NY Times: As Caldor Leaves, Others Rush to Take Up Leases
A SIGN over the customer-service desk inside the 91,800-square-foot Caldor store on Hempstead Turnpike in Levittown read, ”Committed to making you a satisfied repeat customer.”
On the exit door, another said, ”Come again soon. Thank you for shopping at Caldor.”
But customers like Mae and John Fornasiero of East Meadow, who were wheeling a loaded shopping cart back to their car, knew better. There would be no coming back because the Levittown Caldor closed its doors last Sunday following a ”going out of business” sale.
”I’m going to miss Caldor because it was convenient for us and had good value,” Mrs. Fornasiero said. ”Now we’ll probably go to Wal-Mart, but that’s 15 minutes farther away.”
Long Island’s 19 Caldor locations, from Garden City east to Bridgehampton, have been shutting down one by one following a decision by the Caldor Organization of Norwalk, Conn., in January to close all 145 of its stores in nine East Coast states. The Long Island stores will be closed by the end of May.
”Instead of competing with the giants, in my opinion, they should have found another niche,” said Wilbur F. Breslin, the president of Breslin Realty in Garden City, which owns the 250,000-square-foot Carmans Plaza shopping center in Massapequa, which contains a 110,000-square-foot Caldor.
”We are sorry to see them go,” Mr. Breslin added, ”but the Long Island market is very strong, so if one store goes another usually comes in to replace it, which is what we fully expect will be the experience with Caldor.”
In fact, 65 of Caldor’s 145 locations, including 8 on Long Island, have already been spoken for ”and we are making other deals as we speak,” said Jeremy M. Sclar, a partner of W/S Discount Acquisition of Chestnut Hill, Mass., an affiliate of W/S Development Associates, a shopping center developer. The affiliate is assisting Caldor with the disposition of its real estate assets.
The eight Long Island deals, which have been approved by the Manhattan bankruptcy court overseeing the Caldor liquidation, include six locations for which Kohl’s Department Stores of Menomonee Falls, Wis., was the successful bidder.
Kohl’s is paying $142 million for a total of 33 locations — 12 in New York State, 11 in New Jersey, 9 in Connecticut, and one in Baltimore. The six Long Island locations are in Levittown, Ronkonkoma, Melville, Deer Park, East Setauket and Shirley.
In addition, Wal-Mart will be taking over Caldor’s lease in Riverhead. And Kmart will take over its Woodmere location.
WHEN retailers go out of business, the real estate they occupy is often a valuable asset even if they don’t own it. A lease can give another company anxious to find large space quickly the opportunity to do so. And leases, which for large retailers typically extend over long periods, often were negotiated at rents below the current market rate.
If market rents currently are $18 a square foot annually, and a lease with 20 years to go calls for a $10-a-square-foot rent, the $8 differential could allow a company to pay as much as $80 a square foot for the right to take over that lease, estimated Stanley H. Schuckman, president of Schuckman Realty, a commercial brokerage in Woodbury.
Kohl’s intends to spend an additional $165 million to refurbish its 33 stores. The renovated stores will open in the spring of 2000.
Gary Vasques, a spokesman for Kohl’s, described the retailer as a ”family-focused, value-oriented specialty department store selling moderately-priced national brand” merchandise.
Caldor’s demise gave the 36-year-old Kohl’s, which currently operates 213 stores in the Midwest and in the Mid-Atlantic region, the opportunity to enter the New York metropolitan area ”with a critical mass of stores,” he said.
Mr. Schuckman, the Woodbury broker, said newcomers need ”critical mass” to enter a new market. When Caldor arrived on Long Island in 1982, he noted, it acquired a total of 14 locations, including some occupied by the Woolco Department Store chain owned by F.W. Woolworth Company. As Caldor’s broker, Mr. Schuckman said, he helped arrange most of those deals.
Landlords and brokers, including Mr. Schuckman, say Caldor always did well on Long Island, with most of its losses occurring in upstate New York locations and regions like Philadelphia. High rents it paid for its New York City stores also hurt, they say.
Landlords say that because of the strong economy, Caldor’s closing could not have come at a better time.
”If I had a Caldor in a great location, I could make a phone call and have someone interested today,” said Arthur D. Sanders, president of Spiegel Associates in Jericho, which owns more than a million square feet of retail and industrial properties on Long Island.
And most retail experts agree that the demise of the troubled retailer will have a positive effect locally. ”It’s bad for Caldor, but it’s good for Long Island because the stores are being snapped up by good tenants,” said Jeffrey Pliskin, the president of Pliskin Realty and Development in Carle Place.
THE Caldor situation is providing opportunities for major companies to enter or expand in an area that is one of the wealthiest in the country, said Steven B. Greenberg, president of the Greenberg Group, real estate consultants in Hewlett.
”There are limited locations on Long Island where you can find 30,000 square feet, and finding 110,000 square feet is a real challenge,” he said.
The recent acquisition by Royal Ahold, the international food retailer, of 132 Pathmark Stores for $1.75 billion is another example of how a major company uses acquisition to broaden its market share in desirable locations, he said. Of the 132 Pathmark stores, 25 are on Long Island.
Keith Morris, director of community affairs for Wal-Mart stores, said the retailer’s takeover of some of the Caldor locations ”is a win-win situation for everyone.”
”For us, it’s a lot more cost efficient to go this route, and for a municipality it’s a major economic boom to have a retailer like Wal-Mart move in,” Mr. Morris said.
Wal-Mart, which is based in Bentonville, Ark., successfully bid $72.9 million for 12 Caldor locations. In addition to Riverhead, they include one in Suffern, N.Y., six in Connecticut and four in Massachusetts.
Wal-Mart currently has stores in Centereach, Uniondale and Middle Island. The 112,000-square-foot Riverhead store, which Wal-Mart intends to totally refurbish, ”gives us another presence to the eastern side of Long Island and was a great opportunity for us,” Mr. Morris said.
Landlords are also hailing the changeovers. ”When you have a large tenant going through serious problems, you worry,” said Paul A. Bregman, a partner of the Bregman Organization in Plainview, which owns the 83,000-square-foot Ronkonkoma Caldor being taken over by Kohl’s.
”What gives us a lot of confidence is to have a retailer like Kohl’s, which has a good upscale operation and good financials, making such a commitment to the region,” Mr. Bregman said.
The acquisition by Kohl’s of the lease on the 113,275-square-foot Deer Park Caldor ”is very beneficial to us as a shopping center,” said Richard Birdoff, a partner of RD Management, which owns 250 shopping centers nationwide, eight of them on Long Island. ”Caldor performed very well at our site,” he noted. However, the fact that it had filed for bankruptcy protection ”had a negative effect,” he said.
”Kohl’s is just a stronger company,” summed up Stephen Lerner, a partner of Lerner Heidenberg Associates of Closter, N.J., which owns the 82,000-square-foot Caldor store in Shirley also being taken by Kohl’s.
”We are not happy to see anyone go out of business,” said Sam Jemal, a partner of Rockway Realty Associates in Manhattan, which owns the 450,000-square-foot Five Towns Shopping Center in Woodmere where a 110,000-square-foot Caldor is being taken over by Kmart.
”However, Kmart is one of the three top retailers in the country,” Mr. Jemal said. ”They have better brand recognition as a national chain, and the replacement is definitely a step up.”