everyone

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GlobeSt.com: Are the liquidations in the industry actuallygood for your business?

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Friedman: I use an expression: 'It's so bad thatit's too bad.' It's not good for anybody. Bankruptcies now arecausing all companies to liquidate. Very few companies reorganize.That's not good for the company, and that's not good for sellingleases because nobody is buying leases, or at least very few peopleare buying leases. Much of our business is renegotiating leases. Inbankruptcies past, we had a year or so to renegotiate the leasebecause the landlord thought that they would have a tenant if theyreduced the rent. Now there's not going to be a tenant, so there'sno rent relief to be gotten in bankruptcy cases. It's not good forme because we derive a lot of fees from rent relief. Bankruptciesare so short that it's not good for the bankruptcy attorneysbecause they bill by the hour. Need I go on? It's terrible.

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GlobeSt.com: And I thought your business might be a brightspot…

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Friedman: There are other opportunities. Theopportunities in this environment are companies that do have otherpressure points on landlords, such as renewals of leases, andthey're getting better deals from landlords because they can leaveas well. We are refocusing on where you can help the retailers, butit's not the old model of what was there five years ago.

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GlobeSt.com: Was there a lot of competition to obtain theSteve & Barry's contract?

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Friedman: There are only one or two similar firmsthat do the marketing of these bankruptcy leases. So I assume thatthere is a put out to the two or three companies that are theleaders in the field and the company and creditors committee selectthe one that they think will do the best job. It's a veryspecialized practice.

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GlobeSt.com: Are you seeing any kinds of chains out therelooking for space?

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Friedman: No, people that are looking at theseleases from bankruptcy sales are doing it very opportunistically.Any company that did have some growth plans--even though they'vecut back their growth plans--do look at these things, cherry pickand bid on leases that have extraordinary value and fit into thecompany's expansion model.

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GlobeSt.com: Do the various sizes of Steve & Barry'sstores create a challenge?

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Friedman: With Steve & Barry's, you havestores that range from 15,000 square feet to a high of 131,000square feet. Most of them are malls, with some open air and somestand-alones. The more moderate sizes, the 15,000-square-foot to30,000-square-foot stores, there are more users for that space. Sowhen we market these things, we generally focus them on retailersthat use that size space. The rents are very attractive. Most ofthe leases are under $10 [per] square foot, and many of them areunder $5 [per] square foot.

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GlobeSt.com: Did you find many opportunities with Tweetersince they were in a few high-profile locations?

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Friedman: The problem with the Tweeter case isthat it converted to a Chapter 7 liquidation, and they closed upall the stores. There was no sale of the leases, they are all goingto be rejected. The owners of that company, converted into aChapter 7 and stopped the going-out-of-business sales. We marketthe leases during the sales, and since there are nogoing-out-of-business sales, there is no time to market thesebecause they were closed in the middle of the night. All of theleases will just be going back to the landlords.

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I want to make a note about two companies. Steve & Barry'sand Tweeter were both in Chapter 11 the year prior. They're part ofthe few companies that did come out of Chapter 11 because astrategic buyer bought them. Within a year they failed again, andnow they've liquidated. There's a company called Goody's thatreorganized and there's a lot of rumors that they are going to goback under again. What we're seeing is nobody's reorganizing tospeak of. On top of that ICSC is saying there could be 8,000 to9,000 empty stores this year from companies going out or notrenewing leases. There is definitely a glut on the market of spaceavailable and the only way somebody's going to buy a lease inbankruptcy if they see an extraordinary value they couldn't getwith a landlord.

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GlobeSt.com: Do you see this getting worse after theholiday season?

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Friedman: Absolutely, once these figures come out.Everybody's sitting on cash and everybody's frightened. Those whocontrolled their inventories will do better than those that didn't,however, sales are abysmal. I was in a Toys "R" Us on Sunday in NewJersey purchasing some gifts at 12:30, and there were only sevencars in the parking lot.

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GlobeSt.com: Will any sectors get hit worse thanothers?

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Friedman: Anybody related to the home industry.People like Pier 1 have been severely affected and will not getbetter. And all the furniture brands are doing very, very poorly.You have Circuit City in bankruptcy. Will they reorganize? Thatstory will be told very shortly, by the middle of January therecould be a determination whether that company is going to liquidateor reorganize. Best Buy will be the remaining category killer. WithLinens liquidating, Bed Bath & Beyond will be the categorykiller. One will survive because they have the money. But they'repulling back, their numbers aren't good and they're sitting ontheir cash. Everybody is looking to 2010. Nobody thinks anything isgetting that much better in 2009.

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