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After The Retail Apocalypse: Toys R Us Property Company Emerges From Bankruptcy

Toys R Us Property Company I has emerged from bankruptcy as a reorganized entity known as Hill Street Properties. The new entity holds 168 former Toys R Us properties in 40 states.


Under the supervision of Raider Hill Advisors — which the Toys R Us bankruptcy estate hired to do real estate services for it in June — Hill Street will continue to dispose of the real estate of the former toy chain, much like Seritage Growth Properties has been selling off former Sears locations. The strategy has been quite successful — Seritage has been profitable as Sears has struggled.

Major investors in Hill Street include hedge fund Empyrean Capital Partners and Glendon Capital Management, an investment firm specializing in distressed or dislocated assets.

The fate of various Toys R Us shells has been varied since the company threw in the towel about a year ago. Since then, some of the sites have been sold at auction.

In September, Raider Hill and A&G Realty Partners organized an auction of 82 former Toys R Us and Babies R Us stores and other real estate, which followed an auction of 123 properties.

Some individual former Toys R Us stores are making the transition to other uses.

In Houston, for instance, Moody National Cos. is reportedly transforming a site into a mixed-use mid-rise development off Interstate 10. 

In the Bay Area, sporting goods retailer Decathlon will open its first full-scale store in the region at a former Toys R Us property in Emeryville. 

The struggle facing most of these locations is a wider problem for the retail industry — a surfeit of empty big-boxes. That has been an ongoing challenge since the end of the retail building boom in the early 2000s. The closure of Circuit City in 2008 swelled the number of empty big-boxes to an estimated 3,000.

Some old big-boxes have lately become industrial facilities. Stand-alone big-box stores, including former Toys R Us locations, are relatively popular targets for such redevelopment because they can often be converted into distribution centers without needing to be demolished. 

Even so, the transition from retail to industrial can be long and difficult.

“If you have a center that just lost its major tenant yesterday ... it’s going to take years for anyone to pull the trigger on a warehouse conversion,” CBRE Global Head of Industrial and Logistics Research David Egan previously told Bisnow.

A more unusual reported use for former big-box space is a virtual reality theme park, though it isn't something many landlords can count on to take big-boxes off their hands.

A scattering of other converted big-boxes nationwide have become churches, community centers, courthouses and museums. 

One of the most famous big-box reuses is the McAllen Main Library in Texas, which saw a 124K SF abandoned Walmart become a single-story library.