12.8.14: Is Radio Shack “Toast”?

I have fond memories of buying obscure electronic devices and parts at the Radio Shack in Brunswick Square Mall in East Brunswick, N.J., where I grew up. Do you remember when headphones made your head doubly large and the plug-in was the size of your index finger? Well, back in the day, only Radio Shack had the double index finger plug-in that would let you hook up your buddies’ ‘phones to the same turntable so you both could listen to T. Rex on vinyl pound out “Bang a Gong” at the same time…

Alas, times have changed. Selling $2.99 plug-ins does not cut it anymore. The company’s effort to shift into sales of wireless devices with T-Mobile in 2009, Verizon in 2011 and subsequently AT&T did not improve financial results as customers found it easier to buy phones and contracts directly from the phone companies. By 2012, financial results were in steep decline, and by 2013, rumors of bankruptcy were surfacing. In 2014, the company announced the closure of 1,100 stores, almost 20% of its 5,200 U.S. locations. The move was subsequently blocked by its creditors. By September 2014, the company reported it was running out of cash, despite a $250-million investment from private equity funds.

For CMBS conduit and other commercial lenders in the retail sector, Radio Shack may follow the footsteps of other failed retailers that were subsequently liquidated and closed like Linens N Things, Circuit City and Borders, to name a few. The bright side is Radio Shack stores average 2,500 square feet, and closures are not likely to have a major vacancy impact on the shopping centers and malls in which they are typically located.

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This entry was posted in CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , , . Bookmark the permalink.

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