Dillard's Inc DDS.N and Home Depot Inc HD.N, to close underperforming stores or scale back plans to open new ones.

(For summit blog: summitnotebook.reuters.com/)

(See here for SHOP TALK -- Reuters' retail and consumer blog)

Editing by Phil Berlowitz

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