Wednesday, October 11, 2006
Lord & Taylor, Water Tower Place, Chicago, Illinois. (photo by Justin Hall, 2003)
Water Tower Place store to close in spring as owner of indoor mall takes back space; fate of retailer's suburban Chicago outlets is unclear
By Sandra Jones
Chicago Tribune staff reporter
CHICAGO - Lord & Taylor plans to shutter its Water Tower Place store next spring, a move that diminishes the New York retailer's presence in the Chicago area and frees up one of the most prominent locations on the Magnificent Mile.
The decision to leave Michigan Avenue comes one day after investment group NRDC Equity Partners LLC acquired the 48-store chain from Federated Department Stores Inc. for $1.1 billion.
News of the closing follows the conversion of Marshall Field's, also at Water Tower Place, to Macy's last month and changes the face of one of the busiest shopping corners in the city. The two department stores opened as the anchors of Water Tower Place in 1975 and helped the indoor mall--a pioneer in bringing suburban-style shopping to the city--become one of the most popular tourist destinations in Chicago, with an estimated 20 million visitors a year.
Water Tower Place's owner, General Growth Properties Inc., has been eager to redevelop the Lord & Taylor space since acquiring the mall from Maryland's Rouse Co. in 2004.
NRDC, for its part, is concentrating on reviving the storied Lord & Taylor brand, particularly in the Northeast, where the retailer has been a fixture in New York for more than a century. The Purchase, N.Y.-based group, which also owns a stake in Linens 'n Things Inc., plans to put $150 million in capital improvements into Lord & Taylor stores and just hired former Saks Fifth Avenue CEO Christina Johnson to help them.
Lord & Taylor has suffered from neglect under a string of owners, most recently May Department Stores Co. It closed 32 of its weaker stores starting in 2003 and endured several turnaround attempts, losing its luster along the way.
Lord & Taylor is getting out of the Mag Mile property because the lease is up and General Growth wants to take back the space, said Johnson.
"This is not a decision of our making," said Johnson. "We would have liked to have remained."
Still, it is unclear if NRDC will keep the remaining four Lord & Taylor stores in the Chicago area. The Chicago-area stores combined generate roughly $120 million in sales, according to a person familiar with the stores. That's less than 10 percent of the chain's $1.4 billion in annual sales last year.
The remaining stores are at Northbrook Court in Northbrook, Woodfield mall in Schaumburg, Oakbrook Center in Oak Brook and Old Orchard in Skokie.
The Northbrook Court store is the most likely to be closed, according to a person familiar with the plans. General Growth is close to a deal to take the space back from NRDC and will most likely redevelop it.
General Growth officials declined to comment on the Northbrook store's future and declined to disclose plans for the Water Tower space.
"We're looking at a bunch of options," said Mitch Feldman, Water Tower's general manager. It will take three to six months to finalize plans, he said.
NRDC's Johnson also declined to comment specifically on the Northbrook store, but said, "We have no plans to close any stores."
Lord & Taylor's sales at the Mag Mile outpost have been declining for years, ringing up an estimated $25 million to $30 million a year, down from as much as $50 million in the store's heyday, according to people familiar with the store.
General Growth has been looking for ways to boost Water Tower's sales from a relatively mediocre $500 per square foot to as much as $900 within three to five years.
Department stores have traditionally paid minimal rent in exchange for their drawing power. Breaking up the seven-level, 140,000-square-foot Lord & Taylor space into smaller units aimed at specialty stores and restaurants would allow General Growth to generate high rents, said Allen Joffe, retail real estate broker at Baum Realty Group Inc. in Chicago. "Spaces like that don't come on the market very often," he said.
American Girl Place, located just down the street, looked at the site this year as a way to expand its doll store and playland for girls. Von Maur, the Davenport, Iowa-based department store, has also been eager to expand in Chicago and has had its eye on Lord & Taylor real estate.
American Girl officials couldn't be reached for comment.
New York based retail consultant Burt Flickinger predicts that despite Lord & Taylor's loyal customers in the Northeast, it has a chance to improve its business in Chicago, particularly as Macy's wrestles to attract shoppers disenchanted with its takeover of Marshall Field's.
"There is definitely a place for Lord & Taylor," said Flickinger. "When they've got their merchandising magic working for them, it's a very productive store. With consumers being very disappointed that Marshall Field's is gone, there's a great opportunity."