City of Brookfield — A new deal has set the pieces in motion for Sears at Brookfield Square to close in the coming years.
Brookfield Square owner CBL & Associates Properties, Inc. announced Monday that it has closed on a sale-leaseback transaction of Sears. The deal gives the Chattanooga-based developer control of the locations for future redevelopment.
Sears previously owned its store at Brookfield Square, but is now operating under a 10-year lease. CBL has the right to terminate the lease at any time with six months notice.
“We pursued this deal with the expectation that we will redevelop the Sears location at some point,” CBL director of public relations Stacey Keating said. “Sears will not close at this time and they’ll continue to operate as normal.”
CBL does fully intend to pursue other tenants when those redevelopment plans do come along, and another anchor tenant similar to Sears is not a guarantee.
“We’re in the very early planning stages. As soon as we have concrete plans we’ll be excited to share them. It’s way too early to provide a concrete timeline,” Keating said. “We want to be able to find the best fit for the market.”
When reached for comment, Sears Holdings director of corporate communications Howard Riefs said the transaction announced Monday is not out of the ordinary for the company.
“We expect that this transaction will have no impact on our day-to-day operations and the overall shopping experience for our members,” Riefs said. “We will continue to operate our retail stores in these locations and lease back the properties from CBL, just as we do at a majority of our locations.”
Keating noted that CBL has had success in the past with redeveloping underperforming anchors into areas with a number of new stores and restaurants.
“I think that’s where we see growth,” Keating said.
In November, CBL released plans for another major expansion at Brookfield Square, which will include 50,000 square feet of new retail space and a three-level parking deck. Despite many retailers reporting disappointing numbers from the holiday season — including The Limited, which closed all of its locations including one at Brookfield Square in January — Keating said CBL remains confident.
“I think that the whole story of online shopping being the death of brick and mortar is blown out of proportion,” Keating said.
The Brookfield location was one of five Sears department stores and two Sears Auto Centers at CBL-owned shopping malls included in the deal, which had a total value of $72.5 million. Under the terms of the leases, CBL will receive aggregate initial base rent of approximately $5.075 million. Sears will be responsible for paying common area maintenance charges, taxes, insurance and utilities.
“We are proactively transforming our market-dominant shopping centers to meet the changing preferences of consumers,” CBL president and chief executive officer Stephen Lebovitz said. "This transaction provides CBL with the opportunity to redevelop prime real estate and attract exciting new uses at some of our best shopping centers. The leaseback of the real estate by Sears will generate income to CBL and gives us control over the timing of closures while we finalize our redevelop plans at each location.”
Both JC Penney and Boston Store currently own their stores at Brookfield Square, as Sears did previously. Keating noted that CBL currently has no plans to pursue a similar deal with either of those tenants.