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June 22, 2005
Saks selloff could harm State Street
Saks continues to shop around their Carson Pirie Scott chain for new buyers. As previously reported, the company has already sold off their southern department stores division (Proffitt's, McRae's) to Belk, Inc. They are looking to find a home for their northern stores as well, intending to focus solely on their flagship brand, Saks Fifth Avenue (which will be leaving Old Orchard at the end of July) and Parisian, which offers merchandise slightly above the level of its mid-range department store chains.
The northern group of stores up for sale includes Boston Store (WI), Carson Pirie Scott (IL, IN), Herberger's (CO, IA, MN, MT, NB, ND, SD, WI, WY), Bergner's (IL), and Younkers (IA, IL, MI, MN, NB, SD, WI), as well as Club Libby Lu.
Of interest to those in the Chicago area is how this potential sale will affect the retail landscape on State Street. Our sister blog, SteveandAmySly.com has been chronicling the State Street Christmas Windows produced by the "big 3" on State Street: Marshall Field's, Carson Pirie Scott, and Sears. An exit by Carson's would not only make their window displays disappear (which have been quite lame over the past few years anyway), but also provide a potential lack of shopping downtown. The Chicago Sun-Times has more details on this development:
Renewed speculation on Carson's Loop siteSource: Chicago Sun-Times
June 21, 2005
BY SANDRA GUY Business ReporterCarson Pirie Scott's parent company, Saks Inc., took new steps Monday to hold off its debtors, and speculation bubbled about the future of the Carson's store on State Street.
Saks is trying to sell the Carson's department store chain, and that could open up new possibilities for the historic Carson building at 1 S. State.
The building's owner, Joseph Freed and Associates LLC, has built a reputation as a developer of mixed-use projects such as the Arlington Town Square with Ann Taylor Lofts, Jos. A. Bank Clothiers, California Pizza Kitchen and a six-screen movie theater.
"There's unlimited numbers of things you could do [with the Carson's store on State Street]," although condos would never work, said Jeff Renkert, Freed's vice president of marketing.
The space is too cumbersome and the building's landmark designation too restrictive for condos, he said.
The building, a masterwork designed by Louis Sullivan, could keep a scaled-down Carson's store and open up space for specialty boutiques, or it could house a new retailer altogether, even a big-box retailer such as Target.
Other possible tenants include a grocery store to serve the many new residents living downtown, and a student center for the 55,000 college students who attend classes in the State Street corridor, said Ty Tabing, executive director of the Chicago Loop Alliance, formerly the Greater State Street Council.
A $17 million upgrade of the 600,000-square-foot Carson's store heightens the possibility that new tenants will move in. The building's original cornice is being replaced, and the floors, elevator banks, communications systems and heating-and-air-conditioning systems upgraded. Another 400,000 square feet is occupied by offices.
Retail experts have argued that State Street required three "anchor" department stores to attract shoppers, and those anchors are Carson's, Marshall Field's and Sears, Tabing said.
"With Block 37 coming, a new anchor could emerge," he said, referring to retailers that will be part of the planned redevelopment of the long-vacant parcel between Field's and the Daley Center.
Furthermore, new retail could better serve the residential development springing up around the Carson's building: A 33-story condo building is going up on the Walgreens site at State and Randolph, a condo tower is proposed behind buildings at 21-39 S. Wabash, and people already live above H&M, Nordstrom Rack and the Children's Place on State Street.
Retail analyst Lois Huff said a private-equity firm such as Bain Capital, which is rumored to be a potential bidder for the Carson Pirie Scott chain, would look to make money from Carson's real estate.
"The downtown store is, at best, a store that could stand some reinvention, but it is great real estate," said Huff, senior vice president of Retail Forward, a Columbus, Ohio-based retail strategy consulting firm.
Carson's, along with other mid-tier department stores, is stuck in an untenable position between discounters such as Target and Wal-Mart and fashionable luxury stores such as Bloomingdale's, Nordstrom, Neiman Marcus and Saks Fifth Avenue, Huff said.
"The Carson's [on State Street] would be extremely vulnerable for Carson Pirie Scott, but extremely attractive" for a new owner looking to profit from its real estate, she said.
Meanwhile, Saks Inc. announced Thursday that it would offer its bondholders a special payment to persuade them not to force Saks to default on $1.22 billion in debt.
Saks now wants another two months, until Oct. 31, to file its financial statements with federal regulators. Saks is being investigated by federal authorities for allegedly improperly collecting $20 million in vendor markdowns in its 1999-2003 fiscal years. Stores take markdowns when goods don't sell at full price, and they ask their suppliers to eat some of the cost.
Posted by Tannerman at June 22, 2005 11:46 AM | Categories: Anchors