NPK Redevelopment has been
formed as an LLC, jointly owned by Sears Holdings
(80%) in New Plan Excel Realty Trust (20%). This
move sends a powerful signal that the days of the
Kmart brand may be numbered.
When Edward Lampert purchased a
majority stake in the then Kmart Holding Company, it
was widely suspected that Lampert was more
interested in the valuable real estate owned by
Kmart than actually continuing the retail side of
the business. Although denied by Kmart leadership at
the time, this move signifies that the earlier
suspicions were correct.
Integity an issue
This is the second major
occurrence that brings into question the integrity
of Sears Holding Company leadership. When Lampert
masterminded the merger of Sears and Kmart, Lampert
and other senior executives at Kmart assured the
people of the State of Michigan and the City of Troy
that Kmart would keep a "significant presence" in
Southeastern Michigan. It was widely thought, and
not denied, that this meant the new Sears Holding
Company would keep the base of its Kmart discount
stores in the Troy area. As time passed it became
clear that this was not the intention.
Likewise, the Corporation's
leadership had assured other stakeholders that it
was committed to making Kmart a viable retailer.
This move, forming a real estate venture, confirms
earlier suspicions that the lucrative land Kmart
sits on is a major part of the long-term Sears
financial plan.
According to filings with the
Securities and Exchange Commission, New Plan Excel
Realty operates hundreds of strip malls throughout
the nation. Wal-Mart is their largest tenant
followed by Kroger and then Sears Holdings. New Plan
Excel Realty is already working on the redevelopment
of three Kmart stores in Memphis and the Sears-owned
properties closed in September of 2005.
According to Louis Taylor, a
real estate analyst at Deutsche Banc Securities in
New York, as quoted in Crain's Business, "This could
start the process in earnest of unlocking the value
of the real estate. If the economics are what Sears
hopes it will be, I think you'll see Sears broaden
it. Instead of three at a time, they can do a
hundred and split it up geographically, or have
three or four different real estate companies handle
pieces of it. If it works with Kmarts, then why not
do it with Sears?"
The numbers
Most industry analyst have
expected that lamp or would sell 200 to 300 Sears
stores that are falling short of required revenue.
However according to a recent report from Morgan
Stanley, Sears properties are worth only about $50 a
square foot. This is due primarily to their location
in malls, which continues to be a lesser desired
location for large stores and big boxes. On the
other hand Kmart's properties are estimated to be
worth an average of $85 a square foot, according to
the same Morgan Stanley report. Kmart's location or
more desirable as many are in well-developed areas
where land is at a premium and their locations in
strip shopping centers are the main target of
big-box retailers. With Kmart already meeting the
zoning requirements, the startup time to redevelop
an existing Kmart into a new retail establishment is
shortened.
Sears Holdings started Sears
Essentials soon after the merger of the two retail
companies. Many at first thought that Sears
Essentials would be the new retail brand for the
company - provided Sears Essentials was successful.
Although Sears Holdings has not reported holiday
sales for the untested retail format, some industry
analysts feel that the format is falling short of
the sales per square foot required to make the
retail format liable.
As a major landlord for the
former Kmart Corporation, New Plan Excel Realty was
instrumental in redeveloping closed Kmart stores
into multi-tenant retail formats and into health
clubs and office formats prior to the merger with
Sears.
The game of TrustBall™
This development, along with
prior experiences with Kmart Corporation dating back
to Kmart's pre-bankrutcy days, shows a continued
problem at the company with the integrity of its
leadership. This is a major emphasis of the
TrustBall™ workshop offered by Max Impact. Once
trust has come under question, the individual
organization involved must go to the TrustBall™
on-deck circle before they can enter into a trusting
relationship with customers, suppliers, employees,
and other stakeholders. It is in the on-deck circle
that a batter warms up and prepares for the next
at-bat. Once at-bat, the hitter will once again be
able to establish trust. However without the proper
"warm-up" the batter once again strike out.
If you play the game of
TrustBall™ correctly, you will be able to move
around all the bases and score a homerun - perhaps
you will even win the world series of trust.
Conclusion
The leadership of any
organization needs to realize that trust is a
corporate asset and needs to be treated as an
investment. When high trust is present, customer,
employee, investor, and supplier loyalty increases
to the point that all three can be retained for a
lifetime. However when trust is low, productivity
and profits are lost and customers seek to do
business elsewhere, the best suppliers will no
longer deal with you, shareholders will sell and
drive down stock prices, and employee turnover -
especially among the best employees - will increase.
