On February 6, 2015, RadioShack filed for bankruptcy. The 94-year old retailer, unable to adapt to changing consumer tastes and compete with more efficient e-commerce competitors like Newegg, had posted negative earnings for 11 straight quarters. For those in the real estate business, the immediate question became what kind of impact the bankruptcy would have on properties with RadioShack as a tenant. The answer may very well be not much.
For one thing, RadioShack stores tend to be small locations in shopping centers with strong co-tenancy, often including large anchors. It is therefore unlikely that many centers will be impacted greatly as a result of losing them.
Moreover, there is ample demand for Radioshack assets. Several large retailers see purchasing these leases in bankruptcy as an easy, inexpensive mechanism for establishing a geographically diverse foothold. A tentative plan by Sprint to purchase and rebrand 1,300 to 2,000 stores, out of a total of approximately 4,100, is in the works. GameStop just announced the purchase of 163 stores to brand as Spring Mobile locations. Amazon.com is also considering making a play, as it tries to pursue a strategy of using physical locations to display some products.
Finally, many RadioShack leases are dated and have below market rents. Even if locations have to be re-leased, taking into consideration all those currently eyeing these locations, the eventual result could be higher rents for owners. Given the complex factors at play, it is unlikely the level of disruption to landlords from this bankruptcy will be anywhere near the same level observed with other larger footprint retailers like Circuit City.
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Jonathan Hipp
Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to GlobeSt.com on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.
