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BURLINGTON, MA-The pulp story that has become the auction of Filene’s Basement is drawing to a close with the announcement that a venture between “off-price” discounter Syms and real estate company Vornado have won with a reported $62.4-million bid. After an odd-couple, enemies-cum-friends pairing of Men’s Warehouse and Crown Acquisitions claimed the highest bid Friday, with a $65-million offer, Monday’s re-evaluation found the Syms/Vornado bid to be a better fit.

The Men’s Warehouse/Crown bid included 18 of the 26 store leases, inventory and other assets. The Syms/Vornado offer wanted 23 of the 26 store leases, inventory and the distribution center in Auburn, MA. Terry Corrigan of Abacus Advisors, which is overseeing Filene’s restructuring, tells GlobeSt.com, “At the continued auction for the assets of Filene’s Basement [Monday], the company and the Creditors’ Committee determined that the revised proposal submitted by Syms/Vornado constituted the ‘highest and best’ offer. Men’s Wearhouse/Crown decided not to raise their offer and the company declared the auction closed.”

Despite MW/Crown’s higher cash offer, Syms/Vornado’s higher store count eventually made the lesser-monetary bid a more lucrative offer. “Syms/Vornado offered to take more of the store leases than Men’s Wearhouse/Crown offered to take,” Corrigan explains. “As a result, more claims for landlord ‘rejection damages’ would be added to the pool of unsecured claims under the Men’s Wearhouse proposal, and the percentage dividend expected to be paid to unsecured creditors would be lower.” He noted that landlords are treated the same as all other unsecured creditors with respect to their claims, in these situations.

Left in the dust by the Syms/Vornado bid are the Burlington headquarters and the stores in Hyannis, MA and Elizabeth, NJ. In the contested $67-million bid from Men’s Warehouse, the headquarters would have been absorbed. The “rejection damages” were the difference-maker in the auction, as the eight stores left in the cold by the MW/Crown bid racked up too much money to pay out after the proceedings were concluded.

Corrigan tells GlobeSt.com, the Hyannis, MA and Elizabeth, NJ landlords are treated the way any other landlord in a tenant default situation, in that they are entitled to the entire sum of the remaining lease which was abandoned. However, in the case of a bankruptcy proceeding and particularly in real estate, there is a cap since many leases can be 15 or 20 year leases, as an example, and the landlord claims could drown the proceedings. The cap therefore, he explains, has a “maximum amount of 15% of remaining value of the lease, not exceeding three years.” Essentially, to get the maximum there would have to be a full 20-year lease left on the property, which neither of these properties currently have. The difference of two left-over leases to eight, ended up being a spread of roughly $7 million, Corrigan explains. Filene’s lists 25 stores on its website, but the 26th store in the proceedings is the Downtown Crossing space, which has not be operating for the last two years, but would be expected to after the completion of Boston’s Downtown Crossing project, often called the “Filene’s project.”

However, the Boston Herald is reporting that, with Vornado involved in the winning bid, the Downtown Crossing flagship location may go away. The in-limbo location holds an inexpensive lease, which Vornado would like to replace with a newer more expensive one, to anchor its stalled $700-million project with developer John Hynes, which halted development while its monetary situation could be worked out, as no construction loan had been closed at the time.

It might be said that this all began when, former owner Retail Ventures, Inc. sold Filene’s Basement to Buxbaum Group claiming no net proceeds from the sale. Buxbaum, a California-based liquidator and appraiser, cites liquidity issues with its recent purchase as a reason for the property divestiture. RVI had purchased Filene’s out of bankruptcy in 2000, after the retailers had filed for Chapter 11 in 1999.

Crown Acquisitions placed a $22-million “stalking bid”–a bid before the auction proceedings–which concluded with a winning bid by Men’s Warehouse for $67 million, which included 18 stores, the entire inventory, the headquarters in Burlington, MA and the distributions center in Arlington, MA. Crown, however, called foul on MW’s bid calling the auction “a travesty,” according to AmLaw Daily, with their lawyers King & Spalding, arguing in the filing that Filene’s and their attorneys, along with the Creditor’s Committee, ignored Crown’s complaints of violations, pointing to a missed application deadline, among other breaches. The auction was then reopened on Friday, as the four originally solo bidders teamed up in pairs to compete for the property.

The hearing to authorize the acceptance of the offer is scheduled for Wednesday in the afternoon. Syms issued a press release stating that it had won the bid, pending approval, but did not wish to comment further until after the hearing on Wednesday. Crown Acquisitions did not respond to GlobeSt.com inquiries by deadline.

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