Ayres stores may be razed: Smaller shops likely replacements at Castleton, Greenwood

Simon Property Group Inc. wants to take the wrecking ball to the soon-to-be-vacant L.S. Ayres stores at Castleton Square and Greenwood Park malls, clearing the way for development of a collection of smaller stores and restaurants, sources familiar with the plans say.

“There have been numerous site plans circulated showing redevelopment with the existing structures removed,” said Bill French, a local retail broker with St. Louis-based Colliers Turley Martin Tucker.

Mark Perlstein, a partner with The Linder Co., an Indianapolis-based retail brokerage, said he’s seen similar plans showing “lifestyletype anchor tenants along with small shops.” A third source, who declined to be identified, confirmed Simon is moving in that direction.

The changes at the two Simon-owned malls stem from Cincinnati-based Federated Department Stores’ $17 billion purchase of St. Louisbased May Department Stores last August. Federated is parent of the Macy’s chain, and May was parent of L.S. Ayres.

Federated this year is closing department stores in 23 U.S. malls with duplicate locations. Last fall, it said it would close the Ayres at Castleton and the Macy’s at Greenwood Park, but later decided to instead close both Ayres stores.

Simon already owns the Ayres building at Greenwood Park, but before the company can proceed with the redevelopment of the Castleton Ayres it must buy the property from Federated. The 10.9-acre site is valued for tax purposes at $10.1 million, government records show.

Simon spokesman Les Morris did not return calls seeking comment. But in a conference call with analysts Feb. 6, company President Richard Sokolov said Simon was in the process of buying a number of the duplicate locations. Sokolov said Simon planned to announce its intentions for the sites in “the next few weeks.”

Tearing down the existing structures would allow Simon to create mall space that replicates the look and feel of lifestyle centers, such as Carmel’s Clay Terrace, a joint venture between Simon and Carmel-based Lauth Property Group.

In part because of a dwindling supply of land available to construct large shopping malls, lifestyle centers have become the fastest-growing segment of retail development. There were 30 lifestyle centers in the United States in 2002, according to the International Council of Shopping Centers. Today, there are 143.

Such centers typically feature more aesthetic touches than do traditional malls. Tenants usually include a collection of upper-end retailers and full-service restaurants. And unlike a traditional mall, all the businesses are accessible directly from parking lots.

It’s not clear which retailers would take space at Castleton and Greenwood, though in conference calls over the past year Simon officials have rattled off a long list of tenants in an expansion mode, including Joseph-Beth, a Cincinnati-based operator of large-format bookstores. Beth officials did not return calls.

Simon officials in recent months seem to have shifted their strategy for the duplicate properties. In a conference call after the Federated purchase closed last fall, Simon CEO David Simon spoke about the “opportunity to retenant” such malls.

In subsequent calls, however, the company has stopped using “retenant” in favor of another r-word-redevelop.

“We are very excited about the redevelopment opportunities that will become available” as a result of the Federated purchase, David Simon said during the Feb. 6 conference call.

The company is already moving ahead with similar projects at other properties in its 171-mall portfolio.

Simon demolished a Sears at its South-Park Mall in Charlotte, N.C., to make way for a variety of tenants, including California Pizza Kitchen, Dick’s Sporting Goods, Morton’s Steakhouse, McCormick & Schmick’s seafood restaurant and Urban Outfitters.

It’s also replacing a Lord & Taylor at The Galleria in Houston with smaller stores, including a Borders bookstore, Oceanaire and Kona Grill.

Simon would likely pursue a similar mix of tenants for both Castleton Square and Greenwood Park if plans move forward, retail brokers say.

Why the change in direction?

“Department stores have zero growth,” said Howard Davidowitz, chairman of New York-based Davidowitz & Associates, a retail consulting and investment banking firm.

And while many department stores have been struggling, in part because of competition from discount retailers like Target, smaller upscale stores like Sharper Image and Ann Taylor are doing well.

Simon recognizes as much.

In a conference call with analysts in December, Sokolov said the new “collection of tenants [at the SouthPark Mall in Charlotte] is doing dramatically more in sales than Sears did.”

Davidowitz estimates that as many as 90 malls nationwide are in the process of replacing the big boxes on the corners with smaller restaurants and stores.

Simon hasn’t pulled permits for demolition work at either Castleton or Greenwood, according to government officials in Marion and Johnson County.

Regardless of what Simon ultimately does with the sites, it should have no trouble filling the space, brokers say.

“It’s very valuable real estate,” said The Linder Co.’s Perlstein. “It’s in a great location.”

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