Eight months after losing a legal battle, Sears is waging an all-out war to obtain the power to sublease the second floor of its space at The Gardens Mall in Palm Beach Gardens to Dick’s Sporting Goods.
The fight is taking place in the courts, in the state House of Representatives — and even the ballot box for the upcoming March 14 election of new city council members.
Sears is undergoing a nationwide strategy to sublease space at its big mall department stores. The struggling retailer still wants to sell hard goods such as Kenmore appliances, but it says it doesn’t need all the extra room for so-called soft goods that don’t sell as well, such as clothes. In mall stores across the country, Sears has found other companies, such as Dick’s, the big-box sporting goods retailer, eager to sublease space at its prime mall locations.
Sears says its leases give it the right to sublease its space.
But Sears has been stymied in its efforts to execute the same strategy at its store at The Gardens, a 1.4-million-square-foot upscale mall on PGA Boulevard, just east of Interstate 95. There, Sears has a 149,000-square foot store.
Sears’ claims the mall’s owner, Forbes/Cohen Florida Properties L.P., has made noises about blocking the sublease to Dick’s. Sears says this is because Forbes really wants to buy Sears out of its long-term, low-cost lease on valuable mall land. Forbes maintained Sears never even presented a real sublease plan to them.
The situation is unusual for Sears: “It’s the first time a mall owner has not been supportive of what we’re trying to do,and I’ve done over 150 deals,” said Alan Shaw, Sears vice president of leasing and development for Sears Holdings of Hoffman Estates, Ill.
In 2014, Sears tried to beat Forbes through the courts. The retailer sued the mall (and later the city) to win the right to do the Dick’s second floor sublease.
But last June, a Palm Beach County Circuit Court judge ruled against Sears in a complete victory for both the mall owner and also the city of Palm Beach Gardens, which was named in the complaint.
The city was brought into the case because of a 2012 resolution that stated mall anchor tenants could not subdivide their space without the approval of both Forbes and the city. Sears said the resolution was quietly passed with no notice to the company — and only after Sears began talking about subleasing its second floor space to Dick’s.
After the judge ruled against Sears last year, the company appealed the decision. On April 25, the 4th District Court of Appeal will hear oral arguments.
Forbes said it would not comment on the pending appeal.
But in court documents, Forbes said the proposed Sears sublease was out of compliance with many parts of Sears’ lease, including rules regarding signs, which are strictly limited. For example, Dick’s wanted an exterior anchor tenant sign, which Forbes said is prohibited in the Sears lease.
Sears isn’t trying its luck just with the courts, however.
A bill recently was introduced in the state House that would limit a local government’s ability to regulate businesses. Regulations only could be done if they were allowed in Florida state statutes.
Rep. Randy Fine (R-Brevard County) introduced HB17.
“Government, unchecked, will always come up with new things to regulate,” Fine said. The purpose of the bill is to stop excessive regulation: “I want to do what I can to make it easier for businesses to grow,” he added.
The Florida Retail Federation strongly backs the measure, which it says is necessary to resolve a constant conflict with local municipalities enacting resolutions or ordinances that affect, and often hurt, the retail industry.
The Palm Beach Gardens resolution is an example, said Melissa Ramba, vice president of government affairs. “They are trying to regulate business at the local level. They are restricting job growth. How many jobs would Dick’s Sporting Goods create? They should just stop messing around with Sears and let them do what is best for their business.”
If the bill became law, it would require any regulation not in accordance with Florida law to expire on Jan. 1, 2020. This includes the Palm Beach Gardens 2012 resolution, Ramba said.
Gerald Richman, a West Palm Beach attorney for Sears, agreed the city’s resolution would be in violation if this bill became law. “The resolution is unconstitutional,” Richman said. “That’s the whole point. It’s an impairment of a contract.”
But there could be room for disagreement here. Ramba acknowledged the bill does not cover zoning issues, and the city’s 2012 resolution is an amendment to the planned unit development, or PUD, where the mall sits.
Also, in three years, Dick’s might no longer even be interested in subleasing the Sears space. However, since Sears has the lease for another 40 years, it’s likely another retailer might come along and want the second floor space if Dick’s decides to take a pass.
Passing new legislation is never a guarantee, so Sears is hedging its bets another way.
The company is trying to do a little lobbying for the upcoming March election. On Wednesday, Sears’ Shaw was in town to talk to city council candidates and voters about the mall issue.
Sears even created a website, www.searsgardensmall.com, that describes its conflict with the city and the mall.
“I’ve talked to candidates and informed them of what’s transpired and what we’re looking to do, which is survive,” Shaw said. “We’re not looking for any favors. We just want an equal playing field.”
Shaw said the city resolution favors one business, Forbes, over another, Sears. “I don’t think that’s good practice for a city to be doing. We think it’s unfair and we think the voters are unaware.”
A city attorney did not return phone calls seeking comment.
Alexandra Clough writes about real estate, law and the economy.