DSW 2013 Annual Report Download - page 58

Table of Contents
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Value City On January 23, 2008, RVI disposed of an 81% ownership interest in its Value City Department Stores (“Value City”) business to VCHI
Acquisition Co., a newly formed entity owned by VCDS Acquisition Holdings, LLC, Emerald Capital Management LLC and Crystal Value, LLC.
The fiscal 2011 reduction of the loss of $0.2 million was due to revaluations of guarantees due to the passage of time, payments by the primary obligor to the
guaranteed party or information available indicating that it was no longer probable that the liability would be incurred.
Filene’s Basement On April 21, 2009, RVI disposed of Filene’s Basement, Inc. and certain related entities to FB II Acquisition Corp., a newly formed entity
owned by Buxbaum Holdings, Inc., and that entity subsequently filed for bankruptcy ("2009 Filene's Basement bankruptcy"). On June 18, 2009, following
bankruptcy court approval, SYL LLC, a subsidiary of Syms Corp (“Syms”), purchased certain assets of Filene’s Basement. In this note, references to
“Filene’s Basement” refer to the debtor, formerly known as Filene’s Basement Inc., and its debtor subsidiaries remaining after the asset purchase by a
subsidiary of Syms. DSW and RVI received distributions from the debtors’ estates of $1.2 million in fiscal 2011. As of both February 1, 2014 and
February 2, 2013, DSW had a guaranteed lease liability of less than $0.1 million related to leases not assumed by Syms.
The fiscal 2012 gain of $1.3 million and fiscal 2011 loss of $5.0 million were related to guaranteed lease obligations, and fiscal 2011 also included a
distribution from the 2009 Filene's Basement bankruptcy debtors' estates. See Note 16 for additional disclosure regarding the guaranteed lease obligations
related to the 2011 bankruptcy filing of Syms and Filene's Basement.
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Schottenstein Affiliates- As of February 1, 2014, the Schottenstein Affiliates, entities owned by or controlled by Jay L. Schottenstein, the executive chairman
of the DSW board of directors, and members of his family, beneficially owned approximately 17% of DSW’s outstanding Common Shares representing
approximately 48% of the combined voting power of DSW’s outstanding Common Shares. As of February 1, 2014, the Schottenstein Affiliates beneficially
owned 8.1 million Class A Common Shares and 7.7 million Class B Common Shares.
DSW leases certain store locations owned by Schottenstein Affiliates and purchases services and products from Schottenstein Affiliates. Accounts receivable
from and payables to affiliates principally result from commercial transactions or affiliate transactions and normally settle in the form of cash in 30 to
60 days. As of both February 1, 2014 and February 2, 2013, the balance of related party receivables was less than $0.1 million. As of February 1, 2014 and
February 2, 2013, the balance of related party payables was $0.8 million and $1.7 million, respectively. As of February 1, 2014, the balance of prepaid
expenses to related parties was less than $0.1 million, and there were no prepaid expenses to related parties as of February 2, 2013.
Corporate Office Headquarters and Distribution Center Acquisition - On October 31, 2012, DSW entered into an agreement of purchase and sale (the
“Purchase Agreement”) with 4300 East Fifth Avenue LLC, an Ohio limited liability company, 4300 Venture 34910 LLC, a Delaware limited liability company,
and 4300 Venture 6729 LLC, a Delaware limited liability company (each a “Seller” and collectively “Sellers”, which are all Schottenstein Affiliates), pursuant
to which DSW acquired on November 1, 2012 all of the Sellers' ownership interest in 810 AC LLC, an Ohio limited liability company (the “Acquisition”).
Prior to the closing of the Acquisition, Sellers transferred certain Properties (as defined in the Purchase Agreement) to 810 AC LLC, portions of which
Properties were previously leased by DSW for its corporate office headquarters, its distribution center and a trailer parking lot. DSW expects certain portions
of the Properties to continue to be leased by unrelated and related parties. As consideration for the Acquisition, DSW paid to Sellers $72 million in cash,
subject to credits and adjustments as provided in the Purchase Agreement.
On November 1, 2012, in connection with the completion of the Acquisition, 4300 East Fifth Avenue LLC and DSW's wholly owned subsidiary, 810 AC
LLC, entered into a cost sharing agreement (the “Cost Sharing Agreement”) pursuant to which, in fiscal 2013, DSW contributed $3 million to the cost of
replacing the roof of a building on the Properties, with the remainder of the costs being contributed by the Sellers. Also on November 1, 2012, 810 AC LLC
and Schottenstein Property Group, LLC, an Ohio limited liability company (“SPG”) which is a Schottenstein Affiliate, entered into a management agreement
(the “Management Agreement”) pursuant to which SPG provides management, operation, repair, maintenance, replacement, and supervision services with
respect to the properties that are the subject of the Management Agreement, collects rent from other tenants and provides other landlord services with respect to
such tenants. SPG had previously managed the Properties. As compensation, DSW pays SPG 4% of rents, or approximately $0.2 million on an annual basis,
collected from lessees of certain portions of the Properties, plus reimbursement for certain costs pursuant to the Management Agreement. The term of the
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Source: DSW Inc., 10-K, March 27, 2014 Powered by Morningstar® Document Research℠
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