Apollo weighs plans for L&T stores

NEW YORK (Reuters) - With the ink not yet dry on its deal to buy Lord & Taylor, Apollo Real Estate Advisors LP is already facing a barrage of calls from landlords wondering what the investment firm plans to do with the department store chain and the real estate it inhabits.

"We have a long list of phone calls to return," Apollo Real Estate Advisors partner John Jacobsson said at the Reuters Real Estate Summit in New York on Monday.

Last week, Apollo Real Estate Advisors partnered with National Realty & Development Corp. to buy Lord & Taylor from Federated Department Stores Inc. FD.N for about $1.2 billion.

Federated obtained the chain, which is made up of 41 stores in the Northeast and 7 stores in Illinois and Michigan, last year when it bought May Department Stores. Federated had announced its intentions to divest the unit, which has struggled to define itself in the competitive U.S. department store landscape.

Jacobsson said Apollo has reviewed the chain's stores, but has not made any "hard and fast determination" as to which ones will still operate as Lord & Taylor stores. That has mall owners wondering what will become of the stores and the space in their malls.

With a scarcity of land available to build new malls, mall owners are eager to get their hands on large blocks of space at existing malls in the hopes of bringing in more productive department stores as tenants or redeveloping the property into something new.

Jacobsson said Apollo was studying whether the Lord & Taylor stores are too large and could be scaled back, freeing up valuable real estate.

"If you reduce the selling space, you recapture space that can be used for other purposes," he said, adding that Lord & Taylor's flagship store on Fifth Avenue has the ability to acquire adjacent air rights.

For those Lord & Taylor stores that do stay open, Jacobsson said plans for revamping them involve more than simply bringing in a new brand or two to drive store traffic.

"Our idea for what makes it a better store, worth paying attention to, is a lot more of a radical departure than has been implemented the last couple of years," he said.

Jacobsson declined to give specifics as to what those changes could entail.