VOL. 122 | NO. 39 | Thursday, March 1, 2007
Former Kmarts, Cordova Shopping Center Have New Options With New Plan
By Andy Meek
When New Plan Excel Realty Trust Inc. and Sears Holdings Corp. set up a joint development venture in 2005, the venture's first deal involved transforming three former Kmart stores in Memphis.
Sears had closed the stores in 2005, citing their under-performance. Since then, Sears' partner in its development venture - a New York real estate investment trust (REIT) with assets of about $3.5 billion - has more than lived up to its name.
New Plan Excel Realty recently has signed leases, for example, with at least two new tenants at the old Kmart site in Cordova. An 80,000-square-foot Burlington Coat Factory opened at the former Southaven Kmart in September.
And while they were at it, New Plan executives also sunk about $42 million into The Commons, a Memphis shopping center across the street from Wolfchase Galleria that the company bought in December.
The appropriately named REIT thus is bringing what its name suggests - a new plan - to several large-scale commercial properties in Memphis.
The acquisition of The Commons, tenants of which include Circuit City and Home Depot, was announced in New Plan's fourth- quarter earnings report released last week. Company executives had been scouting the center with an eye toward buying it at least as early as October, when they visited with employees at a few of the stores, inquiring about everything from shopping trends to safety at the shopping center.
New Plan announced Tuesday it was being acquired by Australia-based Centro Properties Group - a shopping center management and development company - in a deal valued at $6.2 billion.
Blue-light special no more
Meanwhile, New Plan's redevelopment of the three former Kmart sites has been in the works for more than a year and is coming closer to fruition.
Within the past few weeks, New Plan spokeswoman Stacy Slater said two tenants have signed leases for the former Kmart site at 1245 Germantown Parkway.
Hastings Entertainment Inc., a retail chain whose more than 150 stores offer books, CDs, movies, video games, DVD rentals and accessories ranging from iPods to lava lamps, signed a lease for 25,000 square feet at that Cordova site.
Red Robin Gourmet Burgers, a dining concept that has about 330 locations in the United States and Canada, also will occupy an outparcel there.
"I think they were smart," said Danny Buring, managing partner at The Shopping Center Group Inc., referring to the venture between Sears and New Plan.
Billionaire investor Eddie Lampert, chairman of Sears, merged the company with Kmart in 2005.
"The thing about the Kmarts here is that this thing was a merger of two of the biggest retailers, but it also was a merger of two of the largest real estate owners," Buring said. "New Plan trying to turn the situation around (for Sears) was smart, and I'm assuming theirs is a bigger-picture plan than just the three stores in Memphis."
That last comment was also a thought that New Plan CEO Glenn Rufrano alluded to in the company's third quarter 2005 earnings conference call.
"We would like to do more," he said, referring to the three Memphis-area Kmarts. "That will, I think, be subject to a couple of things. Our performance ... if we perform well on the three projects that we have with (Sears), I think we can get more projects and work with them in the future."
Options to consider
For now, New Plan is responsible for touching up, managing and leasing the three Memphis-area Kmart stores. Rufrano suggested several possibilities for the properties in 2005, including using only portions of the shuttered storefronts, building them out or demolishing them and just building an entirely new center.
"These are sites that range from 18 to 26 acres," Rufrano said at the time, "that will be developed into neighborhood shopping centers."
An example of what New Plan has in mind can be found at the former Cordova Kmart. New Plan has talked with Oklahoma-based America's Incredible Pizza Co. to bring one of that company's signature all-you-can-eat buffets and recreation centers to that site.
To get an idea of what the franchise's concept is about, think Subway - but with Italian food - mixed with miniature golf, a bowling alley, go-karts, bumper cars and video games, all under one retail roof.
Hastings Entertainment and Red Robin, meanwhile, both have snapped up outparcels there.
Hastings Entertainment closed out 2006 with a market capitalization of $73 million. In November, the Texas-based retail chain also unveiled a new store prototype that boasts a larger product selection and new in-store departments.
In the late 1990s, according to the trade publication "Shopping Centers Today," Hastings began phasing in a new store layout that measured about 20,000 square feet and carried $1.2 million worth of merchandise.
Red Robin's signature product, as its full name suggests, is gourmet burgers, as well as all-you-can-eat steak fries. The chain was founded in Seattle in 1969.
New Plan generally announces details of its acquisitions in earnings reports, which is where information about its most recent Memphis purchase can be found. The company bought The Commons from Estein & Associates, a Florida-based firm that paid $34.8 million for the shopping center, in 1997. New Plan's sale closed Dec. 21.
"(This was) a long process, but we have cracked something here," Rufrano said during the earnings conference call. "We truly believe that (Sears) is a real estate-rich company that will someday harvest their real estate. We are now in a position to help them harvest it."