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Local exposure to Macy’s store closures could be vast

King of Prussia Mall

Macy's at the King of Prussia Mall. (Natalie Kostelni/Philadelphia Business Journal)

This article originally appeared on Philadelphia Business Journal.

Pennsylvania Real Estate Investment Trust and Simon Property Group have the most local exposure to a round of closures Macy’s Inc. is planning this year at its namesake Macy’s and Bloomingdale’s department stores.

Macy’s (NYSE: M) announced Tuesday it will close 125 of its “least productive” locations over the next three years. It has a dozen stores throughout the Philadelphia region and three Bloomingdale’s locations.

Macy’s hasn’t released a list of the stores it intends to close, though a partial list published by the Wall Street Journal doesn’t yet include any in the Philadelphia region. However, Macy’s locations at the Harrisburg East Mall in Harrisburg and Nittany Mall in State College are scheduled to close, according to the report.

Philadelphia-based PREIT (NYSE: PEI) owns four regional malls that have Macy’s stores as anchor tenants occupying a total of nearly 1 million square feet. The locations and square footage of those Macy’s are the Cherry Hill Mall at 305,000 square feet, the Springfield Mall at 192,000 square feet, the Willow Grove Park with 225,000 square feet, and the Exton Square Mall with 181,000 square feet. Willow Grove also has a 237,000-square-foot Bloomingdale’s store.

Heather Crowell, a spokeswoman for PREIT, said the company doesn’t know which malls will be affected, since Macy’s has not released a list of store closures, but is tracking the situation.

PREIT is no stranger to redeveloping vacant department stores at its malls. PREIT managed through a round of 13 closures of department stores such as Sears and Macy’s at its malls over the last five years. The company has used the situations as opportunities to reinvent the properties to seize on trends that involve adding more entertainment, dining and fitness spaces at its properties. PREIT has also brought new uses to its properties such as co-working and art installations.

PREIT, for example, completed a repositioning of the Plymouth Meeting Mall last year, spending $40 million to redevelop 230,000 square feet vacated by Macy’s in 2017. Dick’s Sporting Goods, Burlington, Miller’s Ale House and Roll by Goodyear signed leases to backfill that space along with a series of wellness tenants such as Edge Fitness, a salon, cycle bar and day spa. It took two years to lease up.

Simon Property (NYSE:SPG) also has potential exposure to the proposed closures. That Indiana-based real estate investment trust has three Philadelphia-area Macy’s stores at King of Prussia Mall, Montgomery Mall and Oxford Valley Mall. King of Prussia also has a Bloomingdale’s. The square footage of the stores wasn’t available. King of Prussia is considered a high-performing mall.

In Center City, Macy’s has a 435,000-square-foot space that covers the first three floors of 1300 Market St. Its lease runs through October 2027. In addition, there is a Bloomingdale’s Outlet in 22,700 square feet at the Shops at Liberty Place at 1625 Chestnut St.

This is the latest retrenchment by owners of traditional department stores and other retailers who have faced a reckoning as e-commerce and Amazon have taken market share.

In November, Lord & Taylor said it would lay off 81 employees at its department store at the Moorestown Mall in Moorestown, N.J., as part of the brand’s sale to Le Tote Inc. Lord & Taylor occupies 121,200 square feet at Moorestown and its lease is scheduled to expire in 2020, according to documents filed with the Securities and Exchange Commission. The move was part of Hudson’s Bay Co. selling its Lord & Taylor brand to San Francisco-based Le Tote. The deal included Le Tote taking control of 38 stores and related inventory.

In recent years, department stores such a JC Penney and Sears have shuttered stores, and dozens of apparel retailers such as Ralph Lauren, Ross, Wet Seal, Bebe, Payless and Kenneth Cole have closed locations or gone out of business.

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