Sears Bankruptcy Sets Up Second Lawsuit Over Springdale Kmart

This Kmart store at 3142 W. Sunset Ave. in Springdale, seen here in January 2016, has been closed for nearly two years.

A northwest Arkansas real estate investor has filed a second lawsuit in an attempt to free up an abandoned Kmart building he owns in Springdale.

Attorney M. Scott Hall of Hall Estill in Fayetteville filed the suit in Washington County Circuit Court against Transform Holdco LLC of Hoffman Estates, Illinois, on behalf of Ken Nguyen of Rogers.

The lawsuit alleges that Transform has violated the lease agreement by failing to maintain the property.

Nguyen and Hall filed a similar lawsuit in September against Sears Holdings Corp., the parent company of Sears and Kmart. That lawsuit alleged Sears Holdings had failed to pay property taxes or maintain the building and thus had violated its lease.

Nguyen had to switch defendants for this suit because Sears Holdings went into Chapter 11 bankruptcy, and a judge in the Southern District of New York awarded Sears’ properties to Transform in October.

Transform is a subsidiary of an investment company owned by Edward Lampert, former CEO and chairman of Sears Holdings, and it paid $5.2 billion for the assets.

The asset in question is a 60,507-SF Kmart on 7 acres at 3142 Sunset W. Ave. in Springdale. The store opened in 1980 and closed in December 2016.

Nguyen, through his subsidiary JK Properties of NWA LLC, acquired the property as part of a $3 million acquisition from Harps Properties in 2016. He has been unable to sell or repurpose the building with the lease agreement in force, even though the Kmart went kaput.

The assignment of the assets to Transform stipulated that it was free and clear of any claims against Sears, but the new tenants were responsible for taxes and maintenance and the like.

It also stated that the building couldn’t remain vacant for more than 150 days from the date of the assignment — officially May 13, 2019 — and Transform had 60 days to correct any violations when notified by the landlord.

Nguyen’s new complaint claims Transform was notified of code violations on May 13, and the lawsuit was filed July 17 — 65 days later, if Whispers’ math is correct.

The suit is asking for more than $75,000 in damages as well as a declaratory judgment that the lease is void.