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2010-02-21
Sheboygan, WI. Wal-Mart Store Sits Empty—Thanks To Wal-Mart

Wal-Mart has 44 properties for sale in Wisconsin, including 9 buildings that are sitting empty. Of these 9 properties, 3 are over 100,000 s.f. The dead store in Sheboygan, Wisconsin is not even listed by Wal-Mart Realty. The company is trying to sell the one lot remaining at its new Superstore site on Vanguard Avenue in Sheboygan just a few miles away from its 'old' store -- but it is the dead store Wal-Mart left behind that now has city officials worried. According to Wal-Mart, Sheboygan has roughly 82,000 people within a 10 mile radius of their new supercenter. But in 1989, when Wal-Mart first opened a discount store in this city, local officials had no idea that 17 years later the retailer would shut the store down. But even worse -- Wal-Mart put restrictions on the building when they sold it to a private developer, that effectively ties up the store for another 4 years. According to the Sheboygan-Press, the 'old' store has been empty since 2006. It was the anchor store for a mall known as Taylor Heights. Wal-Mart sold its building to developers based in Milwaukee -- but there were some serious strings attached to the sale of the 129,000 s.f. building. Wal-Mart walked away from this huge property insisting that any new owner could not use it for a grocery store, pharmacy, or discount department store larger than 30,000 s.f. These restrictions are in place until the year 2014 -- giving the new Wal-Mart supercenter plenty of time to establish its customer base -- without nearby competition. Such deed covenants have been standard operating procedure at Wal-Mart realty, which is why you don't see many empty Wal-Marts filled by competitors. This store in Sheboygan is one of an estimated 250 'ghost boxes' that Wal-Mart is trying to unload. A Wal-Mart spokesman told the Sheboygan-Press that his company would like to have its dead stores reoccupied -- just not with direct competitors. Wal-Mart openly admits that these kind of deed restrictions are commonplace at Wal-Mart. "We welcome competition in the marketplace, but what we can't be doing is providing infrastructure for our competitors in the same market," the Wal-Mart spokesman told the newspaper. But this has left the city of Sheboygan chafing at the lack of redevelopment at this prominent commercial site. "It is obviously very frustrating," Mayor Bob Ryan told the Press. The Mayor admitted that Wal-Mart's actions "will hold back development at that property for years. And without that building filled, that area does not redevelop." Wal-Mart says it wants to get rid of these buildings, but its restrictions say otherwise. "We want to ensure our former locations are converted back into a productive use as soon as possible," Wal-Mart explained to the Sheboygan-Press. "It makes good sense for us financially, and also for the community." But holding these properties becomes a defensive way for Wal-Mart to keep the trade area as much to itself as possible.

What you can do: The building owner, BR Companies, says there have been retailers interested in the site, some of which were eliminated from contention because of Wal-Mart's restrictions. Lack of an anchor at Taylor Heights prevents smaller stores from wanting to commit until they see who is filling the big empty space left by Wal-Mart. The owner revealed that he has gone back to Wal-Mart to try to get their permission to lease to a grocer -- but so far Wal-Mart, the largest grocer in the world -- has not consented. About ten years ago, Wall Street analysts began criticizing Wal-Mart for carrying on its books hundreds of empty, nonproductive properties. At one point in the late 1990s, Wal-Mart had as many as 350 empty stores in their portfolio -- stores they liked to refer to as 'dark stores.' They were carrying the expense of these stores, one-third of which were over 100,000 s.f., and one-third of which had been on the market for three years or longer. Wal-Mart responded to this criticism by hiring a bunch of private real estate companies across the country to help dispose of its properties, and expanded its Wal-Mart Realty staff to at least 7 people disposing of buildings and land. In some cases, Wal-Mart even gave away stores that were not moving. Despite this increased spending on marketing their 'dark stores,' several hundred of them are still dark. If you assume at least 20 acres per site, Wal-Mart is currently sitting on at least 5,000 acres of properties with buildings -- not counting the hundreds of parcels of land that they also are trying to sell. Not only is the Taylor Heights mall 90% empty -- but the Press says that at the nearby Memorial Mall, retailers are feeling a drop in traffic since Wal-Mart moved away. This unpleasant experience with dead stores has taught city officials in Sheboygan that they need to be better prepared next time. The city's planning and zoning manager told the Press that he favors the idea of having empty big box stores demolished by their owner after a set time period to prevent dark stores in the first place. "We need to ensure that we do our due diligence to make sure these buildings are demolished so the vacancies don't lead to areas that aren't doing as well as they could be." Readers are urged to email Wal-Mart's Real Estate manager Mike Webb at mike.webb@wal-mart.com with the following message: "Dear Mr. Webb, For four years now, city officials in Sheboygan, Wisconsin have been worrying over your 'dark store' in their city. The restrictive covenants you have placed on your property have guaranteed that the 'old' store will not be sold -- and those restrictions are in place another 4 years. It's time for Wal-Mart to stop sitting on this store, and to release its new owners from your anti-competitive covenants. Wal-Mart likes to talk about the competitive marketplace and consumer choice, yet you take overt action like this to prevent anyone from using stores that you have abandoned. Shoppers in Sheboygan are being harmed by your decision to tie up that property. It's time for Wal-Mart to get out of the way, and let any willing tenant use the building."










 
 
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