This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Real Estate Dreams Nightmarish for Sears, Penney Investors


A chain closing a store would seem to be the best indicator that it was not a profitable location for retail operations. That would seem to explain why Sears still has so many for sale. The national vacancy rate was 10.5% in 2013. At its peak during the Great Recession, it was 13%. But Sears has about 40% of its closed buildings from recent years unsold or unleased.

In focusing on how "...today's standalone store can be tomorrow's moonlit-use hotel/residential-retail center," Berkowitz is admitting what the market is stating: that pure retail is no longer the best use for those buildings.

Sears is now looking to convert Sears Auto Center stores into data centers. This strategy failed initially as Sears attempted to create huge data centers from its old stores and warehouses. Now it is going after "smaller footprints in secondary markets."

The shift from huge centers to "smaller footprints" appears to be yet another admission of defeat by Sears management in its real estate activities, evinced by the 119 closed buildings still available.

With 40% unsold, the market is also telling Sears that the value is not there; to be repurposed, its location has to be desirable to make the time, effort and expenses worthwhile.

Sears, J.C. Penney, Bon-Ton Stores, Radio Shack and others are generally suburban mall or strip shopping center tenants. In a speech at the "Invest for Kids Conference" in Chicago last October, legendary real estate investor Sam Zell pointed out that those were not desirable real estate investments due to societal trends and demographic changes. The closing down of stores and then being unable to sell them by Sears and others is certainly testament to that warning from Zell.

Sales growth, earnings-per-share growth, and the stock price have all plunged for Sears, Radio Shack, J.C. Penny, Bon-Ton Stores, and other retailers. It is difficult to see how the real estate is undervalued when there is a glut that is not going away in the United States, which means far fewer buyers than sellers for the future. It is the same situation that has the stock price of so many retailers falling. At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Jonathan Yates has written for numerous publications including Newsweek and The Washington Post. He is a former general counsel for a publicly traded corporation. Much of his career was spent working on Capitol Hill for Members of Congress in both the House and Senate. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
JCP $7.63 0.00%
SHLD $42.40 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs