Monday, May 9, 2011

Losing $25 million on Linens 'n' Things

In a profile of real estate investor Richard Baker, the New York Times inserted a brief but instructive mistake story. Baker is now the CEO of Lord & Taylor, and his NRDC Equity Partners focuses on retailing investments.

[NRDC's] first deal was a dud. After losing out to a consortium of real estate and private equity investors on Toys “R” Us in 2005, Mr. Baker and his partners invested $25 million alongside Apollo Global Management, the private equity firm, in its $5.1 billion purchase of Linens ’n Things. They lost their entire investment when the company, a housewares retailer, collapsed three years later.

Richard Baker says the fiasco taught him a lesson. “Where I failed was that if I’m going to invest in a transaction, I need to control it,” he says.

Of course, it's only been a few years since that experience. Perhaps as time passes Mr. Baker will learn that investments that you control can also fail. If that happens (or doesn't happen), it'll be a great story. Stay tuned.

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