Week in review: Kimco’s post-merger strategy for Weingarten and more from this week

Kimco’s post-merger strategy for Weingarten

Kimco Realty plans to ramp up leasing and ground lease deals in the 100 million-square-foot portfolio created by its $3.87 billion acquisition of Weingarten Realty, executives told investors on a conference call about the merger agreement. The deal creates a pool of 559 open-air, grocery-anchored shopping centers and mixed-use properties across major U.S. markets.

Executives said the low cap rate placed on the deal, in the high-5 percent range, reflects the growth potential unlocked by combining the two portfolios. That growth will be achieved by moving new, more profitable and successful tenants into spaces vacated by tenants driven out of business by the pandemic. “Though it’s a spot cap rate, you’ve got visibility into what we intend to produce,” said Kimco CEO Conor Flynn, who will serve as CEO of the combined companies. “The pandemic removed the weakest credit tenants from our rent roll, and we have a chance to replace them with new, omnichannel tenants that will drive NOI growth.”

In many markets, Kimco will have denser concentrations of properties and increased clout when negotiating with tenants. The Fort Lauderdale-Miami region, in particular, “is a very exciting and powerful combination,” Flynn said.

Don’t expect Kimco to ramp up development now that it’s an even bigger company, he said. Instead, expect the company to execute more ground leases on properties it already has entitled. The approach allows Kimco to benefit financially without sacrificing its balance sheet, Flynn said. “What we’ve been thinking about is how to activate the entitlements, how to make sure that we don’t take on too much risk and that we continue to focus on [funds from operations] growth.” Also don’t expect the company to unload excess properties from the deal. “You won’t see a meaningful disposition program because it’s already been done,” he said.

Apparel sales look ready to burst. Which brands will benefit?

“I’ve got nothing to wear!” The climb out of the pandemic has only just begun, but consumers are ready to refresh their closets, just in time to give struggling apparel sellers a burst of business. According to an advance estimate from the U.S. Census Bureau, clothing store sales climbed 101.1 percent year over year on a seasonally adjusted basis in March, besting by far the 15.4 percent overall increase in U.S. retail sales minus motor vehicles, auto parts and gas for the month.

Consumers may need new clothes because they’re visiting new places: The only year-over-year decline recorded by the Census Bureau was at food-and-beverage stores, for which sales fell 11.8 percent, but sales at food-and-beverage service establishments increased by 36 percent year over year.

Other signs indicate apparel shopping patterns may be returning to normal after the pandemic. Weekend visits at clothing and accessories stores tracked by location analytics firm Placer.ai increased 10 percent from the fourth quarter 0f 2020 to the first quarter of 2021.

According to Placer.ai’s latest Apparel Index, several retailers that sell apparel posted big year-over-year foot traffic growth during the first quarter, including T.J.Maxx, up 22 percent, and Hibbett Sports, Maurices and Dick’s Sporting Goods, each up 17 percent. Not every player saw sales growth, however. JCPenney saw the biggest year-over-year decline in foot traffic during the first quarter, at 20 percent. Macy’s was down 16 percent, Dillard’s was down 11 percent and Gap stores were down 8 percent, according to the report.

At American Eagle Outfitters’ namesake stores and Aerie lingerie stores, the retailer said, sales are outpacing expectations thanks to government stimulus, increased consumer optimism and pent-up demand. Meanwhile, value apparel retailer CitiTrends said first-quarter sales are up 145 percent compared with before the pandemic.

This time last year …

SCT’s top stories as the world was coming to grips with the pandemic a year ago this week:

Retailers' latest moves: Curbside pickup, dark stores, shopping reservations and more
Washington Prime launches online marketplace for tenants in closed centers
How COVID-19 testing sites landed in two California mall parking lots
Smart restaurants are prepping for new normal
Investors gauge safety of net lease sector amid COVID-19 uncertainty
Communication technologies put to work during COVID-19
Nebraska Crossing wants to be benchmark for retailer reopenings

Philadelphia development visionary Ron Rubin has died

ICSC member and former trustee Ron Rubin has died at the age of 89. He worked at his family’s firm, The Rubin Organization, for decades until PREIT acquired the firm in 1997, making Rubin chief executive of the merged companies. Under his leadership PREIT purchased Center City Philadelphia’s Gallery at Market East, now known as Fashion District Philadelphia, and burnished PREIT’s portfolio of top-tier suburban malls. Rubin remained PREIT’s chief until 2012, when Joseph Coradino assumed the role. Contributions in memory of Rubin can be made to the Abramson Cancer Center.

4 retail property transactions to note

A single-tenant, 3,250-square-foot property leased to Levain Bakery at 3131 M St. NW in Washington, D.C., traded for $8.25 million. The location, which opened in 2020, is the first outside the New York City region for the popular cookie bakery, whose first store opened in 1995. At just over $2,538 per square foot, this transaction marks the highest price per square foot for an urban retail property in Washington, D.C., for the past 10 years, according to CoStar. SRS National Net Lease Group represented the buyer, as well as the seller, a local investor specializing in stabilization of distressed real estate. SRS National Net Lease Group senior managing director Rick Fernandez called the property “a perfect example of the new, pandemic-driven demand for quick-serve, low-contact dining choices.” He said: “The prime, urban, street-level storefront with a sidewalk full of pedestrians provides predictability of the income stream for the investor.”