At Southgate Mall, Saks might lead wave of departures
John Hielscher / Sarasota Herald-Tribune
SARASOTA – As potentially devastating as Saks Fifth Avenue’s exit may be for Southgate Mall, it could be just the first of several major tenant losses there for mall owner Westfield Corp.
That is because tucked within many mall and shopping center lease agreements are “co-tenancy” clauses that allow retailers to effectively rip up their space commitments if key fellow merchants — or competitors — go elsewhere.
For many upscale Southgate merchants — including Banana Republic, Pottery Barn, Williams-Sonoma and Coach — the loss of Saks’ cachet and drawing power could be ample reason to leave the mall, depending on the language in their individual leases.
Though a mass exodus of the so-called “in-line” stores from the 425,000-square-foot Southgate may be remote, there is a risk, experts say, and merchants already are concerned.
By lunchtime Wednesday, commercial real estate broker Barry Seidel had fielded calls from four worried Southgate retailers.
All fretted over their future, after learning that Saks intends to move in 2014 to a new, much larger store at the planned Mall at University Town Center.
“They were nervous about it,” said Seidel, owner of American Property Group of Sarasota Inc.
With good reason: Saks is Southgate’s most luxury-oriented retailer and a magnet that attracts shoppers to the rest of the 60-store center at 3501 S. Tamiami Trail.
Saks’ sales per square foot — a key measure of viability in the retail trade — far outpace those of other Southgate tenants.
As part of its move to the 115-store Town Center, Saks will double in size, to 80,000 square feet.
While Seidel and others say Saks will be “sorely missed” when it ventures to the new $315 million mall, many experts contend that it will not lead to the significant hemorrhaging of other merchants.
“Saks is more of a destination place,” Seidel said. “Their customers don’t go into the mall as much as people think they do.
“They go to Saks, get what they want and they leave.”
Limiting any defections, too, is that fellow Southgate tenants Dillard’s and Macy’s, which have also announced plans to open at the new 880,000-square-foot University Town Center mall, say they will remain at the Westfield property.
Westfield officials declined to comment about any co-tenancy clauses or whether they might affect the roster of tenants at Southgate.
“Terms and conditions of agreements between landlord and tenant are confidential matters that are not discussed or disclosed,” said Catharine Dickey, a Westfield executive vice president.
The demographics that originally brought Saks to Southgate in 1996 are still in place, noted John Harshman, president of Harshman & Co. Inc., a Sarasota commercial real estate brokerage firm.
“Saks moving out may have some short-term impact, but I’d be surprised if they don’t fill that space with a very quality retailer pretty quickly,” Harshman said.
Saks draws wealthy shoppers from Longboat Key, Siesta Key, The Landings and neighborhoods west of Tamiami Trail.
Some analysts, including Phoenix-based retail consultant Jeff Green, question whether faithful Longboat Saks shoppers will travel to the new mall, which is to be built on University Parkway near Interstate 75, about 12 miles from Southgate.
“The best demographics in Sarasota are along the coast,” Green said. “That’s making those people drive pretty far.”
Officials from Banana Republic, Pottery Barn, Williams-Sonoma and others did not return calls regarding co-tenancy clauses or whether they might exercise them when Saks departs Southgate.
But Green and others argue that key in-line stores may be reluctant to move from Southgate, even without Saks as an anchor.
“The shopping patterns are in place,” Green said. “Southgate is a ‘tweener’ location between I-75 and the coast. It’s more convenient for the bulk of the affluent. It’s an older center, but that doesn’t mean anything.”
Southgate’s age — it dates to the mid-1950s — may even help push the mall to reinventing itself post-Saks, experts say.
Westfield has long contemplated expanding Southgate since buying the 35-acre mall for $62.5 million in January 2003.
Most recently, it floated a plan last year to add as many as 30 stores, including the region’s first Apple electronics store, but negotiations stalled.
That plan represented a scaled-down version of a 2007 expansion that would have cost $120 million and added a second floor and as much as 270,000 square feet to the mall.
Westfield officials declined to comment on any expansion or renovation plans at Southgate.
But Green and others contend that Saks’ loss may push Westfield to aggressively go after upscale department store Nordstrom to replace its key anchor.
Nordstrom stores typically range from 80,000 to 120,000 square feet. While building a new anchor might be difficult on Southgate’s 35 acres, there would be enough physical room once Saks vacates — and even more if Macy’s, Saks’ neighbor in the mall, leaves as well.
At its other Sarasota mall, Sarasota Square, the closing of a Dillard’s eventually led Westfield to convince Costco Wholesale Club to open there.
Though Nordstrom is not a Westfield staple tenant — its department-store roster typically includes Macy’s, Sears and J.C. Penney — the upscale Seattle-based retailer does anchor Westfiled’s Annapolis Mall; Garden State Plaza in Paramus, N.J.; and Galleria at Roseville in Roseville, Calif., among others.
Seidel and others believe that Westfield will find a way to turn Saks’ loss to its advantage.
“The owners are big players,” Seidel said of Westfield. “They won’t let the mall go down. They’ll find somebody good, and somebody on par with Saks. If anything, this could be a change to the better.”