Sears Gets Another Reprieve, But Mall Owners Just Want It To Go Away Already
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Sears has once again avoided the chopping block, but some of its key landlords aren't cheering.
Sears Holdings Chairman and former CEO Eddie Lampert has reached a deal with attorneys for his hedge fund, ESL Investments, to pay $4.4B to keep 425 locations open as the company's bankruptcy auction proceeds. The transaction was agreed upon with the condition that Lampert pay $120M in cash Wednesday afternoon, CNN reports.
The auction will be held on Jan. 14, but it could take months for all bids to resolve, according to CNN. ESL holds more of Sears' debt than any other entity, but it is fighting its fellow creditors to stave off liquidation. Among those in favor of closing all remaining stores are Simon Property Group and Brixmor Property Group, the Wall Street Journal reports. That represents a stark contrast with what landlords have often preferred as similar big-box retailers like Bon-Ton and Toys R Us circled the drain, according to the WSJ.
As Sears has lost money for years, Lampert's strategy to stem the bleeding has been to close locations and cut costs, which has so far proved unsuccessful. While Macy's has engineered a turn of fortune by spending money to revamp and adjust to the changing nature of retail, Sears and subsidiary Kmart have gathered dust, as the creditor group including Simon and Brixmor alleged in court documents.
Whether due to disinvestment from Lampert and ESL or the bad press that has surrounded the business for the better part of a decade, significantly fewer shoppers are frequenting Sears. The chain saw an 11% year-over-year drop in Black Friday shoppers this past year, while Macy's and J.C. Penney saw year-over-year increases, according to the WSJ.
Going forward, the billions in debt Sears owes will be the deciding factor in its fight for survival. Though Lampert's plan is set to require $1.3B in further loans to finance, an earlier version reportedly would have included ESL forgiving $1B of the debt it held over Sears — a clause that other creditors refused, and threatened to derail the deal entirely, CNN reports.
Other creditors have alleged that as the head of both entities, Lampert is attempting to safeguard his investments at the cost of their own, CNN reports. Regardless of Lampert's intentions, landlords like Simon and Brixmor believe that the real estate Sears stores currently occupy would be more valuable if they were vacated.
Declining foot traffic means that Sears can't provide the benefits anchor retailers are supposed to provide neighboring tenants, as malls including Sears saw less year-over-year growth in Black Friday shoppers as the nationwide average. Whether through creative re-tenanting or mixed-use redevelopment, many landlords are ready to move on from Sears.