Art Van is out of money and is liquidating and closing all stores

[Deleted User 12047]

Did anyone notice the presence of Thomas Lee Partners, the same people who fucked up iHeart?

[TC Talks]

MW, I'm surprised that you see this as anything other than a planned event. The Private Equity firm buys it, loads it up with debt, strips off assets, then bleeds it to death.

I could point to dozens of companies that ended this way. As part of this deal, Levin (a Pittsburgh chain) was purchased back by the original owners. With the real estate gone, there really is no option for the Van Eslander family to do that here.

[Lester The Nightfly]

MW, I'm surprised that you see this as anything other than a planned event. The Private Equity firm buys it, loads it up with debt, strips off assets, then bleeds it to death.

I could point to dozens of companies that ended this way. As part of this deal, Levin (a Pittsburgh chain) was purchased back by the original owners. With the real estate gone, there really is no option for the Van Eslander family to do that here.

You are 100% correct. It's what PE firm do, it's their standard operating procedure and sole purpose of existence. Happens everyday of the week and it doesn't matter what the product is. Furniture, potato chips, widgets... make no difference in the calculation. It's how Mitt Romney made his fortune, Bain Capital. When a company gets snatched up by a PE firm, it's roughly equivalent to being bit by a zombie, there's only one outcome.

[TC Talks]

I'm busy at the office right now. I'll post a detailed response this evening.

I look forward to it, Please keep in mind what actions took place before and after the sale to The private-equity Firm. Everything I read suggests they went into a mass expansion taking on loads of debt the minute the chain was sold.

[Lickalime]

All of the furniture in my house (outside one bed frame out of four) is from Costco. They're prices are great and so is their delivery. You can't beat their return policy either. As long as Costco is in business, I will buy my furniture there.

[km1125]

....
Bob's only has 3 Metro Detroit stores so far. Their entrance into the market didn't help matters, but I doubt they command much market share yet.
...

Looks like 4 stores now, but looking at YELP their reviews don't look that great.

[696lover]

Art Van was purchased by an Equity firm named Lee Partners in 2017. In these transactions it is common to use the corporation itself as collateral on the purchase price.

Obviously Lee saw the real property as the best asset in the purchase. They split it off into a REIT, then tightened the screws on the cash flow to get the loans paid down enough to release the real property.

Now they have an operating entity with warehouses full of stuff, and real property leases on their own stores with ending dates on those leases. Collapse the operating entity, liquidate it, let the bankruptcy court decide if it is going to auction off the leases for the term remaining.

Now Lee Partners owns a whole lot of buildings and underlying ground all over the midwest, many of which are in great areas, and is out of pocket little or no money at this point.

As soon as the kids sold this was going to happen no matter what.

[Lester The Nightfly]

Excellent post MW. Fair to say we can't paint all PE firms with the same brush, some actually do unearth value in a company by ferreting out inefficiencies or infusing capital for growth but there are also many that structure the deal largely based on collecting large acquisition fees (the vig) at the expense of doing anything in terms of developing the future of the business.

[Rate This]

It is unclear to me if THLP is the landlord of the Art Van real estate. It also unclear to me if the real estate is free of bank liens. Perhaps 696lover has some inside info on this matter.

If Lee believes the real estate is worth considerably more than $550 million, then your theory may have merit, 696lover. However, that theory seems inconsistent with how THLP generally conducts its investment affairs.

I think this is a simple case of mismanagement and poor strategy, not an innate desire from day one to rip the company to shreds and sell pieces of the carcass.

Good article from Furniture Today:
https://www.furnituretoday.com/furnitur ... t-art-van/

By the way, I appreciate the nice words, Lester. Thank you!

What sorts of entities are typically buying companies for parts then? They won’t openly say “gee this would be nice to smash with a hammer into little itty bitty pieces” but clearly some deals are done with that as end goal...

[Some Guy from Toledo]

Sad to see them go, they already managed to make it to my area a decade ago (I've been to their "Sleep Shop" near me).

[Mega Hertz]

I'm still bummed about Lasky Furniture and now this.