A&G Real Estate Partners’ portfolio optimization of gift and stationery retailer Paper Source earned it a share of the “Distressed M&A Deal of the Year-Middle Markets” award at Global M&A Network’s 13th Annual Turnaround Atlas Awards Ceremony. The awards committee also recognized SSG Capital Advisors, investment banker on the Paper Source deal, and Carl Marks Advisors, financial advisor to the secured lender.
The Melville-based real estate advisory firm, which specializes in lease restructuring, real estate sales and auctions nationwide, received the award during the virtual event held on Jan. 26-27. “Once again, we honored eminent firms and top-performing dealmakers from the North and South Americas, who exemplify excellence for executing transactions,” said Shanta Kumari, CEO and Global Group Editor, Global M&A Network.
“We are honored to receive this latest recognition from Global M&A Network on behalf of our team,” said A&G Co-President Emilio Amendola. “In our view, Paper Source was a strong illustration of how the right approach to real estate can turn a retailer’s fortunes around.”
Challenges created by the initial onset of the pandemic in 2020 were at the root of A&G’s engagement with Paper Source, noted A&G Senior Managing Director Todd Eyler. “The pandemic occurred right after Paper Source had snapped up 30 new stores from competitor Papyrus,” he said. “Although Paper Source had an online presence, about 85 percent of its revenue was coming from the brick-and-mortar operations.”
Safety concerns about shopping in stores were just part of the reason sales and traffic had declined at those locations. “So many in-person events like weddings and graduation parties had been postponed, which directly affected market demand for Paper Source products,” Eyler explained.
In March 2021, Paper Source filed for Chapter 11 bankruptcy protection. At that time, the retailer employed 1,700 people and operated 158 stores with $36 million in estimated annual lease charges. It was reportedly saddled by about $100 million in debt. “Paper Source certainly needed to rethink its real estate portfolio given the changes that were occurring,” Amendola said.
A&G conducted an in-depth portfolio review, crafted strong messaging and dove into negotiations with landlords. “Within 45 days, A&G had restructured a total of 130 of these leases, saving about 20 percent of annual average occupancy costs per location and securing an average of about one month of abatements per location,” Amendola noted.
In May 2021, Barnes & Noble parent company Elliott Investment Management L.P. acquired the retailer for a reported $91.6 million. This enabled Paper Source to emerge from Chapter 11 with plans to operate 130 stores and its ecommerce business. “Paper Source’s financials, primarily based on the restructured leases in the portfolio, were a major driver of that acquisition,” Amendola said.
Global M&A Network named A&G “Real Estate Restructuring Firm of the Year” for its overall work in both 2019 and 2020. The firm was also recognized by the organization in both years for its efforts on numerous individual deals.