NEW YORK — A deal to sell Mervyn’s appears to be near, and Retail Ventures Inc. has emerged as a finalist in the auction, people familiar with the situation said Thursday.

Two other finalists, Vornado Realty Trust, a Paramus, N.J.-based real estate investment trust that is among the largest commercial property holders in the New York area, and Sun Capital Partners, an investment firm, also were said to be in the running for the chain. Target Corp. put Mervyn’s on the block in March.

The sale might happen at the end of July or early August, said the sources, who asked not to be identified. Some contract terms and credit agreements still need to be negotiated with the finalists.

Jay Schottenstein, chairman of Retail Ventures Inc., and Rodger R. Krouse, Sun’s co-founder and managing director, could not be reached for comment. Vornado does not comment on market speculation.

Mervyn’s would be a likely target for Retail Ventures, considering RV’s other divisions, Value City Department Stores, Filene’s Basement and DSW Shoe Warehouse, all have a promotional or discount price orientation. The Schottenstein family also has a 26.8 percent stake in American Eagle Outfitters, according to a May proxy statement. Schottenstein is chairman of American Eagle.

Blackstone Group and the Apollo Group, who have been reported to be interested in the chain, were said to have dropped out of the bidding .

Target wants to sell Mervyn’s to a buyer who will continue to operate it, rather than liquidating. But selling the stores has been tougher for Target than the divesting of Marshall Field’s, which May Department Stores bought for $3.2 billion in June. Mervyn’s lacks cachet and has long been considered a candidate for liquidation. The 260-store chain for the year ended Jan. 31 reported its pretax profits declined 32.6 percent to $160 million on a 6.9 percent drop in revenues to $3.55 billion.

Vornado has a history of purchasing retail real estate, including the former Alexander’s chain. The company recently bought a real estate portfolio in Southern California that includes 25 supermarkets. The deal was Vornado’s entry into the most populated U.S. state.

This story first appeared in the July 23, 2004 issue of WWD. Subscribe Today.

Sun Capital, which likes to tackle turnaround situations, is based in Boca Raton, Fla. In the past year, it bought Musicland from Best Buy as well as Hub Distributing, operators of the Anchor Blue and Levi’s Outlets by M.O.S.T. chains, from the American Retail Group, among other deals.

Mervyn’s has been regarded as long neglected by a parent corporation devoting more resources to the Target chain. However, market sources have said that Mervyn’s could capitalize further on Hispanic customers, considering Mervyn’s two biggest markets are Texas and California.

— With contributions from Lisa Lockwood