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Written by Mark Sell, BT Contributor   
May 2018

Leases are announced for vacant Kmart site, but neighbors are itching for results

IKmart_1magine this in the old Kmart at 108th Street and Biscayne Boulevard, now ten months vacant:

• Burlington Coat Factory as the big anchor, rising 30 feet on the north end, taking up roughly 42,000 square feet (the size of a respectable Publix), with a partial teardown-buildout.

• PetSmart, at 18,014 square feet.

• Ross Dress for Less, at 27,736 square feet.

• Michael’s Crafts, at 22,736 square feet.

At least, for now, that’s the idea: four successful off-price stores to replace the shuttered one. This is retail, circa 2018, when anything can happen and announcements are subject to change.

Neighbors across the six-foot peach-colored wall in Miami Shores (the Kmart property itself is in unincorporated Miami-Dade County) cannot wait. They consider the vacant property a mounting blight, with trash piled in the back and Hurricane Irma damage still evident.

On April 13, the county posted a notice of violation, and crews were soon out picking up bulk trash thrown in the back and repairing a supporting column in the front.

Seritage Growth Properties, the landlord of the 9.8-acre site, disclosed the PetSmart, Michael’s, and Ross leases in a third-quarter statement in November 2017, and slated them for development in the second quarter of this year. The Burlington lease was signed in December, according to county records.

Repeated BT queries to Seritage went unanswered. Prominent Miami retail brokers, who declined to speak on the record, said they’d heard nothing about Seritage timelines for the property.

Seritage was formed by Sears Holdings chairman and hedge fund manager Edward “Eddie” Lampert in 2015, to spin off Sears and Kmart properties into profitable real estate holdings. Lampert, who built his fortune with AutoZone and AutoNation, bought Kmart and Sears in 2005, an acquisition that has since resulted in nothing but trouble.

Kmart_2

Seritage is placing its main public focus nearly six miles north, where it is replacing the demolished Sears store in Aventura Mall with Esplanade at Aventura, 215,000 square feet of retail and restaurants spread over 12.3 acres at the corner of the William Lehman Causeway and Biscayne Boulevard. Completion of the first phase is scheduled for late 2019, with 100,000 additional square feet to follow.

At the Kmart site, Seritage has one operating tenant in a separate building: discount grocer Aldi, a no-frills, popular German-based corporate cousin to Trader Joe’s.

Lampert made news April 23 when he proposed that his hedge fund, ESL Investments, purchase the Kenmore appliance brand -- the most valuable asset of Sears -- and other Sears units in an effort to save his embattled and dwindling retail empire.

As of February 3, ESL Investments had 1002 Sears and Kmart stores, down from 1430 a year earlier. According to the website Business Insider, Sears is closing 57 stores in 2018, and Kmart 109.

Kmart operated 2171 stores at its peak in 2000, and just 432 at the end of 2017. More than 200,000 Sears and Kmart employees have been thrown out of work, and there are grave doubts Sears and Kmart will even exist as retailers by this time next year.

The reclusive Lampert, age 55 and a father of three, has a home in Indian Creek Village, and residences in Aspen, Colorado, and Greenwich, Connecticut. He’s a devotee of Ayn Rand, putters about on his 288-foot motor yacht The Fountainhead, and is active in Chabad.

He worked his way through high school after family reversals and graduated Phi Beta Kappa in economics from Yale, where he was a member of Skull and Bones and roommate of U.S. Treasury Secretary Steve Mnuchin.

The market agrees that Sears properties are more valuable as a real estate play than as a retailer. Sears stock peaked at $131.21 in April 2007, and closed at $3.16 on April 27, 2018. No wonder. In March 2017, Sears Holdings, having lost $10 billion in six years, warned investors that “substantial doubt exists related to the company’s ability to continue as a going concern.”

Kmart_3

Seritage, separately traded, has fared better, peaking at $56.47 on April 2016 and closing at $35.64 on April 27.

The Miami Shores neighbors have plenty to say.

Herb Schauer, 80 years old, who keeps a proudly tended fruit and vegetable garden behind his house with statues of lions, has his opinions.

“After the hurricane, they did nothing,” says Schauer of Lampert. “They let it rot. People are throwing food over. They’re making love and throwing their rubbers over. I had stock in Kmart and lost every penny I had invested. He wants to kill Sears -- and he’ll do it.”

Up a few doors, Chantal Merle curates her home, its pool, and meticulous garden with great care. She’s trying to sell her property and isn’t pleased by what she sees on the other side of the wall.

“I look over the fence and truckers are dumping the food, tires, and garbage. Sex, condoms, whatever you want,” Merle says. “It was good to see crews picking up, but the rotting food is still there. And people keep dumping things.”

The decline of Sears and Kmart has caused suffering across the board, from the top down.

Lampert himself has not been spared. As of April, Forbes lists his net worth at $1.55 billion. That net worth has declined as he has plowed money back into his holdings to grab valuable assets to prevent or delay the final closure of Sears and Kmart stores. Back in 2006, Forbes pegged his worth at $3.8 billion.

Suffering, of course, is relative. Consider Shane Rasche, age 61. According to a Rise News video posted in April, Rasche worked at the Kmart for more than a decade until it closed, and says he has yet to find another job. So he’s trying to stave off eviction before receiving his first (presumably modest) Social Security check.

Kmart_4

Retail brokers contacted by the BT say the location makes sense for off-price retailers on well-traveled Biscayne Boulevard almost directly between downtown/midtown and Aventura. Burlington, Ross, Michaels, and PetSmart have so far proved that brick-and-mortar stores can work, with increases in both year-to-year and store-by-store earnings.

Retail brokers also give Seritage high marks for savvy in structuring leasing and development deals under Benjamin Schall, its president and CEO.

“This is an excellent development site, and this is hopefully not the final iteration of what will be there,” says independent real estate consultant Michael Maxwell. “This is well-suited for mixed-used development rather than solely retail. One would hope that Seritage will not only maximize the value to its bottom line, but that of the community.”

For now, Schauer, Merle, and other Kmart neighbors can find limited comfort with the work crews and with the closure and condemnation of the adjoining Miami Shores Motel, just within the village limits and south of the Busy Bee Car Wash. The boarded-up motel, considered an eyesore and source of police calls, is separated from residents by a locked gate. Development plans at the motel site remain uncertain.

While Miami Shores and Biscayne Park have sometimes cast acquisitive eyes at the Kmart property, neither municipality has acted.

For Schauer, Merle, and their neighbors, the option for now is to keep the pressure on the county to maintain the property as they await further work from Seritage.

 

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