Kohl’s Food Store landlords ponder closing of stores
As rumors continue to swirl about which food store chain is going to take over the soon-to-be vacant Kohl’s Food Stores in the Milwaukee area, the landlords that own the 23 food stores are watching with great interest, but little control.
That’s because, for the most part, Great Atlantic & Pacific Tea Co., the Montvale, N.J., corporate parent of Kohl’s, has long-term leases on many of its stores and will be required to continue to the pay rent even though the stores will no longer be operating as of the end of August. It also means the decision as to who might take over the space and when that would occur is out of the hands of the people that own and manage the shopping centers.
The food store chain, once the dominant player in the Milwaukee grocery store market, announced in June that it was closing the stores, along with its administrative offices and distribution center in Wauwatosa, because of declining sales.
“It is a tough situation to be in because you don’t have much control over it,” said Michael Weiss, president of General Capital Group, a Mequon development firm that owns shopping centers or buildings that house five Kohl’s stores. “You just have to sit back and see what happens and hope it is in the best interests of your property.”
Most real estate observers expect a majority of the Kohl’s stores to be acquired over the next several weeks, with most betting that Sheboygan-based Fresh Brands Inc., which operates Piggly Wiggly and Dick’s Supermarket, will purchase a majority of the locations. The grocery store chain has just four stores in Milwaukee and Waukesha counties.
But the real estate observers also predict that a handful will be purchased by several small food store operators, including John Nehring, who owns the V. Richards Market on West Blue Mound Road in Brookfield and the Sendik’s Food Store on Oakland Avenue in Shorewood.
“I think you are going to see some of the small, niche players come in and try to pick off some of the better locations,” said a real estate attorney. “This is an opportunity for them to expand, but not have to start from scratch in terms of acquiring the property and building a new store. They can do some remodeling and be ready to open the doors very quickly.”
Wauwatosa Mayor Theresa Estness said Nehring had contacted city officials about his interest in several Kohl’s stores in Wauwatosa, but she said he was still trying to work through A&P, without much success.
“We are watching this very closely because it has a big impact on our city and our residents,” she said. “We would be very interested in having a Sendik’s or V. Richards in Wauwatosa. But we’ll just have to wait and see what happens.”
Nehring could not be reached for comment.
Max Rasansky, president of The Polacheck Co., a Milwaukee real estate brokerage, identified seven Kohl’s locations that he said would be very attractive to grocery store operators – on West Appleton Avenue in Menomonee Falls, at the intersection of Highway 164 and West Capitol Drive in Pewaukee, at RiverPointe Shopping Center in Fox Point, on North Oakland Avenue in Shorewood, at North 82nd Street and West Blue Mound Road in Milwaukee, at the Ruby Isle Shopping Center in Brookfield and at Juneau Village in downtown Milwaukee.
“These are all strong locations from a real estate standpoint that I just can’t see staying vacant for very long,” he said. “Someone is going to step up on most of them and make a deal to get another food store up and running.”
Rasansky said if a major food store chain does purchase all the stores, they may turn around and sell several of the stores to smaller food store operators, who are interested in picking up just one or two sites.
“There could be a lot of moving around in the next few months,” he said.
The key, Rasansky said, is to get an agreement done before the stores close at the end of the month.
“It would be so much better for them to come in before the stores close rather than letting them go dark,” he said. “You don’t want to give the customers the opportunity to go elsewhere and create new shopping habits. Once that happens, it is hard to bring them back.”
David Donoian, a broker with The Boerke Co., a Milwaukee real estate brokerage firm, predicted that the Kohl’s planned closure would also open up some opportunities for the major grocery store players left in the market – Roundy’s Corp., which operates Pick ‘n Save Warehouse Foods Stores, and Jewel-Osco, a Melrose Park., Ill, grocery store chain, which has opened 17 supermarkets in southeastern Wisconsin since 1995.
Several real estate observers have said Pick ‘n Save is interested in acquiring the Kohl’s Store on Oakland Avenue in Shorewood because it does not have a presence in that area. Stores that are expected to close and not reopen include the one near Bay Shore Mall in Glendale, which is being torn down as part of the mall’s expansion project, along with a location in Waukesha and one on West Appleton Avenue in Milwaukee.
“I believe you are going to see Pick ‘n Save and others look to strengthen their hold in certain submarkets,” Donoian said. “They are all going to be jockeying around seeing which locations would pay off the best for them in the long run.”
Real estate brokers said A&P was handling the negotiations itself and was being “very tight lipped” about what it was going to do.
“There has been a lot of speculation, but until something is signed and sealed, it could keep changing,” Donoian said.
Rasansky said the departure of Kohl’s will be a big blow to Milwaukee because it will leave the area with only one dominant food store chain, Pick ‘n Save. Twenty years ago, he noted, the area had four strong chains – Kohl’s, Pick ‘n Save, Sentry Food Stores and Cub Foods.
Aug. 22, 2003 Small Business Times, by Mark Kass, for SBT
