Interesting Times

Forever 21 and Kohl’s acquired 46 former Mervyns leaseholds in a bankruptcy auction through a joint bid valued at approximately $6.3 million. Kohl’s will take 31 of the sites and Forever 21 15. The transaction is pending a final court approval, expected to be granted before the end of the month.

Most of the Mervyns locations are 80,000-square-foot, triple net leased properties, with 20-year terms and rents within 90 percent of market rate, says Rich Walter, president of Faris Lee Investments, an Irvine, Calif.-based retail brokerage firm. Faris Lee served as a real estate advisor to Mervyns before the retailer filed for Chapter 11 bankruptcy in July. The firm continues to serve in that capacity.

“The value of those boxes is actually better with a Kohl’s inside than it was with a Mervyns,” says Walter. “And Forever 21 is a new tenant with that format and that size, but it appears that they are very popular. I think they are very well off financially and this is probably a good time for them.”

Of the purchased leases, 22 are on sites currently owned by the Macerich Co., including 8 at Macerich-owned malls. Macerich purchased 39 Mervyns sites in late 2007/early 2008 and expects to close on another two by the second quarter of 2009.

“The Forever 21 retailing model has got a very attractive proposition for consumers and they operate some 40,000-square-foot and 50,000-square-foot stores, so we know what they can do with large spaces,” says Tony Grossi, senior executive vice president and COO with Macerich Co., about the discount apparel chain that plans to use former Mervyns stores to expand its footprint.