Another unsuspecting positive to JCP re-positioning situation today:
Sears Exit Would Leave Big Holes in Malls. Some Landlords Welcome That.
7:00 am ET October 12, 2018 (Dow Jones)
By Esther Fung
The prospect of Sears Holdings Corp.'s imminent bankruptcy threatens to widen the gap between the more successful shopping centers and the struggling ones.
Mall owners with trendy retailers, lively restaurants and other forms of popular entertainment have continued to prosper. Many of these landlords would welcome Sears' departure, mall owners and analysts said. The department store's exit would allow them to take over a big-box space and lease it to a more profitable tenant.
In malls where leases were signed decades ago, Sears rents could be as low as $4 a square foot. New tenants in the same space could bring in as much as six times that amount.
But for mall landlords in more economically depressed areas, where there is often still a glut of run-of-the-mill retail and much of the former foot traffic has migrated to online shopping, the loss of Sears as anchor tenant could be troubling. The brand still attracts some consumers, and many owners would be hard-pressed to find another large tenant to take Sears' place.
Several other department stores, like J.C. Penney Co. and Macy's Inc., have been closing weaker locations and aren't eager to lease space in floundering malls, while a number of other chains, like Toys 'R' Us Inc. and Bon-Ton Stores, that once occupied big-box spaces are out of business.
Real-estate investment trusts sold off after The Wall Street Journal reported late Tuesday that Sears was preparing for chapter 11.
But in each case, rent from Sears represents less than 1% of these mall owners' overall revenue, according to Wells Fargo Securities and SNL. This helps mitigate some of the financial impact, but a Sears departure could still have a negative impact.
For instance, if the landlord is unable to find a replacement tenant, a so-called cotenancy clause would allow other mall tenants to seek rent reductions or lease terminations.
A Sears liquidation would also pose problems for holders of debt that is backed by malls where the retailer operates. More than $10.6 billion worth of loans that were converted into commercial-mortgage-backed securities that financed retail properties. These properties count a Sears or Kmart among their top five tenants, according to data firm Trepp LLC.
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