Clovis News

Gottschalks' last sale: real estate

In a mostly empty office off Friant Road, the few remaining Gottschalks employees are hard at work doing the only thing the bankrupt retailer does any more -- raising money to pay creditors.

"We've got about four people left downstairs working through every claim, and there are hundreds of claims from unsecured creditors," said James Famalette, Gottschalks' chairman and chief executive, who now counts his remaining tenure in weeks.

Once-mighty Gottschalks owes creditors more than $50 million. But with the merchandise long gone and the last of 58 stores closed two months ago, about all that's left to sell are the company's few remaining real estate assets.

Four pending sales await approval this month by a federal bankruptcy judge in Delaware, including a $3.35 million deal to sell Gottschalks' Eureka store to Illinois-based Hilco Real Estate Holdings LLC. A hearing on the sale of the 71,000-square-foot site is set for Sept. 29.

Each property sold adds to what Gottschalks has available to pay off merchandise suppliers and service providers who have gone unpaid since the Fresno-based department-store chain filed for bankruptcy in January, Famalette said.

Famalette expects he won't be needed after these last real estate deals are resolved.

"After that, Greg Ambro [the executive VP and chief operating officer] will continue on as the company's administrator" until the bankruptcy case is completed, Famalette said.

Gottschalks has raised almost $23 million so far in sales of property and leases. At an auction in May, retailers Forever 21 and Macy's collectively ponied up more than $19.7 million for 12 former Gottschalks locations.

And in August, a bankruptcy judge approved a $3.2 million deal in which Gottschalks sold the lease for its headquarters in north Fresno's River Park corporate center as well as its interest in the partnership that owns the building off Friant Road.

"We have to raise as much as we can through this process, and at some point -- probably months from now -- our unsecured creditors will be asked to approve a settlement," Famalette said.

The demise of Gottschalks moved rapidly following the company's Chapter 11 bankruptcy filing Jan. 14. By April, chainwide going-out-of-business sales were under way at the hands of liquidators, and the final day of business at the last stores was July 12.

According to court records, Gottschalks estimated it owed more than $54 million to companies that provided merchandise and services to the retailer.

Through Aug. 1 -- the most recent operating report filed by Gottschalks with the bankruptcy court -- records show receipts of more than $282 million since mid-January through the sale of the company's merchandise and other assets, against expenditures of $188 million.

And after paying off the bankruptcy financing the company obtained from General Electric Capital Corp., court records showed, the company had cash on hand of about $19.2 million.

It may be months, however, before creditors know just how much money they will receive from the Gottschalks estate or what the formula will be for dividing the available funds.

"When it comes to this time, the bankruptcy becomes more of a grinding process rather than a speedy process," Famalette said.

In addition to allowing prospective real estate buyers time to evaluate the details of their deals -- and seeking out other potential bidders -- a handful of remaining Gottschalks financial staffers are sorting through thousands of claims filed by unsecured creditors to reconcile the claims against the company's own records.

As that process unfolds, the proceeds from asset sales continue to accumulate. Eventually, the company and a committee representing the creditors will assess the available funds and the claims against the estate and propose a settlement for a bankruptcy judge to approve.

Gottschalks also had about 40 former store locations across the western U.S. for which it was unable to sell its interest in the unexpired leases.

The company has rejected, or abandoned, those leases, including for stores at Clovis' Sierra Vista Mall and Fresno's Manchester Center. Those properties have now returned to the control of their landlords, Famalette said.

Bankrupt retailer Gottschalks is working to sell its real estate assets to raise cash for its creditors.

View Wheeling & dealing in a larger map