Retail Midwest

Last of Bon Ton stores hit the market in bankruptcy auction

Last of Bon Ton stores hit the market in bankruptcy auction,ph1
The former Herberger's location at Midway Marketplace in St. Paul, Minnesota.

Real estate advisory and brokerage firm A&G Realty Partners will auction 10 department store properties formerly owned by The Bon-Ton Stores, Inc., on Jan. 28 in New York. All bids for the bankruptcy auction, which centers on fee-owned properties in six states, are due Jan. 25.

With stores ranging in size from 45,000 to 165,000 square feet, the available assets include locations throughout the Midwest in Iowa, Michigan, Minnesota, Indiana and Illinois, as well as a tenth location in Pennsylvania. They were formerly operated under the Bergner’s, Herberger’s, Carson’s, Younkers, Elder-Beerman and Bon-Ton banners.

Three of the properties are located in Qualified Opportunity Zones. “We’re seeing massive interest in these incentives among high-net-worth investors and diverse real estate funds alike,” said Emilio Amendola, co-president of A&G. “They offer capital gains tax reductions of as high as 15 percent, and holding for a full 10 years can yield a capital gains tax deduction of 100 percent. On top of that, many Opportunity Zones nationwide are in gentrifying areas with strong growth potential.”

The three formerly fee-owned Bon-Ton assets located within opportunity zones are in the Iowa City and Twin Cities markets. The 98,458-square-foot, one-story Younkers at Coral Ridge Mall on 9.1 acres in Coralville, Iowa is one mile from the I-80/I-380 interchange. This property draws from the 80,000-plus students and employees at the University of Iowa.

“In addition to a mix of traditional and big-box retailers, the mall’s ability to pull from outside its trade area is enhanced by an ice arena and 10-screen cinema,” said Michael Jerbich, a Chicago-based Principal at A&G.

The two other opportunity zones properties are both two-story former Herberger’s locations—one at Midway Marketplace in St. Paul, Minnesota (124,136 square feet on a 6.65-acre lot) and one in downtown St. Cloud, Minnesota (93,900 square feet on a 1.33-acre lot). The St. Paul location has light rail directly behind it and is a quarter mile from the $250 million Allianz Field soccer stadium now under development.

“The second floor of this income-producing building already has a Capital One facility with a long-term lease,” Jerbich said of the St. Cloud property. “Finding a new use for this space is a top priority for St. Cloud economic development officials, which highlights the potential for public-private collaboration.”

The other former Bon-Ton assets available at auction include one in Iowa—the 165,000-square-foot Younkers in Des Moines, Iowa, where Polk County has extended a low-interest, long-term redevelopment loan to the store’s shopping center, Merle Hay Mall—and two Illinois locations: a 128,000-square-foot Carson’s at Spring Hill Mall in Dundee Township and a 125,000 -square-foot Bergner’s at White Oaks Mall in Springfield. The Elder-Beerman in Downtown Richmond, Indiana is located adjacent to city-owned property and officials have floated the idea of turning this former store into a conference center.

the auction also includes two former Younkers locations in Michigan—a 150,081-square-foot store at River Towne Crossings in Grandville and a 106,131-square-foot store at The Lakes Mall in Muskegon. River Towne is a popular destination in the Grand Rapids area thanks to a diverse mix of retail uses while in Muskegan, the majority of local residents are reportedly in favor of a $180 million casino that’s been proposed for this area.

In May 2018, A&G was retained to dispose all real estate assets of The Bon-Ton Stores, Inc., on behalf of a joint venture between Great American Group, LLC (a subsidiary of B. Riley Financial, Inc.), Tiger Capital Group, LLC and Bon-Ton’s Second Lien Noteholders. The assets included seven ground leases, 194 leased locations and 23 fee-owned properties.

“To date, 13 fee-owned and seven leased properties have been successfully sold to storage users, developers/investors, fitness centers, a casino, home furnishings retailers and healthcare users, to name a few,” Jerbich said. “The large-format spaces on auction here are rife for reinvention and repurposing, and the sale also represents a tremendous opportunity for market penetration in these areas.”