In the past three days Federated Department Stores has agreed to sell 20 stores, putting it more than halfway to its goal of shedding 80 stores that were made redundant by its merger with May Department Stores. Simon Property Group and Macerich Co. will take over nine and 11 stores, respectively.
“They’re actually working through it faster than I would have thought,” says Jeff Green, president of Jeff Green Partners, a retail consultancy. “It’s a daunting process to figure out which of the two duplicates should stay open, not from a branding standpoint, but from a physical standpoint.”
Financial terms of the deals were not disclosed. The sale of all 80 properties will bring in $400 million to $500 million, according to a Federated spokesperson.
Simon Property Group acquired seven Federated buildings at its properties and reached an agreement to terminate Federated leases at two other malls. Nordstrom will move into Federated spaces in three malls in Massachusetts (Burlington Mall, South Shore Plaza in Braintree and Northshore Mall in Peabody). At the Ross Park Mall in Pittsburgh, Federated’s former Macy’s will be occupied by a Nordstrom and a Cheesecake Factory. In Indiana, Dillard’s will take Federated’s space at Simon’s Eastland Mall in Evansville, Ind. At Castelton Square Mall in Indianapolis, University Park Mall in Mishawaka, and Greenwood Park Mall the Federated shells will become part of lifestyle-center additions, which will include such tenants as theaters, bookstores and restaurants. Simon did not announce plans for its Pheasant Lane Mall, Nashua, N.H.
In all, 21 Simon properties were affected by the Federated/May deal, according to a Simon spokesperson. In addition to the nine accounted for in the most recent deal, four of the sites were sold to Boscov’s and two others are being converted by Federated into Bloomingdale’s. That leaves six more sites to be dealt with.
Meanwhile, Macerich acquired 11 stores in all—10 at properties it owns. Three of the stores are in Arizona, seven are in California and one is in Connecticut. The deal will close in July 2006. Macerich has not disclosed how it plans to retenant the spaces.
Previously, Federated sold 12 stores to Westfield Group, 10 others to Boscov’s Inc. and one each to Gottschalks and Warwick Mall LLC.
Beyond the 80 stores to be divested, Federated has 22 other properties impacted by the merger. Five properties that contain May Department Store brands that will be converted to Macy’s and four others will be converted to Bloomingdales. At three properties, Federated will pursue a “dual-box Macy’s” strategy where Federated will split its merchandise between two anchor locations.
“That has to do with size of boxes,” Green says. “ The women’s department at Macy’s takes up a lot more space. So you may need to put the men and home departments elsewhere… It’s opportunistic with regard to physical nature of what’s going with the stores.”
Federated has also agreed to sell two other properties to Westfield that it will continue to operate as Macy’s. Lastly, eight Lord & Taylor locations will be closed, converted or sold as part of its planned divestiture of the Lord & Taylor division.
-- David Bodamer