REITs put Sears in ‘rearview mirror’

Mall landlord Simon, for one, says it is putting Sears in its rearview mirror. “This is a unique opportunity,” Chairman and CEO David Simon told investors. "We're going to generate positive momentum with the properties due to this. We're going to be able to drive traffic now from this box." The Simon portfolio currently contains 33 Sears stores. Simon owns 17 of those, and they will all be demolished, replaced and redeveloped by 2019, the executive says.

Sears Holdings says it will close 142 unprofitable stores by the end of the year as part of its Chapter 11 bankruptcy protection filing. 

Regency Centers, meanwhile, says it anticipates that the impending closures will hurt occupancy and leasing growth only temporarily. “While these bankruptcies will certainly impact near-term results, more importantly, the remerchandising and redevelopment opportunities triggered by recapturing this real estate will positively impact our shopping centers over the long term,” said CEO Hap Stein, on the firm’s third-quarter earnings call. 

“We have two Kmarts and one Sears location,” Stein said. “Two of these locations were included on the initial closure list, both of which are redevelopment opportunities that we are excited to finally unlock. All three are located in grocery-anchored shopping centers where grocery sales average over $950 per square foot. Average rents on these locations are less than $8 per square foot.”

Meanwhile, Kimco Realty raised its outlook for 2018 based on its successful redevelopments and re-leasings of former Toys 'R' Us spaces during the third quarter. The company has leased up 13 of its 21 recently vacated Toys 'R' Us stores to off-price, furniture, hobby, fitness and entertainment tenants, according to CEO Conor C. Flynn.

Flynn says he anticipates similar interest in the portfolio's Sears stores. “The recent Sears Holdings bankruptcy should provide Kimco with the long-awaited opportunity to reposition our 14 remaining Sears Kmart locations, which are significantly below market,” said Flynn. “And while these boxes account for only 60 basis points of our total average base rent, we have been proactively marketing these locations and are ready to recapture them and start to create value.”

The company told investors it now expects its full-year 2018 NOI growth guidance to range somewhere between 2.3 and 2.7 percent, up from the previous projection of between 2 and 2.5 percent.