Levin Management has been involved with Toys R Us since its beginning.
In fact, the CEO of the North Plainfield-based firm, William Farber, negotiated the lease of the Toys R Us store in the Blue Star Shopping Center in Watchung in 1973 — the second store in the chain to open.
So, when the news broke last week that the iconic toy company was going to liquidate, it hit the leaders at Levin Management, a commercial services real estate firm, a bit harder than it may have for most.
The liquidation of Toys R Us is more devastating than many people realize.
It will cost thousands of New Jerseyans their jobs at the company’s corporate headquarters in Wayne and the dozen or so stores it still had left in the state. And that should never be minimized, as each job loss is a catastrophic event for the person involved.
But the exit from the marketplace carries a hurt that extends to many others.
Small, independent toy makers lose a huge vehicle for introducing their products.
Municipalities lose huge tax revenue from their books.
And, at Levin, it means a major tenant in five of the more than 100 properties (and 14 million square feet) it manages is leaving the market much sooner than expected.
Company President Matthew Harding broke down the impact.
“Toys R Us is an anchor of shopping centers,” he said. “They are 40,000 square feet on average, ranging up to 70,000 square feet or even larger if they do a combined Toys R Us and Babies R Us side by side.
“That’s a big hole in a shopping center, both in an attraction of customers and a hole in the rent roll of the landlord.”
Harding has been in the real estate game for decades. He said he’s seen the cycles of retail. And, perhaps even more keenly than others, he was aware of the company’s troubles.
Levin manages five Toys R Us locations, three of which were pegged for closing during the initial declaration of bankruptcy last December.
And while that gave Levin and his team a jump on looking for a new tenant, it wasn’t the nine to 12 months’ notice his group usually gets when a tenant is not going to renew its lease.
“It’s a lot of space, it’s a big anchor and it’s immediate,” Harding said. “It definitely gets our immediate focus and triggers a number of things from leasing plans. We’ve already been working on lining up tenants for spaces, but this obviously accelerates that.
“Then, we need to analyze other leases clauses to see if there are any other issues to deal with.”
Those clauses could be the next domino to fall.
Levin said some tenants may have clauses that allow them to terminate their lease early or get a lower rent if the Toys R Us in the center closes.
Other stores in the centers also take a loss in perception — perhaps even more so than the bottom line.
“It does create the black eye of having a dark store in the shopping center,” Harding said.
And it does bring more worries.
Who’s next is now a common concern in the industry. Harding said those scenarios come up at Levin on a regular basis.
“We keep a pretty good watch on that,” he said.
They aren’t the only ones concerned.