Five Years After Bankruptcy, Over 90% of Sports Authority Stores Have New Tenants

Five years ago this month the bankrupt Sports Authority closed its doors for good.

 Over 460 Big Box stores - more than 16 MM square feet - were instantly vacated.

 A victim of the retail apocalypse.

But did Sports Authority’s real estate fall victim as well?

Nope.

Today more than 90% of former Sports Authority stores have new tenants. 

Launched by private equity in 1987 - during the rise of “category killer” Big Box retail - Sports Authority grew quickly by opening new stores and acquiring regional chains.

Within three years the chain of stores was flipped to Kmart. Then it was spun out to the public markets in the mid-1990s.

In 2006, private equity once again acquired Sports Authority – this time for $1.4 Billion in a deal funded heavily with debt.

And just in time for not only a global recession but also a period of significant change in retail fueled by explosive e-commerce growth.

Bankruptcy followed in 2016.

There were many reasons for the Sports Authority bankruptcy:

Excessive leverage, substandard merchandising, strong competition, rapid e-commerce penetration, failure to adapt to a changing landscape and customer base.

But, as it turns out, its real estate was not at all the problem.

Rather it was very much in demand from other users.

Two retailers - Dick's Sporting Goods and Burlington Stores - each took 38 former Sports Authority locations.

The stores leased to Dick's and Burlington stores account for ~20% of all re-tenanted Sports Authority sites.

In fact, roughly 1/3 of new Dick's stores and nearly 1/4 of new Burlington stores that opened during the past 5 years were in a former Sports Authority.

Other growing retailers snapped up former Sports Authority stores as well.

Over 40 stores were leased by furniture retailers such as Ashley HomeStore and Bob's Discount Furniture. Large format craft retailer Hobby Lobby took 17 stores.

In fact, roughly 75% of re-tenanted Sports Authority stores have been filled by a single Big Box user – rather than subdivided into multiple, smaller suites.

Of the roughly one hundred former Sports Authority stores that were subdivided into multiple suites, TJ Maxx and its family of concepts – including Marshalls, HomeGoods, Home Sense, and Sierra Trading Post – have leased space in more than one third of these locations. Grocers such as ALDI, Sprouts, and Total Wine and More have set up shop in more than a quarter of the former Sports Authority locations.

There have been creative re-uses as well – in about 10% of sites.

A few former Sports Authority stores been redeveloped into medical offices. Others are now self-storage sites. The Sports Authority in Park City, Utah was transformed into the The Ray, a 500 seat theater created by Sundance Institute, operator of the Sundance Film Festival.

And the former Sports Authority site in Queens, New York is being redeveloped into a new, 3,000 student high school.

So why has Sports Authority real estate thrived - even during a period when nearly 40,000 retail stores closed their doors?

Most of the former Sports Authority stores were modern, Big Box suites, suitable for both many types of retailers or a variety of other uses.

Also, many were in well-located, suburban Power Centers, adjacent to quality retailers, and in dense, "land scarce" areas in which there has been little to no new construction in years.

Just 10% of former Sports Authority stores were in malls.

So what are the takeaways from the rapid re-tenanting of the former Sports Authority stores?

Well, it shows that brick and mortar real estate does not drive the "retail apocalypse" narrative. Weak retailers may fail but stronger retailers will gladly step in to take take their place.

Additionally, it proves that Big Box is still "functionally relevant" space to many retailers, unlike increasingly "functionally obsolescent" asset types like malls and aging strip centers.

Finally, it demonstrates that quality, well-located real estate is not likely to sit idle or neglected for an extended period of time – even if a retail store is no longer its highest and best use. 

Ultimately, the bankruptcy and mass closing of a retailer's store base - as in the Sports Authority case - can be a unique opportunity, both for stronger retailers to upgrade their store base and for real estate owners to enhance, improve and stabilize their properties for the long-term.