Could mall operators help rescue bankrupt Bon-Ton department stores?

Facing the prospect of big empty spaces in their malls if bankrupt BonTon Stores Inc. goes out of business, shopping center owners might be able to — as they did with another retailer — help rescue the company by investing in it.

But don’t count on it, says one industry analyst.

Bon-Ton, which operates dual headquarters in Milwaukee and York, Pa., has lost money for seven consecutive years. The company filed for Chapter 11 bankruptcy Feb. 4, saying it was trying to restructure financially or sell the company.

Some creditors, however, contend it’s not likely Bon-Ton, the parent company of Boston Store, Younkers and other department store brands, will be able to survive. They have called for the retailer’s immediate liquidation.

Few things are dreaded more by mall owners than a “going out of business” sale at one of their anchor stores and the huge, rent-less shuttered space that then appears. The exit of an anchor not only pares rent revenue, it can lead to the departure of other mall stores that counted on traffic generated by the anchor store. It can at least lead to demands that other retailer rents be reduced.

That’s why some retail experts think mall owners might consider a joint investment to help Bon-Ton reorganize and stay alive.

“It is not far-fetched,” said attorney Gregory Plotko, of the New York firm Richards Kibbe & Orbe.

Plotko, who specializes in bankruptcy and special situation investments, said there is precedent for mall owners getting together to aid in the survival of a retailer. In 2016, Simon Property Group and General Growth Properties Inc. helped keep teen-apparel retailer Aeropostale operating.

“Bon-Ton has a lot of stores, and if they’re in the right number of malls and represent large-enough boxes, there’s definitely consideration of that going on,” Plotko said.

As part of its proposed reorganization plan, Bon-Ton, which already has announced it is closing almost 50 of its 260 stores this year, is looking for a new investor. In a document included in its bankruptcy filing last week, Bon-Ton noted that “there are a number of parties active in the process, including a number of merchants and landlords who have expressed interest in participating in a transaction.”

Chicago-based retail real estate consultant John Melaniphy said that given the upheaval on the brick-and-mortar side of the industry today, “it’s not inconceivable” that mall owners would get involved in trying to keep Bon-Ton in business.

Mall owners also could make financial concessions that could help BonTon keep operating.

“All options are on the table, and certainly with 260 locations around the country, it would be in their best interests to consider that those stores remain open because of the snowballing impact that might have on other leases in their facilities and co-anchor tenancy requirements,” Melaniphy said.

However, Jeremy Metz, a real estate

analyst who follows the mall operators, doesn’t foresee a rescue by landlords occurring.

“I think mall landlords coming together to save Bon-Ton is unlikely,” said Metz, director of U.S. real estate for BMO Capital Markets in New York. “Strategically, I think mall owners will continue to proceed cautiously with any further vertical investments along the lines of what (Simon) and GGP did with Aeropostale.”

In the Aerepostale transaction two years ago, Simon and GGP were part of a consortium that won Aeropostale at an auction after the retailer filed for Chapter 11 bankruptcy protection.

A Simon spokesman didn’t immediately return a reporter’s call. But GGP spokesman Kevin J. Berry described the Aeropostale deal as “very unique.”

“We entered the company alongside Simon and Authentic Brands Group, who is the real operator of the business,” Berry said.

The consortium deal meant hundreds of Aeropostale stores stayed open.

As to whether there is any interest by GGP in investing in Bon-Ton, Berry said the mall owner “would rather not go down hypothetical paths.”

Bon-Ton has fewer locations in major U.S. malls than Aeropostale does. GGP has Bon-Ton stores in only 13 of its more than 120 malls around the country, one of which is Fox River Mall in Appleton, where Bon-Ton is closing its Younkers store. GGP doesn’t own the space used by Younkers at Fox River Mall, which has other anchors and is 97% leased, Berry said.

In Wisconsin, GGP also operates Mayfair mall in Wauwatosa, featuring a Boston Store that was remodeled in 2015, and Eau Claire’s Oakwood Mall, which has a Younkers store.

Records show Simon Property Group had 107 shopping centers in 2017, including Greendale’s Southridge Mall, which has a Boston Store that was renovated in 2012, and six other malls that have Bon-Ton stores.

Metz said Simon Group and GGP had a significant number of Aeropostale stores in their malls, so by making the investment they were also controlling the process and protecting their real estate. Bon-Ton, on the other hand, doesn’t have a lot of exposure to top-end malls run by Simon or GGP, “who are really the only ones capitalized well enough to do something like that,” Metz said.

In addition, Metz said, in the Aeropostale situation, the two mall operators had a partner in Authentic Brands, and there’s “no real brand value in department stores necessarily.”

Sixteen of the 63 malls run by CBL & Associates Inc. feature Bon-Ton stores, including the Boston Store at Brookfield Square. Two of them — neither in Wisconsin — were on Bon-Ton’s list of stores to be closed.

A CBL representative said the company had no comment Tuesday. But CBL Chief Executive Stephen Lebovitz, asked about Bon-Ton in a conference call with Wall Street analysts last week, said his company was talking with the retailer about some stores “where the rents are higher and need to be adjusted.”

“We also don’t know how Bon-Ton is going to play out over the next few months,” Lebovitz said, according to a transcript by the investment data firm Seeking Alpha.

Plotko said that in Chapter 11 bankruptcies, there’s often tension among stakeholders who want to liquidate and those who want the company to survive. Landlords, who are generally unsecured creditors, are averse to liquidation, he said.

“They do tend to want a customer — someone there to collect revenue from — and with the current state of the market, it makes complete sense for them to become more active,” Plotko said.

Plotko added: “The worst thing you could have is big, empty, black storefront — a dark storefront. That’s the worst thing a mall owner could want.”