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Faith Hope Consolo
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In the News

UPDATE 3-Federated to sell Lord & Taylor for $1.2 billion

NEW YORK, June 22 (Reuters) - Federated Department Stores Inc. said on Thursday it would sell the 48 stores of its Lord & Taylor department store chain to a private equity group and a real estate developer for about $1.20 billion in cash.

The buyer -- NRDC Equity Partners LLC, a partnership of private equity firm Apollo Real Estate Advisors, L.P. and real estate developer National Realty & Development Corp -- said Lord & Taylor will continue operating as an upscale fashion retailer run by chief executive Jane Elfers and her team.

While the purchasers said it would be business as usual for the department store chain, analysts said they saw the deal as being as much about the urban real estate assets as about retailing.

The amount of prime real estate -- an average store covers 120,000 square feet -- makes this one of the biggest real estate deals in a long time, according to Faith Hope Consolo, chairman of the retail leasing and sales division of Prudential Douglas Elliman, Prudential Financial's real estate arm.

"The locations -- from Chicago to New York to Boston to Washington, D.C. -- are so key, and combined with the size of each location, afford a lot of possibilities," Consolo said.

"I can envision some of the key locations being mixed-use," Consolo said. In a mixed-use building, part of it is a store and another part, typically an upper portion, may be residential.

"I think some of the other locations may stay as Lord & Taylor, and yet other locations lend themselves very well to a 'big box' retailer," such as Target Corp. , she said.

Some of the biggest recent U.S. retail deals, such as Kmart Holding Corp.'s acquisition of Sears and the purchase of Toys R Us. Inc. by a group of investors, have involved real estate developers eager to redevelop underperforming locations into more successful projects.

Richard Baker, president of NRDC Equity Partners, said there had been debate about what are the best locations and sizes for Lord & Taylor stores. He said NRDC would work with the chain's management to evaluate the options.

"We're going to look at every store and make sure we have the right location and most efficient size and analyze every aspect of it to make sure we're doing the right thing," Baker told Reuters in an interview.

Lord & Taylor, which is made up of 41 stores in the Northeast and 7 stores in Illinois and Michigan, used to have stores in other U.S. markets, such as the Southeast, but Federated scaled back to what it perceived as the most exclusive markets.

Baker said there would be no change in managing the retail chain. "It's business as usual at Lord & Taylor," he said.

Baker said there were no imminent plans to expand beyond the current market, but did not rule out the possibility.

"We certainly will consider opening up new stores," Baker said. "Whether we buy them or lease them will be a question."

In January, Federated said it would divest Lord & Taylor in order to focus on its Macy's and Bloomingdale's brands.

In February, NRDC acquired retailer Linens 'n Things in partnership with Apollo Management, L.P.

Federated said it was advised by Goldman Sachs and JP Morgan while NRDC was advised by Tri-Artisan Partners LLC and Bear Stearns & Co.

The transaction, pending regulatory approval, is expected to close in the third quarter, the company said.

Federated shares rose 33 cents, or nearly 1 percent, to close at $36.13 on the New York Stock Exchange.

 

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