Saturday, January 20, 2018
Business

Tyrone Square Mall redevelopment a sign of the times for retail

ST. PETERSBURG — The fences are up and the construction has started. The former Sears department store at Tyrone Square Mall, which had been open for nearly 50 years, closed months ago to make room for new development: Tampa Bay's first Lucky's Market organic grocery store and a Dick's Sporting Goods.

It's a classic sign of the times for the American shopping mall — traditional department stores are closing at a remarkable rate while newcomers are gobbling up the prime real estate left behind after their funeral. But in an intriguing turn of events, the flailing, though long-standing Sears store that closed in St. Petersburg and the new tenants that are coming in after it, are all benefiting the same company. Or at least, the same owner.

Seritage Growth Properties is the New York-based real estate company in charge of a redevelopment plan at Tyrone Square Mall, which includes demolishing the 188,515-square-foot department store to make way for a new 151,952-square-foot shopping center for tenants like Dick's, Lucky's and Petsmart, with room for one more anchoring retailer. Seritage, which went public in 2015, is responsible for developing more than 200 Sears department store sites across the country. It's the same company that turned half the Sears space at Westfield Countryside Mall in Clearwater into a Whole Food Market.

Previous Coverage: Developer wants Sears out, Dick's Sporting Goods and Lucky's Market in at Tyrone Square Mall

The link? Billionaire Eddie Lampert.

Lampert is the founder and chairman of a lot things. He's the chairman of Sears Holding Corp., the parent company of Sears and Kmart, where he also became the company's CEO in 2013. He owns the majority of shares in Sears Holding Corp., too. The former AutoNation executive is the head of ESL Investments, his own real estate hedge fund. And guess what? He's the chairman of Seritage Growth Properties, the real estate development company spinning off 200-plus department stores.

It's worth noting that the market value of Sears Holding Corp. is about a measly $800 million compared to Seritage's $2.4 billion value.

Clearly this is a lucrative move for Lampert and Seritage, and in some cases, Sears, which like many other retailers, has more stores than really makes sense these days. As Sears stores continue to under perform, Seritage can stop the bleeding by closing a store altogether or by leasing out part of its large space to another tenant.

"It's a unique situation. Certainly the value of these department stores are in their real estate," said Jeff Green, a retail analyst based in Phoenix. "It's a way for the Sears' parent company to monetize some of these locations by spinning them off into a separate public company."

Think of Seritage as the landlord of a good chunk of Sears department stores. When they come up with a better plan for that real estate's future, Seritage has the right to kick out its current tenant or change up the size of the store through the leases its signed with Sears.

As of January, Sears leased 337 of its 670 full-line Sears stores and 668 out of 735 Kmart stores through Seritage, according to a company spokesman. Seritage owns 266 of those locations, giving them a playground of more than 40 million square feet of retail space to experiment with.

"It's a smart way of downsizing the box," Green said. "What you're finding now is that Sears stores are too big. In many cases the retailer is closing its second story and just operating out of the first one. Redevelopment is a great cost savings measure, and its an attempt to keep the retail company viable for a little longer."

Malls may be the least relevant today than they've ever been, but their real estate is still incredibly valuable, analysts say.

"If a store isn't performing there are plenty of others who are lined up to take over that desirable space," said Steve Kirn, a lecturer on retail at the University of Florida. "Sears has some very good locations, places that are highly desirable for a Dick's Sporting Goods or a Whole Foods. Space can easily be reconfigured."

It's interesting to see a CEO and chairman that will benefit no matter what the future holds for the struggling retailer he basically owns and oversees.

Or maybe Lampert just sees the writing on the wall. Department stores are very quickly becoming relics of retail's past, with the likes of Amazon and others surging ahead in the digital and brick and mortar spheres. The only value Sears has left, after years of steadily declining same-store sales, layoffs and store closures, is the real estate parcels it owns at malls around the country.

So what happens when and if Sears goes down for good? Seritage will likely pivot and work with other retailers. The real estate firm has completed 50 commercial real estate projects with a combined investment of $500 million since its inception in 2015. While the vast majority of the company's investment is in Sears, Seritage also has interests in 31 properties through joint venture investments with major mall developers like General Growth Properties, Simon Property Group and Macerich.

Contact Justine Griffin at [email protected] or (727) 893-8467. Follow @SunBizGriffin.

   
Comments
Tampa Bay jobs chief Ed Peachey making top dollar

Tampa Bay jobs chief Ed Peachey making top dollar

For years, Edward Peachey has bragged about the number of jobless people he has helped find work.As president and CEO of CareerSource Pinellas and CareerSource Tampa Bay, he’s in charge of the two main government agencies that provide training to the...
Published: 01/20/18
Sunday Conversation: Lightning VP Keith Harris strikes a chord for the Boys & Girls Clubs

Sunday Conversation: Lightning VP Keith Harris strikes a chord for the Boys & Girls Clubs

Keith Harris fondly looks back on some memorable days from his Tampa upbringing when he worked as a lifeguard at a pool next to a Boys & Girls Club. ¶Whenever it rained, he watched as the kids retreated to the safe haven of the club. They entered int...
Updated: 1 hour ago
Inspector General launches investigation into Tampa Bay’s local career centers

Inspector General launches investigation into Tampa Bay’s local career centers

The state has opened an investigation into CareerSource Pinellas and CareerSource Tampa Bay, days after the Tampa Bay Times asked about whether the two regional job centers were inflating the number of people they had helped get hired. The agencies, ...
Published: 01/19/18
Tech firm TranferWise moves to Ybor City, illustrating a new chapter in Tampa’s business history

Tech firm TranferWise moves to Ybor City, illustrating a new chapter in Tampa’s business history

TAMPA — You could sketch an economic history of the city of Tampa — and maybe get a glimpse of its future — just by looking at the old J. Seidenberg & Co./Havana-American Cigar Factory.It opened in 1894, making it Ybor City’s second-oldest brick ciga...
Published: 01/19/18

Want to buy into an exchanged-traded bitcoin fund? You might have a long wait

NEW YORK — It may be a while, if ever, before investors can buy an exchange-traded fund made up of bitcoin and other digital currencies. Federal regulators have a long list of questions they want answered before they’ll approve a digital currency fun...
Published: 01/19/18
Child psychologist weighs in on mom who charges 5-year-old ‘rent’

Child psychologist weighs in on mom who charges 5-year-old ‘rent’

A Georgia mother has gone viral for charging her 5-year-old "rent." Yup — the kid pays up for food, water, cable and electric, too.Essense Evans described in a Facebook post how she handles her daughter’s allowance. The post, written on Saturday, was...
Published: 01/19/18

Addicted to your smartphone? Now there’s an app for that

Did you text? Sorry, I can’t see messages right now. Arianna Huffington locked my phone.The media tycoon turned wellness entrepreneur wants to keep you out of your phone, too, with a new app called Thrive. Its goal is to make it cool for a generation...
Published: 01/19/18
Proposed monument near St. Pete pier would honor Tony Jannus history-making flight

Proposed monument near St. Pete pier would honor Tony Jannus history-making flight

ST. PETERSBURG — Tony Jannus’s history-making flight in an early seaplane — simultaneously as ungainly and graceful as a pelican on the wing — is what Mayor Rick Kriseman calls an "under-told and under-appreciated" story, but a team of local history ...
Published: 01/19/18
Learn how bus rapid transit (and rail) could work in Tampa Bay

Learn how bus rapid transit (and rail) could work in Tampa Bay

ST. PETERSBURG — The newest hope for transportation in the Tampa Bay area is a bus rapid transit system projected to cover the 41-miles separating St. Petersburg from Wesley Chapel and attract 4,500 new riders at a fraction of the cost of light rail....
Published: 01/19/18
Five things Tampa Bay needs to know about bus rapid transit

Five things Tampa Bay needs to know about bus rapid transit

ST. PETERSBURG — Transportation planners on Friday unveiled a new transit vision for Tampa Bay leaders on Friday morning: Bus rapid transit.Also known as BRT, it has arisen as the leading option in an ongoing study to find the best regional transit p...
Published: 01/19/18