Downtown Boston Store to be Cut in Half
Its corporate owner Bon-Ton will downsize store, but could be good news for city.
Major changes are coming to the downtown Boston Store and its troubled corporate parent Bon-Ton. The store will be cut in half, going from 123,000 square-feet to approximately 55,000. In turn, Bon-Ton will move part of their corporate headquarters into the space vacated by their flagship store.
Bon-Ton, which is quietly headquartered Downtown as well as in York, PA, employs 750 people in Milwaukee between their offices and the department store in the historic building on Fourth and Wisconsin, and other nearby buildings used for its corporate operations.
The department store chain was looking to remodel their offices as part of a city financing plan, but this new configuration will allow them to develop entirely new offices within the building and experiment with a smaller footprint store. As part of the change, the store will eliminate its children’s department and home and furniture department.
According to the city Senior Economic Development Specialist Dan Casanova, the store will now be on the north half of the first two floors of the building, while the office space will move into the southern half. Office space will be maintained on the entire third floor and a small portion of the fourth floor.
The store, which is not formally part of the attached Shops of Grand Avenue mall, is viewed as an important anchor to the area by the city. In 2014, the Common Council approved giving Bon-Ton $300,000 a year through 2018 to keep 750 employees in the complex.
Then in early 2017, the Common Council approved a $1.9 million forgivable loan to Bon-Ton to help support an office remodel in exchange for the company maintaining the store, extending their lease through 2028 and continuing to employ 750 people in the building. According to Bon-Ton the store has operated at an annual loss of $600,000 in recent years.
These changes will open up approximately 100,000 square-feet of space on the fourth and fifth floor for a future office tenant. This is a win for the city according to Casanova. Speaking before the board of the city’s redevelopment authority, Casanova stated: “overall we think while the retail is getting smaller there is an opportunity for more tax revenue here because there are going to be more employees potentially in the building.”
Casanova also said the changes will be good for Bon-Ton. “By leasing less space it puts Bon-Ton in a better space financially.” The publicly traded company has lost money every year since 2011. The changes will allow Bon-Ton to stop leasing space in The Blue building across the street at 310 W. Wisconsin Ave.
The changes will also yield positive changes for the walkability of the Westown neighborhood. A lobby will be constructed for the office space along N. 4th St., increasing the amount of street activity. In addition, a number of large window bays the city believes have been bricked shut for nearly a century will be opened up with large windows.
The 428,652-square-foot building was acquired by Chicago-based North Wells Capital for $25 million in April. It was previously owned by WEC Energy Group affiliate Wispark, which is exiting the real estate development business. Casanova noted the changes to the remodeling plan were a result of North Wells Capital, an arm of Urban Innovations Ltd., evaluating the best use for the building.
Bon-Ton owns and operates 267 stores spread across six department store brands, including Bergner’s, Boston Store, Caron’s, Elder-Beerman, Herberger’s and Younkers.
Bankruptcy, Takeover or Recovery?
Back in 2014, when the city agreed to the subsidy for Boston Store, my colleague Bruce Murphy reported on Bon Ton’s shaky financial structure: “its debt is ten times higher than the industry average, and its revenue, net income and earnings per share have been in decline for years.”
Earlier this week the company announced a crucial amendment to a $880 million credit line that sent its stock price soaring.
But yesterday, Bloomberg reported that Sycamore Partners has held talks with Bon Ton regarding a potential acquisition. Bloomberg reports that Sycamore has “a reputation for scooping up troubled retail operations.”
Earlier this month, Bloomberg had reported that suppliers were beginning to protect themselves against a potential bankruptcy of Bon-Ton by changing payment terms and scaling back shipments.
The company reported a loss of $63 million in 2016.
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