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Shopping Centers Today -> October 2002
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LANDLORDS SCRAMBLE TO FILL SPACES VACATED BY AMES
By Ian Ritter
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Many shopping center owners in the Midwest and on the East Coast have spent the past few weeks trying to fill spaces vacated by Rocky Hill, Conn.-based Ames Department Stores.
The discount retailer, which filed for Chapter 11 bankruptcy protection in August 2001, when it closed 125 of its 452 stores, announced this past August that it would shutter its remaining 327 units. The company said at the time that it would take 10 weeks to vacate those locations.
“Many of the Ames locations are located in smaller, less populated markets that will be much harder to fill than some of the vacancies created by other discounters,” said Brad M. Hutensky, co-chairman of ICSC’s Committee on Open-Air Centers and president of the Hartford, Conn.-based Hutensky Group.
Acadia Realty Trust, a Port Washington, N.Y.-based REIT with 32 shopping centers and four Ames stores, is going to feel a pinch, because Ames accounted for $1.2 million, or 2.9 percent, of Acadia’s annual base rent. “I would think any landlord, on a temporary basis, that has Ames — like us — is going to feel pain,” said Jon Grisham, Acadia’s vice president and director of financial reporting. “There’s no doubt there will be some downtime.”
Ames is the latest to go down of a string of regional discount chains hit hard by the growth of more-efficient national chains such as Kohl’s, Target and Wal-Mart. Norwalk, Conn.-based Caldor went dark in 1999, and Bradlees, Braintree, Mass., shut down in 2000.
Last year Ames obtained two agreements to help it reorganize. It received a $700 million loan from Fairfield, Conn.-based GE Capital (which in July split into four separate GE financial services units) and $55 million in debtor-in-possession financing from Kimco Realty Corp., New Hyde Park, N.Y. But all this, plus its decision to close 125 stores in August 2001, was not enough to lift the siege by the other discounters and save the chain from extinction.
Some REITs and other landlords have insisted that the Ames closings will have little effect on them, and they express confidence that they will easily find replacements. Ross Nussbaum, a Salomon Smith Barney REIT analyst, told sct that the companies he covers will probably not be hurt too badly.
“I think that the liquidation of Ames will have a negligible impact on the REIT industry, because most of that hit last year [with the bankruptcy],” he said. He added that Kimco Realty will most likely get back its investment without much trouble.
For its part, Kimco Realty says the eight sites it leased to Ames accounted for 0.4 percent of total base rent, the exact same figure Boston’s Heritage Property Investment Trust cited for its four Ames stores. Federal Realty Investment Trust, Rockville, Md., had two Ames units, accounting for 0.3 percent of annualized base rent.
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Far from being a blow, the departure of the Ames stores will create opportunities for New Plan Excel Realty Trust to lease to other, more stable tenants, said Stacy Lipschitz, vice president of corporate communications at the New York City-based company. Though New Plan does not expect to fill any of the vacated spaces this year, it is in talks with a “variety of tenants,” she said.
According to a Morgan Stanley Dean Witter report, the rent per square foot at Ames sites was below that of Kmart stores. Kmart Corp. filed for Chapter 11 last January.
Matthew Ostrower, a Morgan Stanley analyst, agreed that the Ames closings will have little direct effect on REITs and that a few retailers, such as Bed Bath & Beyond and Wal-Mart’s Neighborhood Market chain, are looking for spaces similar to those Ames is vacating, which average 80,000 square feet. “So far this year there has been pretty healthy demand for big-box spaces,” he said.
But some landlords, especially those whose centers are in low-income neighborhoods or have outdated configurations, could have a hard time replacing Ames, Ostrower said. In general, he observed, it’s never good for landlords when a hole like this opens up in the market.
“It’s just additional supply available, and that’s not positive for the REITs,” Ostrower said. “But it will be impossible to measure that effect.”
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