Canadian landlords find new tenants for Target stores
Publish Date: February 09, 2015
Landlords are confident that they will weather Target’s withdrawal from Canada. “Looking at our Canadian operations, our occupancy remains very strong at 96 percent, and we are fortunate to have the full guarantee of Target’s U.S. parent for all nine of our Target stores in Canada,” said David B. Henry, vice chairman and CEO of Kimco Realty Corp., on an earnings call. “Canadian Tire, Costco, Walmart, Home Depot and Metro grocery stores have all expressed interest in some of our Target locations. It is quite possible that we will end up with stronger tenants and a significant financial settlement from Target U.S.A.” Regardless of Target’s lack of success in Canada, property values and prices remain at historic high levels there, thanks to strong demand from pension funds and other institutional investors, he says. Kimco reported strong leasing momentum across its portfolio in the fourth quarter, with leasing spreads of 9.4 percent.
Meanwhile, Canadian landlord RioCan has 26 locations currently leased by Target, representing 1.9 percent of its total annualized rental revenue, at an average lease rate of $6.62 per square foot and an average remaining lease term of approximately 12.7 years. Target U.S. is also guaranteeing these leases for their remaining terms. “Our locations are in strong retail nodes, and while this process will unfold over time, we expect that the interruption to revenue will be minimal, if at all,” said RioCan CEO Edward Sonshine, in a press release. “Ultimately, this could prove to be an opportunity for RioCan.”
Target announced plans to close all of its 133 stores in Canada. Of those, 130 are leased. The chain has already begun liquidation sales that will last 10 more weeks. Target says it expects to be out of Canada completely by early May.