Sears, struggling to sell property, markets a valuable asset: real estate
Buyers can no longer come in droves for keys, watches or washing machines. But Sears, the once ubiquitous department store that’s been battered by the growth of e-commerce, may have one more thing of value in the marketplace: its own buildings.
For the past decade or so – and accelerating in recent months as its owner embarked on the equivalent of a clearance sale – investors have been betting on new uses for vacant Sears stores, from Santa Monica, California, south of New Jersey.
Many sites, often old windowless carcasses connected to shopping malls, are not straying far from their original mission: they are being redesigned for new retailers.
But certain addresses, in line with a tendency to reconvert dusty commercial properties, are given new and sometimes unexpected functions. At more than a dozen sites across the county, developers are setting up high-end apartments, state-of-the-art classrooms, and even labs where classified weapon systems are designed.
âSears seemed to have thrown in the towel a long time ago and is now looking to monetize its properties,â said Joseph F. Coradino, managing director of PREIT, a Philadelphia-based mall owner who has remodeled about half a dozen of Sears stores. More recently, a health care facility announced that it was taking back a shell from its Moorestown mall in New Jersey.
Granted, Sears isn’t the only chain struggling with empty aisles. Several department stores filed for bankruptcy during the pandemic, including Neiman Marcus, JCPenney and Lord & Taylor, although like Sears, many of these retailers were struggling and were closing stores long before the coronavirus crisis.
For Sears, the transition to new uses is perhaps most pronounced in its hometown of Chicago, where for decades the tallest building was the Sears Tower. But not more. Sears moved a long time ago and since 2009 the 1,450 foot black-toned skyscraper has been called Willis Tower, for a British insurance company.
In Chicago, several stores have recently completed or are about to have a makeover, including one of Sears’ oldest properties, at East 79th Street and South Kenwood Avenue, which opened in 1928 and sold its last machines. to be sewn in 2013.
After all traces of Sears were cleaned up, the buff brick structure, almost a block, reopened last year as a self-storage facility operated by ExtraSpace Storage.
âI remember the cosmetics counter just inside the front door,â said Zeb McLaurin, recalling the trips he took with his family there in the early 1980s. Today, Mr. McLaurin, president of McLaurin Development Partners, co-owns the 140,000 square foot building, which he purchased in 2018 for $ 900,000. The seller was Seritage Growth Properties, a real estate investment trust and offshoot of ESL Investments, which has owned Sears since 2005 and also controls Kmart. Sears filed for bankruptcy in 2018; its assets were acquired a year later by Transformco, another entity controlled by ESL. Only a handful of Sears stores remain open.
With the opening of this Chicago store nearly 100 years ago, Sears launched a nationwide campaign to add a physical element to a thriving mail order business. Special attention has been paid to making its stores look alike but also stand out.
Indeed, a tall campanile-style central tower with arched windows at the East 79th store resembles that of the North Lawndale neighborhood that once dominated the company’s factory and catalog printing plant. This spire, now called Nichols Tower, has come back to life as a community center and hub for nonprofit groups focused on housing and education.
For Mr. McLaurin, a demolition would not have been profitable. His site, on the South Side of Chicago, is not suitable for an expensive new development, at least for now, he said.
But others have kept shops for the architecture because, in part, they often find it compelling, such as in Chicago’s Portage Park neighborhood, where a once bustling shopping district is a shell of itself.
Novak Development Company, which bought the two-block site from Seritage last year for $ 11.5 million, plans to preserve the Art Deco-style facade of a 1938 Sears while adding 206 apartments and 50,000 feet retail squares. City Council blessed the project this fall; construction is scheduled for next summer.
In 2020, Novak bought another Sears Chicago site from Seritage, a mix of beige brick buildings and parking lots on a three-block West Side site that cost $ 2.4 million. Novak will build 150 apartments and commercial spaces, although the site’s Sears store has been demolished.
Since the start of the pandemic, Seritage’s stock price has plunged, while its longtime CEO has left. By September, its portfolio of 266 Sears and Kmart properties, which the company bought for $ 2.7 billion in 2015, had been reduced to 171, according to a company spokesperson. Of these properties, 130 were Sears stores.
Even with a portfolio of tailors, Seritage has continued to move forward with its own Sears redevelopments, according to records, including a residential project in West Covina, Calif.
The company is also involved in the conversion of office space including Mark 302, a 50,000 square foot project in Santa Monica, California, for which Seritage has partnered with Invesco, an investment firm. The almost complete remodel offers a bright atrium and a ground floor market, but also retains much of the original structure from 1947, a designated local landmark. The name of the former occupant remains on some facades.
âThese stores were built in fantastic locations, were easily accessible and have good parking,â said Jeff Pion, vice president of CBRE, which markets potential offices in a closed Bloomingdale’s across the street. Street. âLeasing has probably been slower than Seritage would like, but the same can be said for office leasing in general over the past 21 months. “
A fundamental challenge seems to be taking buildings that shy away from natural light and adapting them to modern tastes, which was a challenge during a 1939 poured concrete Sears in Houston. To brighten up the space, which is owned by Rice University, the designers removed the roof from the three-story building and added two more floors lined with windows. Escalators were also phased out in the $ 100 million renovation and replaced with classrooms and a 250-seat forum.
“It was by no means a valuable restoration,” said Anneli Rice, architect of the Shop cabinet. âWe used what was useful and deleted the rest. “
The Ion, as the Sears are now called, partially opened last spring and counts Microsoft and Chevron among its office tenants. A craft beer bar will open next year.
Insufficient electrical power and plumbing are a challenge at the former Sears store in Moorestown Mall as it is converted to an outpatient medical clinic for the Cooper University health care network. In the spring of 2020, Cooper bought Transformco’s stake in the store for $ 9 million.
The 23,000 square foot 1963 structure originally had four bathrooms. But since it will now house medical offices, it will take around 50, said Mr Coradino, the owner of the mall, who has also installed four new retailers in a vacant Macy’s and is considering a proposal to reassign a Lord & Taylor empty. Plans are also underway to build a hotel and 375 apartments in parking lots.
For PREIT, the benefit of adding a health care clinic in the mall is the addition of new buyers. Relatives of patients may now have something to do, it is believed, while they wait.
A similar calculation is played out in Lawton, Oklahoma. A former Sears in the city-owned Central Plaza shopping center near the Fort Sill military base is being retrofitted into a hub for the production of weapons and navigation systems.
During the day, defense contractors will work hard on top-secret technology in rooms that were once cavernous, but will be sliced ââinto smaller pieces, with more guarded doors, in the interests of security, Taylor said. , project director. , the FISTA Innovation Park. A closed Dillard’s in the mall is undergoing a similar reinvention.
But when lunchtime comes, defense workers should head to food courts and perhaps shop along the way, which should benefit retailers in the mall, Taylor said. âWe have created a collaborative ecosystem,â he added. “And anyway, no one else was standing in line to occupy those stores.”