The RealINSIGHT Marketplace auction of 16 Sears locations has been pushed out until next month despite “tremendous response” from over 200 interested parties, according to James Shevlin, a managing director at CWCapital.
Sears is marketing 16 US Midwestern and Texas locations for sale, as reported (see story, 6 March). Five of those stores are located in malls that back USD 467m in CMBS debt spread across five deals. While the Sears are anchor tenants at the property, none directly back any of that CMBS debt.
Indicative bids are now due 1 May and the auction is 22 May, according to the RealINSIGHT website. Final bids had previously been due Wednesday (25 April). CWCapital owns the RealINSIGHT platform. Cushman & Wakefield is brokering the offering.
“We initially had an earlier call-for-offers date but given other product in the market and realizing these are not easy deals, they’re somewhat complex … more time was needed,” Shevlin said. “The response we are getting is still very good.”
Going concerns, not dark stores
Toys “R” Us’ move to a liquidation process in March was possibly a “minor” factor in the decision to delay the bidding, Shevlin said. But the flurry of distressed retail news is constant and “there’s never going to be a perfect time when all the stars align,” he said. “We’re at a point where there is a lot of interest and on May 1 it will be interesting to see how things work out.” Shevlin declined to disclose the reserve price.
Shevlin stressed that the Sears properties in the offering are a different type of product than the Toys “R” Us assets. “These are not dark stores, these are going concerns,” he said. “And Sears’ ultimate goal when they look at these offers is probably to find a situation where someone may offer them a sale lease-back opportunity.” By contrast, buyers of Toys “R” Us assets are going to end up with a vacant box that’s probably not attached to a mall, Shevlin said.
Sears owns and fully occupies the spaces that are being sold, which range in size from 131,685 sq ft to 244,893 sq ft, as reported. The CMBS deals with exposure are MSC 2011-C2 (USD 137.6m), JPMCC 2012-C8 (USD 119.7m), SCGT 2013-SRP1 (USD 91.6m), GSMS 2011-GC5 (USD 80.7m) and JPMCC 2006-CB16 (USD 37m). The sale will not directly impact the CMBS debt as the retailer is a non-collateral anchor tenant.
Big deal for RealINSIGHT
The Sears offering is the largest from a third-party seller that CWCapital has offered on its RealINSIGHT platform.
The special servicer launched RealINSIGHT in March 2017 and reported total sales from its own book of USD 1.536bn in unpaid balance last year. This year, CWCapital expects to sell USD 2bn in assets on the platform from its own book. In addition, the firm, which this year began selling assets for others on the site, is on track to exceed its original USD 100m target of third party RealINSIGHT sales, he said.
Sales on the platform are transparent and reach more potential buyers, Shevlin said. In addition, CWCapital has established a 10% hard deposit requirement the reduces retrades, something that was common last year in offline negotiations. The buyer, “could try to walk away but the seller could say, ‘I’m going to hold your deposit and I’m going to take the second-place buyer,’” Shevlin said.
There’s strong investor appetite on the platform for multifamily, industrial, self-storage and hotel properties while demand for retail assets is “hit or miss,” he said. Grocery-anchored centers are still strong but power centers and malls are difficult to sell, Shevlin said.
One issue facing some properties is that the loss of certain large retailers can trigger co-tenancy clauses, he said. As a result, he said, “sometimes it’s hard to value retail.”
A Cushman broker and a Sears spokesperson did not immediately respond.