Bon-Ton Stores Hit Bankruptcy Auction Block

NEW YORK CITY—The final 10 fee-owned department stores, formerly owned by the Bon-Ton Stores will be sold in a bankruptcy auction conducted by the brokerage firm A&G Realty Partners. The auction will be held at the offices of the sellers’ law firm, Jones Day, at 250 Vesey St. in New York City on Jan. 28, 2019 beginning at 10:00 AM. All bids for the properties are due on January 25.

The assets range in size from 45,000 to 165,000 square feet. They are located in IL, IN, IA, MI, MN and PA. The stores had operated under the names of Bergner’s, Bon-Ton, Carson’s, Elder-Beerman, Herberger’s and Younkers.

Three of the properties are in qualified Opportunity Zones created by the Tax Cut and Jobs Act of 2017.

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

The assets located within Opportunity Zones include the following:

The Younkers at Coral Ridge Mall in Coralville, IA is a one-story, 98,458 square-foot Brookfield property on a 9.1-acre lot. The store is close to the University of Iowa which has a population of more than 80,000 students and employees.

“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,” says Michael Jerbich, a Chicago-based principal at A&G.

The Herberger’s located at downtown St. Cloud, MN is a two-story, 93,900 square-foot structure on a 1.33-acre lot. The building is income-producing with Capital One having a long-term lease for the second floor.

The Herberger’s at Midway Marketplace in St. Paul, MN is a two-story, 124,136 square-foot structure on a 6.65-acre lot. It is adjacent to a light rail, and the $250 million Allianz Field soccer stadium is being developed within a quarter of a mile from the property.

Amendola tells GlobeSt.com that considering the contraction of the department store sector, the overall results of the sale efforts for Bon-Ton’s properties to date have been in line with A&G’s expectations.

“Most of Bon-Ton’s sites were leased, and with economic terms that largely failed to resonate with the marketplace, the overwhelming majority of these leases were ultimately rejected and returned to the landlords,” says Amendola. “We knew that this was going to be a challenging project and, based on the uses we’ve seen for the 20 locations that were sold thus far, it’s clear that forward-thinking developers and investors largely view this as an opportunity to introduce different concepts to their properties.”  

To date, 13 fee-owned and seven leased properties have been sold to storage users, developers/investors, fitness centers, a casino, home furnishings retailers, and healthcare users, according to Jerbich. ”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,” he says.

The additional following seven former Bon-Ton stores will be also be sold at the auction:

The Younkers at Merle Hay Mall in Des Moines, IA is a two-story, 165,000 square-foot building on a 7.81-acre lot. Polk County extended a low-interest, long-term loan to help redevelop the center which has leases with Target, Kohl’s and Flix Brewhouse, according to press reports. The municipalities of Des Moines and Urbandale are also reportedly working on other public incentives.

The Carson’s at Spring Hill Mall in Dundee Township, IL is a two-story, 28,000 square foot building on an 8.76-acre lot. Rouse Properties owns the mall which is currently undergoing a $40 million renovation.

The Bergner’s at White Oaks Mall in Springfield, IL is a two-story, 125,000 square-foot building on a 1.2-acre lot, owned by Simon Property Group.

The Elder-Beerman in downtown Richmond, IN is a two-story, 100,000 square-foot asset on a 1.5-acre lot.

The Younkers at River Towne Crossings in Grandville, MI is a two-story, 150,081 square-foot building on a 9.94-acre lot.

The Younkers at the Lakes Mall in Muskegon, MI is a one-story, 106,131 square-foot building on a 9.7-acre lot.

Finally, the Bon-Ton at Lewistown Mall in Lewistown, PA is a one-story, 46,660 square-foot structure on a .83-acre lot.

In April 2018, the Bon-Ton Stores received court approval to wind down its operations. In May 2018, A&G was retained to sell all real estate assets of The Bon-Ton Stores, Inc., on behalf of a joint venture of 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.