Kimco Realty Corp. expects to benefit from considerable mark-to-market and long-term redevelopment opportunities in the wake of the recently announced Sears Holdings bankruptcy filing. Overall, Kimco’s exposure is limited to 14 leases (three Sears and eleven Kmart, one of which is subleased to At Home), representing just 0.6% of annualized base rent and 1.9% of the company’s total gross leasable area.
The announcement “may afford us the long-awaited opportunity to recapture boxes with significant mark-to-market potential in our core markets, and sparks several new redevelopment opportunities within our portfolio,” said Conor Flynn, Kimco’s Chief Executive Officer. “Given the highly favorable demographics of these locations, along with the continued demand for well-located, high-quality real estate, we expect to build on our past success in creating value by re-tenanting and redeveloping these below-market anchor spaces and activating underutilized parking fields.”
Sears/Kmart pays among the lowest rents of any tenant in Kimco’s portfolio. The 14 Sears/Kmart leases have an average base rent of $5.25 per square foot, which is significantly below the company’s portfolio average of $15.95. Demographics across the 14 locations are desirable, with a population of 129,000 within a three-mile radius with an average household income of $88,000.
Select opportunities include:
Whittwood Town Center, an infill site in the densely populated Los Angeles suburb of Whittier, California, serving a population of approximately 175,000 within a three-mile radius with an average household income of over $93,000.
Bridgehampton Commons in Bridgehampton, New York, serving the affluent Hamptons community, with an average household income of over $193,000 in a three-mile radius.
Kendale Lakes Plaza in Miami, Florida, with a population of 215,000 within a three-mile radius in this strong South Florida market.
Since 2015, Kimco has proactively reduced its overall exposure to Sears/Kmart and has recognized the benefits of recapturing eight Sears/Kmart locations, achieving an average rent spread of 211%. The recaptures triggered the redevelopment of four of those centers, including:
Hylan Plaza in Staten Island, New York, where a former Kmart has been demolished to make way for The Boulevard, Kimco’s $186 million Signature Series redevelopment scheduled to open in 2020, featuring tenants such as Alamo Drafthouse, Marshalls, Ulta, LA Fitness and ShopRite, which replaced Kmart at a rent spread of 727%.
Vermont-Slauson Shopping Center in Los Angeles, California, where a former Kmart was re-leased to Ross Dress for Less and dd’s Discounts for a total rent spread of 748%.
Bayhill Plaza in Orlando, Florida, where a Kmart box was re-tenanted with a PGA Superstore and Ross Dress for Less for a total rent spread of 127%.
Fullerton Plaza in Baltimore, Maryland, where Kmart was replaced by Weis Markets for a rent spread of 191%.