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Broken Bookselling

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Barnes and Noble Landlords Placed on Alert as Bookseller Weakens

January 25th 2013

Barnes and Noble Closing dated

Weakened revenue and an increase in store closures by Barnes & Noble Inc. calls the bookseller’s stability into question, say leading business analysts. Agha Nawazish Ali Khan, a securities analyst for SNL Financial, a San Francisco financial services firm, flags Barnes & Noble’s disappointing holiday sales in a report highlighting its role as an important tenant for some of the country’s top mall operators. The retailer’s top landlords are Simon Property Group (25 stores), DDR Corp. (18 stores), CBL & Associates properties (16 stores) and General Growth Properties Inc. (14 stores, including Clackamas Town Center).

Barnes & Noble operates 689 bookstores and its bn.com e-commerce site. On Jan. 2, it reported comparable store sales fell 8.2 percent in the fourth quarter.

Wharton Marketing Stephen J. Hoch guru has bluntly proclaimed: "I don't think Barnes & Noble has a prayer," Hoch says. Barnes and Noble should have grown due to the bankruptcy of Borders, the expansion of Internet buying, and the explosion of e-books. Instead the dysfunctional book chain recorded an approximate 12 percent drop in all three areas--its retail stores, its BN.com website, and its Nook e-reader. The end is being predicted by critics and experts, and being hammered into reality by millions of Americans who are voting with their wallets and turning away from the collapsing giant.

SNL stated, "Federal Realty's rental income was negatively affected by one particular Barnes & Noble lease renewal, as described in the company's 2012 third-quarter earnings call. The lease, at Federal Realty's Willow Grove Shopping Center in suburban Philadelphia, was renewed for five additional years, but at "significantly less rent," according to CEO Donald Wood, due to the retailer's "strategic importance at that particular shopping center at this time." Wood explained that due to this, the 51 renewals the REIT accomplished during the third quarter generated 1% less rent going forward than previously. This, he noted, was because the Barnes & Noble renewal "skewed the results." If one removed that lease, renewals rose 3%, the executive said.  As of Jan. 18, 42 SNL-covered U.S. real estate companies reported property exposure to Barnes & Noble."

SNL continued the warning stating, " American Realty Capital — Retail reported the highest property exposure by percentage, with one reported lease across its two-property portfolio. The company completed its December acquisition of San Pedro Crossing Shopping Center in San Antonio for about $32.7 million, as reported Jan. 8. At the time of sale, the shopping center was 97.5% leased and tenants included Barnes & Noble, Toys R Us and Office Depot. Pennsylvania REIT and Hines Global REIT Inc. followed next in the property-exposure rankings, with 12.2% and 10% of properties in the U.S. exposed to Barnes & Noble as of Jan. 18. In terms of number of properties exposed, Simon Property Group Inc. is at the top of the list with 25 properties as of Jan. 18. Five of these assets are in the New York-Northern New Jersey-Long Island, NY-NJ-PA MSA. Two are in the Dallas-Fort Worth-Arlington, TX MSA."


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