A Perfect Example of a Department Store Vacancy Solution

Implications: This article explains in more detail than any other I have read in recent years, the mechanics of what happens when a successful regional mall ($446 psf) finds itself with a sudden vacancy of a key anchor tenant.  It shows the approximate costs associated with finding a replacement tenant and gives a final resting place to the widely held belief that department store real estate has some intrinsic value.

Analysis: Willow Grove Park is a highly successful regional mall opened in 1982 and fully remodeled in 2001. Its' major anchors are: Sears, Bloomingdale's, Macy's and a vacant Strawbridge's. After the Federated - May Co. merger it was determined that Federated (now Macy's) had too many stores in the mall and wanted to close and sell their 229,000 s.f. Strawbridge's. A fast growing regional chain (Boscov's) wanted to buy it but did not want the entire space and did not have the resources to redevelop the store.

A deal was made with the mall owner (PREIT) to buy back the space from Boscov's at a discount, redevelop the space for both a Cheesecake Factory restaurant and a new 194,000 sf Boscov's. The entire transaction will cost PREIT approximately $19.7 million and should lay to rest any future comments about the "hidden" real estate value in companies such as Dillard's or Sears.