Sears' landlord seeks tenants for some store spaces as the retailer tries smaller formats

The landlord of five Sears and Kmart stores in Maryland has been seeking new tenants to take over some of the space, part of an agreement between the troubled retailer and the developer that controls about 250 Sears Holdings properties across the country.

The Sears at The Mall in Columbia will shrink from two floors to one later this year to make way for two new mall tenants, Barnes & Noble and an entertainment concept to be announced latersaid Lindsay Kahn, a spokeswoman for mall owner General Growth Properties.

For now, the four other Sears or Kmart locations will remain open, including Sears stores at Hunt Valley Towne Center, Bowie Town Center in Bowie and Valley Mall in Hagerstown, and a Kmart at South River Colony in Edgewater, a Sears spokesman said.

Those four stores were sold in 2015 to Seritage Growth Partners, a real estate investment trust, and leased back by Sears Holdings. As part of that deal, the Sears building in Columbia was sold to a joint venture of Seritage and General Growth Properties. As landlord, Seritage has the right to reclaim up to half the space at each store space.

"To date, we have not received notice from Seritage that they will be exercising that right" except at the Columbia store, Howard Riefs, a Sears spokesman, said in an email.

The Seritage-owned Sears or Kmart stores in Maryland are not among 42 Sears and 108 Kmarts that Sears Holdings announced it will close this spring, including a Kmart in Dundalk.

The closings and potential re-leasing of other stores comes as Sears recently warned that its ability to stay in business is in question. Sears isn't the only big department store chain trimming stores and forcing malls to re-evaluate old business models.

Both JCPenney and Macy's are downsizing. A JCPenney in Easton was among 138 closures for that chain. Macy's is shuttering 100 stores, but none in Maryland.

At the Columbia mall, the Sears top floor will be shared by Barnes & Noble and the entertainment tenant, both opening within the year, said Lindsay Kahn, a General Growth spokeswoman.

General Growth Properties' Kahn said "several new concepts" will soon be announced at the Columbia mall. In addition, Z Gallerie, a new tenant that sells home furnishings designed to be stylish and affordable, will open by early summer, and H&M will open a larger apparel store in May. The mall also started renovations this week to upgrade its center court by removing a fountain and creating more seating and meeting space.

"Every mall across the country is looking at its position in the market and finding ways to make sure that they remain relevant in the retail landscape," said John Meyer, a principal with brokerage firm KLNB, which is marketing Sears' building leases for Seritage in Maryland, except for the Columbia site.

For older or less profitable malls, and even some top performers, that could mean bringing in new uses, such as housing, offices or entertainment, he said.

"We have too many malls, and they're going to need to figure out a way to make these assets relevant," Meyer said.

At least 13 retailers are closing more than 1,500 stores nationwide this year as consumers frequent stores less often and use computers and mobile devices to browse, shop for deals and make purchases.

The Limited and Wet Seal went out of business altogether, closing more than 400 apparel stores, including six Limited stores in the Baltimore areas. Electronics and appliance retailer hhgregg closed all of its Maryland stores, including six in the Baltimore area.

Abercrombie & Fitch announced plans to shutter about 60 U.S. stores when leases expire. Shoe retailer Crocs Inc. expects to close about 160 stores by the end of 2019, and BCBG Max Azria Group, which filed for bankruptcy, began closing about 120 U.S. stores in February, including a factory store in Arundel Mills in Hanover and two mall stores, at Towson Town Center in Towson and at Wisconsin Place in Chevy Chase.

According to CoStar Group, about 100 U.S. malls will lose at least two of their department store anchors, and several will have three anchors close at once.

Sears officials say staying relevant requires a transformation that involves attracting more members to the Shop Your Way online program, focusing on well-known brands such as Diehard and Kenmore and operating fewer, and some smaller, stores.

Meyer said his firm has seen interest in Sears' space from retailers, restaurants and entertainment-related uses, typically for a portion of the store, though no leases have been finalized.

In its annual report, Sears said the leaseback agreement will help the company reduce space in some locations.

It "provides us with substantial flexibility in how we manage our store network moving forward," the company said.

lorraine.mirabella@baltsun.com

lorraine.mirabella@baltsun.com

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