Transformco, the owner of Sears and Kmart stores, has acquired a large retail building on Long Island that once housed one of its Kmarts.
The Illinois-based company is now the owner of the 237,000-square-foot retail building in the Sayville Plaza shopping center in Bohemia, The Real Deal has learned. The company had held a master lease on the building until recently.
In February 2020, Transformco shut down the Kmart store in that building — along with 95 Sears and other Kmart locations — leaving 182 of the two chains’ stores in operation nationwide. At that time, the company cited a “difficult retail environment and other challenges.” The pandemic accelerated shoppers’ shift to online, although recent studies show retail foot traffic is rebounding.
The seller was Sayville Menlo, an entity owned by Arctrust, a private real estate investment trust based in Clifton, New Jersey. Financial terms were not disclosed, but based on the town of Islip’s property assessment, the fair market value of the 24-acre property is about $44 million. Arctrust and Transformco declined to comment on the price, citing a confidentiality agreement.
The transaction stems from a lawsuit filed in 2017 by Arctrust initially against Sears Holdings and later Transformco, arguing that the tenant failed to perform repairs and maintenance required by the lease. The tenant denied the allegation, and the case ultimately led to a negotiated settlement, court records show.
Robert Ambrosi, chairman and CEO of Arctrust, wrote in an email that the recent transaction was “all related to accomplish a settlement.” Transformco did not immediately respond to a request for comment.
Founded in 2019 by billionaire Eddie Lampert, Transformco has acquired more than 420 surviving Sears and Kmart stores from bankrupt Sears Holdings Corporation. The company still has more than 330 locations — via ownership or leases — and is using various tactics to monetize its portfolio, including leasing its properties to other tenants or redeveloping them, said Scott Carr, president of Transformco’s real estate business.
While a major facelift is ongoing at the Sayville Plaza building, Transformco has secured three tenants — discount grocer Aldi, home decor chain At Home, and flooring retailer Floor & Décor — who will occupy more than 80 percent of the property. Transformco is marketing the remaining 39,600 square feet.
Transformco’s other recent deals include one with its New York City landlord Vornado Realty to replace the Astor Place Kmart with Wegmans. The company also sold five Kmart store leases in different parts of the country to Target in January.
The firm’s activities aren’t limited to retail, Carr added.
“A number of our assets have either been leased or sold to non-retail users where they’re becoming industrial, residential medical offices and auto dealerships,” he said.