For Big-Box Retailers, Online Auction Platforms Offer A Greater Pool Of Investors
Frequent announcements that big-box retailers are shuttering U.S. locations have confirmed a fact retailers have come to acknowledge: spending habits have changed. A preference for experiential shopping and the rise of e-commerce has led to a decrease in consumer spending at brick-and-mortar department stores. To compensate, several large retailers have begun to sell off or reposition assets.
Sears, after declining sales performance last year, found itself in a similar position. To increase financial flexibility and enhance overall liquidity, Sears executed a $440M financing plan secured by 138 properties to fund its pension plan and release properties from a prior ring-fence agreement with the Pension Benefit Guaranty Corp. From there, Sears initiated plans to monetize these stores and pay down debt.
When Cushman & Wakefield was exclusively retained to act as adviser and agent in the sale of the various Sears stores, the national team recommended selling the properties through online commercial real estate auction site and listing service RealINSIGHT Marketplace.
RealINSIGHT is one of the leading marketplaces for properties of this type. As big-box retailers look to sell off assets, using online platforms has become an effective strategy to get in front of and interact with more investors.
“The greatest benefit to using RealINSIGHT Marketplace is the ability to achieve Sears' goals: garner the highest proceeds in the most efficient and certain time frame,” Cushman & Wakefield Managing Director Sean Hayes said. “Investors click and bid online. There is this certainty of execution, and given the timeline needed to monetize these stores and raise liquidity, we believe it is the best sales strategy for Sears.”
The Cushman & Wakefield team chose to partner with RealINSIGHT after working with the online marketplace on six previous deals and becoming familiar with its online sales process.
Interested investors go through a two-bid process. In the first round, a large pool of interested parties bid on the asset based on how it fits their investment profiles. Buyers can highlight the strength of their interest in this round. Sellers are then able to select the most capable buyers to compete in a final sale round. The process allows for an efficient processing of a large investor pool while also aiming for maximum pricing by choosing only those with a strong interest in acquiring the asset.
Online real estate marketplaces have gained a reputation for attracting only opportunistic, value-add buyers, but assets do not have to be distressed or require renovation to generate interest, Hayes said. Bids on the Sears portfolio will be accepted on one or more properties, and investors are poised to evaluate repositioning opportunities while in a leaseback scenario with Sears. Each of the Sears locations is open and operating.
In time, investors might evaluate an alternative use for the properties as each store offers fundamentals that appeal to the shift toward experiential retail. The stores are in dominant regional malls in established, high-traffic retail and commercial corridors. The locations also offer above-market median incomes, dense populations and benefit from other nearby anchor stores, diverse in-line retailers, dining and entertainment options.
The Sears location at Paseo Plaza Mall in Pasadena, Texas, for example, is a regional shopping mall offering 63 stores. The new owner spent over $1M in upgrades.
Cushman & Wakefield’s collaboration with RealINSIGHT Marketing is part of a multipronged approach for reaching investors. The online marketplace supplements the national team’s network of investors, as well as the expertise of the local Cushman & Wakefield brokers with whom the national team has partnered in each market.
In casting a wide net and using the expertise of Cushman & Wakefield brokers, combined with RealINSIGHT Marketplace’s two-bid process, Sears increases the probability of a successful sale.
“Sears wanted to garner the most efficient proceeds in the shortest amount of time,” Hayes said. “The best way is to reach as many investors as possible.”
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