Seritage Growth Properties is poised to sell a shuttered Sears in Boca Raton after losing a lawsuit over its redevelopment plan for the property.
Since at least 2016, Seritage has wanted to redevelop the 180,000-square-foot department store at 5900 Glades Road, within Town Center at Boca Raton. But it hit a roadblock when Simon Property Group, which owns the rest of the mall, sued Seritage in 2019, claiming Simon has the right to purchase the Sears site.
This month, Palm Beach Circuit Judge Samantha Schosberg Feuer sided with Simon Property, putting an end to the three-year legal battle.
The dispute centered on the language and interpretation of an agreement governing the Sears site. The document gives Simon an option to purchase the Sears site and the right to get the property appraised if Seritage’s redevelopment project includes non-retail uses, according to Feuer’s order.
In making her ruling, the judge had to decide whether Seritage provided formal notice of its project to Simon, and whether Seritage’s plan includes non-retail uses. Both are required to trigger Simon’s purchase option. And Feuer said both thresholds were met.
Seritage communicated its vision for the property with Simon several times since 2016, the judge said in her order. And in 2018, Seritage submitted a development application to the city proposing shopping, dining, fitness and entertainment, according to the order. Plus, the filing came shortly after a Seritage representative hand delivered the proposal to Simon, the judge wrote.
Seritage’s proposal for restaurants, entertainment and gyms constituted non-retail uses, Feuer said in her order. According to dictionary definitions she brought up in the order, retail is the sale of goods, but it’s not the sale of services such as those provided at restaurants, gyms and entertainment venues.
In an emailed statement, a Simon representative touted the order.
“After being delayed by Seritage, we look forward to finally being able to create a harmonious addition that is consistent with the high quality the community expects from Town Center,” said Mark Silvestri, president of retail development at Simon, in the statement.
Seritage’s attorneys declined comment. In a court response filed last week, Seritage said it objects to Feuer’s order and plans to seek a rehearing.
The judge’s order doesn’t immediately open the door for Simon to get an appraisal on the Sears site and then pursue its purchase option, Seritage said in a court filing. Instead, Seritage now has six months to put the property on the market and seek a buyer other than Simon. After that, Simon would have an opportunity to match any potential buyer’s proposed price, Seritage said in its filing.
The order comes as Seritage has been on a selling spree of much of its retail holdings. The New York-based firm rushed to pay down a $1.44 billion loan from billionaire Warren Buffett’s Berkshire Hathaway. Following robust property sales last year, Seritage met a key threshold when it managed to reduce the loan balance to $800 million, allowing it to extend the mortgage term to 2025, according to a filing to the Securities and Exchange Commission this month.
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In October, Seritage sold the renovated Aldi-anchored plaza at 10790 Biscayne Boulevard and 1290 Northeast 108th Street near North Miami for $38 million. That came after the firm flipped Westland Gateway Plaza at 1460 West 49th Street in Hialeah for $28.3 million, marking a $6.2 million profit for Seritage in one day.
Seritage has another 22 properties under contract for sale for a combined $366.3 million and has accepted offers for other properties for a combined $98 million, according to the firm’s SEC filing. Seritage, which spun off from Sears and Kmart in 2015, is led by CEO Andrea Olshan.
Simon has significant South Florida holdings. They include Sawgrass Mills mall in Sunrise, as well as stakes in Dadeland Mall in Kendall and Aventura Mall in Aventura. David Simon is CEO of the Indianapolis-based firm.