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What I'm about to write is pure speculation on my part. Take it with a grain of salt. I used to work for Sears corporate. Sears got some incredibly good deals
by johnvanommen 6y ago
What I'm about to write is pure speculation on my part. Take it with a grain of salt.
I used to work for Sears corporate. Sears got some incredibly good deals on leases. They were known to sign leases that are 99 years long:
https://www.thedenverchannel.com/news/front-range/denver/councilwoman-stepping-in-to-remove-empty-sears-building-in-southeast-denver https://www.thedenverchannel.com/news/front-range/denver/cou...
This creates a "tug-of-war" between the company that owns the building, and the company that is leasing it.
For instance, in the article posted above, Sears was paying $33,333 a month for their lease.
If the lease is 99 years long, and if the owner of the property can lease it to someone else for $50,000 a month, that creates a problem for the owner.
Basically the owner is in a pickle: they want to lease it to someone else, but as long as Sears is paying the lease, they can't.
So this creates a tremendous incentive for the property owner to buy out the lease holder. It also incentivizes Sears to let the property fall into disrepair. For instance, in the article I posted above, you can see that the community was eager to see something done about that derelict boarded up building.
Here's some math:
1) Sears is paying $33,333 a month on a 99 year lease
2) The property's market value is $50,000 a month
3) There's 50 years / 600 months left on the lease
If you do the math, that lease that Sears has might be worth ten million dollars or more.
Again, pure speculation on my part, but I personally believe that a lot of companies are getting wise to this scheme.
If you've ever gone to your local mall, and wondered why Sears and Roebuck is still open when there are four customers... well now you know.
- lonelappde 6y agoWhy doesn't the property owner buy out, win-win?