Friday, December 30, 2011

Blue Light Special - Sears Closing List

I like Eddie Lampert. I want him to win. How can you not like the story of how he got to where is, well, at least up until about 2003-ish when he bought K-Mart, followed a year later by the Sears acquisition. In all fairness, he quickly shuttered hundreds of stores and turned the new company into a cash cow in the short-term, but ever since the stores have allegedly (I haven't been in a K-Mart since at least 1995, and not in a Sears since at least pre-9/11 - if ever) suffered from a lack of adequate CapEx and ever-changing leadership. Never mind that the retail environment is just tougher today than it was a few years ago.

Then he missed an opportunity to capitalize on the value of the real estate at the peak of the market. Even in back in '04 when the Sears merger was underway, splitting the company into an OpCo/PropCo strategy where you would split the retailer into a Real Estate company (and leverage it up with CMBS debt) and an Operating Company made a lot of sense. The debt likely would have been fine today as well, given that they would have signed some long-term leases (of course, the OpCo may be stuck with lease payments if it shuttered 120 stores...). Within a few months, KKR/Bain/Vornado were divvying up ToysRUs in precisely the same manner.

Well, I'm still rooting for the guy. He announced over the break that they're closing 100-ish stores and they released a list of 80 closures in the last couple of days. They're list is in a PDF and doesn't copy out cleanly, so I pasted a complete list at the bottom of this for anyone who wants it.

CMBS Exposure - Please note that this is not an attempt to be a thorough or complete list, just a quick snapshot. There is a HIGH probability that there are some missing or incomplete data in the list below. The analysis simply consisted of pulling every property with a tenant with a name like "%Sear%" or "%K%Mart%" and matching against ZIP codes on their closure list (Zip codes change, Annex A's misspell stuff, etc.):
Deal Loan Name Loan Status PCT of Deal
MSC 2007-IQ14 Ershig Mall Portfolio Perform(w) 0.83%
GMACC 2004-C2 Shoppes at St. Lucie West Grace(w) 2.06%
MSC 2005-IQ10 69th Street Philadelphia (I) Grace(w) 4.43%
JPMCC 2006-CB15 Lightstone Portfolio Del 90+ ss 3.31%
MSC 2005-T17 Coventry Mall Del 30 ss 9.26%
CSFB 2002-CKN2 Crystal River Mall REO 4.16%
MCFI 1996-MC1 Kmart/Rocky Mount REO 100.00%
BACM 2005-6 Island Walk Shopping Center Perform(w) 0.50%
WFDB 2011-BXR BXR Loan Perform 100.00%
CSFB 2001-CKN5 Manhattan Plaza In Foreclosure 2.45%

In the table above, the formatting kept cutting off columns - if you'd like the complete mapping of columns shoot me an email at

Full Closure List (Source)

Also, CRE Console put together a little map using one of my favorite free online mapping tools here. Over at Retail Traffic, Elaine Misonzhnik postulates that the real estate may be in high demand at many of these locations.


crabsofsteel said...

"Commercial-mortgage bond holdings probably will not suffer from Sears Holdings Corp.’s closing of as many as 120 stores, according to Fitch Ratings.

Kmart or Sears is listed as the tenant on 255 loans packaged into the securities, Fitch said in a statement yesterday."

Fitch = Wrong. Kmart/Sears are tenants in well over 400 non-defeased loans in CMBS. If they file BK, expect to see the same thing as the last time Kmart filed BK. Unless you can think of retailers who are expanding into 100k+ sf spaces and who don't need the massive TI these spaces need.

Dark Space said...

Someone pointed out that the K-Mart closure I listed for the WFDB 2011-BXR deal, is actually not in the deal! The K-Mart is in a property next door to the WFDB 2011-BXR property, Hazel Path Commons, which houses a Sears Retail Outlet store. The K-Mart store closure next door probably benefits this particular property more than it hurts it.