NREI – Pending Sears Buyout Puts Regional Mall Owners in Limbo

Reis in the News

By Beth Mattson-Teig
Source: National Real Estate Investor – Pending Sears Buyout Puts Regional Mall Owners in Limbo

Sears Holdings Corp. Chairman Eddie Lampert put in a winning bid to buy the struggling retailer out of bankruptcy earlier this month following the company’s Chapter 11 bankruptcy filing in October. But the “rescue” Lampert is orchestrating to keep the lights on at more than 400 Sears and Kmart stores is not necessarily welcome news to mall owners.

Lampert’s bid of $5.2 billion to buy the company via his hedge fund, ESL Investments, was accepted by U.S. Bankruptcy Court. However, it is not a done deal. Creditors still have the ability to appeal that decision and plead their case in favor of liquidation. To that point, the Wall Street Journal reported this week that the Pension Benefit Guaranty Corp. is one group that has filed papers in bankruptcy court in opposition to the purchase.

Even if Lampert’s acquisition is successful, many view the move as simply delaying the inevitable. Orchestrating a turnaround at this stage will be challenging to say the least. Not only has the store base been shrinking, but one of the problems that has plagued the chain is lack of capital investment in its stores and operations. According to research firm Reis Inc, the store count has shrunk from 2,300 in 2005 to an estimated 230 Sears stores that will remain after the upcoming March closures, and another roughly 200 Kmart stores. “It would be very difficult for Sears to regain their footing after downsizing,” says Reis Senior Economist Barbara Byrne Denham.

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