AN EXPENSIVE HOBBY FOR VORNADO

Implications: Vornado Realty Trust, one of three partners that bought out TRU in 2005, has now agreed to buy 44 previously closed TRU stores.  Of the 44, 26 are leased to others and 18 are currently vacant.

The fact that the article offered little information other than the proposed financial data (18 million S.F., $190 million price, $105.55 PSF), there is very little to draw upon to help understand the wisdom of this move.  However, one thing is clear:  Mr. Roth believes his organization can do a better job of monetizing these properties than the combined partnership has done. 

Analysis: Mr. Roth has certainly proven his expertise at monetizing old chain store properties. However this time he may have taken on a project even he will find daunting.

These 44 stores are truly the "bottom of the barrel". They were among the 100 worst performing TRU stores out of the 681 stores they operated at their peak. Almost half remain vacant despite some very knowledgeable folks trying to get rid of them. 15 are not owned by TRU and likely represent difficulty in obtaining consents if and when a tenant is found willing to pay a profit to Vornado.

Mr. Roth may yet pull a rabbit out of his hat and find a way to make some money on this collection of dogs and cats but my money is on him finding that these locations are vacant for good reasons and if the former best toy store in the world and one of the smartest location pickers could not make money in these lowly locations, no one else is likely to be able to either.

A year from now I suspect not one location will have brought significant profit to Mr. Roth's new venture.