Michael Staenberg’s real estate development firm says it has acquired the Sears department store attached to the Chesterfield Mall in what could be The Staenberg Group’s first foray into redeveloping the failing mall.
The Staenberg Group (TSG) will also make an offer to buy the rest of the 1.3 million-square-foot mall next month in hopes of redeveloping the facility into a massive mixed-use destination, said Tim Lowe, TSG’s vice president of leasing and development.
“This is the first step in the redevelopment process and it gives us the ability to control and lead it,” he said. “We will find out who else is participating in the process and then create a development plan that will ultimately have to be approved by the city.”
Officials with Sears did not return requests for comment.
Lowe said TSG envisions an open-air, high-end mixed-use project with residential, office, retail, restaurant, theater, health club and supermarket components. In all, the project would cost more than $100 million, he said.
The development would be similar to Santana Row, an upscale living and shopping district just south of San Francisco, Lowe said.
“There’s nothing like it in St. Louis,” he said. “It’s the right real estate in the right market.”
Sears will continue to operate and lease the 170,000-square-foot Chesterfield store from TSG until it moves forward with a redevelopment plan or Sears closes on its own. A purchase price was not disclosed, though the property has an appraised value of $5.3 million, according to St. Louis County records.
Lowe said TSG has had discussions with Macy’s and Dillard’s — two other anchor tenants at Chesterfield Mall that own their respective properties — about similar deals.
C-III Capital Partners, which took control of the mall through foreclosure in mid-2017, put a majority of the mall up for sale in mid-March. No asking price was listed. Prospective buyers have been told to turn in their offers by May 2.
Lowe did not disclose a timeline for redevelopment and construction could still be years down the road.
Chesterfield officials said they’d like to see a deal for the mall get done before the end of the year. Even if that were the case, developers would have to draft plans and gain necessary approvals before any dirt could be moved.
“This is a complex project and it will take getting the right people together to create something that is probably a two- or three-year process,” Lowe said.
Occupancy at Chesterfield Mall has fallen to 63.8 percent today from 96 percent in 2013 — the last time the mall’s previous owner, CBL Properties, disclosed such figures — according to NAI Global, which is marketing the property on behalf of C-III.
Chesterfield Mall has an appraised value of $12.4 million, according to research from Trepp, a provider of data to the securities and investment industries. The appraisal is down drastically from $286 million in 2006. The mall has an appraised value on file with St. Louis County of $36 million.
Staenberg’s group figures to see stiff competition from other interested developers looking to take a flier on Chesterfield Mall.
Chesterfield City Administrator Mike Geisel previously told the Post-Dispatch the city had met with at least five firms interested in redeveloping the mall. The city has not seen any project proposals to date, he said, and is unaware if those firms are negotiating with C-III.
“I’d think there would be good bidding activity on Chesterfield Mall,” Lowe said.
Sears, meanwhile, has started selling off much of its real estate under sale-leaseback agreements. And earlier this month, the retailer said it would auction off its stores attached to Mid Rivers Mall and South County Center.
Lowe said TSG will “take a look” at those properties, too.
CBL Properties, which owns Mid Rivers and South County malls, is also thought to be a likely bidder and has acquired seven Sears locations over the last two years, said CEO Stephen Lebovitz.
Lebovitz told the Post-Dispatch the company has had internal discussions on how to handle Sears stores at Mid Rivers Mall or South County if they should come up for sale or Sears loses them in some other form.
Sales at Sears stores, according to the company’s most recent annual report, have declined from $18.2 billion in 2016 to $13.4 billion last year.
Sears is seeking to transition out of being a landlord.
“We expect to continue to right-size, redeploy and highlight the value of our assets, including monetizing our real estate portfolio and exploring potential asset sales, in our transition from an asset intensive, historically ‘store only’ based retailer to a more asset light, integrated membership-focused company,” the company said in its latest annual filing.
According to data from research firm Reis Inc., vacancy rates at U.S. regional malls hit 8.4 percent in the first quarter of 2018, up from 7.9 percent in the prior year period.
St. Louis’ malls have reported similar results.
Taken collectively, St. Louis’ seven regional malls — Chesterfield Mall, Mid Rivers Mall, Plaza Frontenac, South County Center, St. Clair Square, St. Louis Galleria and West County Center — are also at a six-year high for vacancy.
At the end of last year, the average vacancy rate for those malls was just less than 11 percent, a figure driven mostly by Chesterfield Mall’s abysmal 36 percent vacancy rate. But even excluding Chesterfield Mall, area malls are at a six-year high of nearly 7 percent.