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KING OF PRUSSIA, PA-As part of the Chapter 11 bankruptcy petition filed by locally based FAO Inc. last week, the retailer retains DJM Asset Management Inc. to dispose of its Zany Brainy division’s 89 leases in 27 states. Melville, NY-based DJM, which specializes in disposing of surplus retail real estate assets, is accepting bids from now to mid-January and will conduct an auction on the leases at the end of January.

The leases range in size from 6,093 sf to 15,520 sf and are in freestanding, strip center and mall locations. Andy Graiser, DJM’s co-CEO, says a majority are “in premium regional markets with strong demographics in some of the highest quality shopping centers in the country.”

The two states with the most locations up for bid are California with 10, and Pennsylvania with nine. Rental rates under the existing leases vary dramatically. The base rate for 10,875 sf at Wynmore Shopping Center in Ardmore, PA, for example, is $25.45 per sf until Feb. 29, 2004, with a scheduled increase to $26.07 per sf until the lease expires the following year. The current base rental rate on a similar size store at Park Place Centre in Memphis is $13.14 per sf through lease expiration in January 2009.

Meanwhile, at the request of its lenders, on Dec. 4, FAO retained liquidators to conduct inventory clearance sales in all 142 Zany Brainy, FAO Schwarz and Right Start stores and is seeking a buyer for the FAO Schwarz and Right Start businesses by Monday, Dec. 15. If no buyer is found by then, FAO is required to accelerate the liquidation of those assets, including leases.

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