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STS acquires 21 Strauss stores

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CLEVELAND—Somerset Tire Service Inc. (STS) has taken over the assets of 21 Strauss Discount Auto stores in New Jersey, New York and Pennsylvania—18 through transactions with the U.S. Bankruptcy Court in New Jersey—and is converting them to STS Tire & Auto Centers.

The acquisitions are in addition to five greenfield locations STS opened earlier this year prior to the Strauss bankruptcy and nine other properties under development throughout the dealership's tri-state marketing area.

In about a dozen of the acquired stores, Advance Stores Co. Inc. is taking over roughly half the space in the former Strauss stores, which average about 14,000 to 15,000 square feet, and is converting them to Advance Auto Parts retail locations, according to Somerset Tire President Bill Caulin, who discussed the transaction in a conversation at the recent International Tire Exhibition & Conference (ITEC) in Cleveland.

Most of the remaining stores already have tenants—some automotive, some not—Mr. Caulin told Tire Business.

Strauss Discount Auto, the South River, N.J.-based East Coast auto parts and tire retailer/auto service provider, closed its 46 stores in June and filed for Chapter 11 bankruptcy. The filing was Strauss's third Chapter 11 filing in the past six years.

At its peak, Strauss operated more than 110 stores in New Jersey, New York and Pennsylvania. The company dates to 1919, when Herman Schlenger of Newark, N.J., founded R&S Auto; in 1982 R&S merged with Strauss of New York.

As of the first week of October, STS had reopened eight of the 21 properties it acquired and expects to have the others renovated and open before year-end, Mr. Caulin said. In particular, the acquisitions put STS directly into Philadelphia for the first time and strengthen the dealership's presence in the Philly metro area, he said.

The value of STS's deals with the bankruptcy court could be as high as $9.5 million, according to court documents, but this likely will end up being lower depending on a final accounting of assets and other provisions included in the contracts, Mr. Caulin said.

The deals include auto and tire service equipment from a number of other Strauss stores, he said, so STS is able to cull the best pieces of equipment for the stores it's reopening.

“The timing (of Strauss's bankruptcy) could have been better,” Mr. Caulin said, “since we were already in the middle of expanding. But when an opportunity comes along, you have to be ready to act.”

Separately, Advance Stores has acquired 10 Strauss locations in New Jersey and nine in New York and is converting the auto parts portion of the stores to Advance Auto Parts retail locations.

Advance agreed to pay $3.85 million for the 19 stores and inventory, according to the court filings. It continues to seek possible co-tenants to operate the auto service portion of the former Strauss stores, a company spokesperson said.

In addition, auto parts/service and tire retailers Monro Muffler Brake Inc. and Pep Boys-Manny, Moe & Jack have bids in to take over leases on three stores: Monro for a location in Toms River, N.J., and Pep Boys for stores in Bayside and Bronx, N.Y.

For Somerset, Strauss's bankruptcy filing came in the midst of an expansion plan the company already had started earlier in the year. Somerset had opened five greenfield locations—two each in New Jersey and New York and one in Pennsylvania—prior to the Strauss bankruptcy, and the employee-owned dealership has nine other properties under development throughout its tri-state marketing area.

When the organic growth and Strauss acquisitions are open, Somerset will have a network of 155 stores.

Mr. Caulin declined to say what Somerset is investing in the greenfield sites, but did acknowledge that opening the acquired Strauss locations was significantly less expensive than opening new stores.

Based on the data from the court filings, STS is paying roughly $475,000 per outlet for the Strauss locations it is taking over. The company did not say what it's spending to convert the locations to its specifications and design.

Somerset has rehired some Strauss employees, including a few store managers, Mr. Caulin said, although the Strauss stores were closed long enough that many former employees have moved on to other positions. At the time it closed in early June, Strauss had 580 employees on its payroll, according to its Chapter 11 filing.

Advance Stores did not respond to repeated requests for comment on its plans for the Strauss locations it acquired and/or agreed to operate alongside the STS retail locations.



To reach this reporter: bdavis@crain.com; 330-865-6145.
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