SPOTLIGHT: KIMCO’S NORTHEAST REGION
A LOOK AHEAD: Redevelopments are being planned and executed throughout the Northeast region, including at The Boulevard, formerly known as Hylan Plaza.
Stretching from central New Jersey through New England to the state of Maine, the Northeast region has long occupied a special place in Kimco’s portfolio. This is a coveted and challenging market for commercial real estate; the region is extremely competitive, highly desired by retailers, and populated by a shrewd and sophisticated tenant base. In our experience it has been fertile ground, with successes in the recent past signifying promise for continued growth.
The Northeast is Kimco’s third largest region, yet it runs second only to our Western region in total revenue for the company. Our assets in the territory are currently comprised of 118 properties spanning some 13.5 million square feet. Nearly half the assets are situated in New York’s metropolitan area (the city’s five boroughs, plus Long Island, Northern New Jersey, and Southern Connecticut), with the balance spread throughout New England with a strong concentration around metro Boston. Our Northeast team is based in Kimco’s corporate headquarters on Long Island, and we operate a satellite office in Newton, Massachusetts. These bases help to provide our personnel immediate access to our properties throughout the Northeast.
A uniquely attractive set of characteristics keeps demand high and properties at a premium. Many parts of the I-95 corridor have high barriers to entry, and the core of Kimco’s Northeast region follows the Interstate between New Jersey and New Hampshire. Located in this stretch are New York and Boston, where populations are dense and household incomes run above national averages, adding another incentive to having a robust property portfolio. The core of Kimco’s Northeast region is centered throughout this segment of the Interstate, where we consistently see above average rent growth and high occupancy rates. From here we are enjoying some of the company’s proudest success stories. It’s a mature market and it remains an ongoing target for acquisitions.
Retailers are also looking to strategically expand or break into the Northeast region. The Fresh Market targeted the area a few years ago to expand its footprint and after several years, now has a handful of stores. In our Wayne, New Jersey asset, we recently signed a lease with Floor & Décor, a national flooring and home improvement tenant. This will be one of their three first stores in the Northeast. Other retailers opening stores in the Northeast corridor include European retailer Primark, Cost Plus World Market, Stein Mart, QuickChek, and many smaller franchise concepts and specialty/ethnic grocers.
Kimco’s commitment to developing the region most recently culminated in the purchase of an extensive portfolio primarily in the Boston Metro area. As reported here (Booming in Boston), the 24-property deal closed at the end of April and features a tenant mix ideally suited to our focus on grocers, necessity-based retailers, and discount stores. At 1.4 million square feet and nearly 100 percent occupied, the purchase is currently the crown jewel of our Northeast portfolio. We detected a great deal of untapped value during the underwriting process, and the purchase has already exceeded our expectations. Shortly after the deal was closed, our talented leasing team was able to pick some low-hanging fruit which increased the NOI, and thus added about 50 basis points to the portfolio’s acquisition cap rate. The portfolio continues to perform brilliantly, and we’re increasing value with renovations, expansions, and several planned mixed-use redevelopments. It has been the gift that keeps on giving.
As we continue to explore new opportunities, we’re also keenly aware of the need to align the entire Northeast portfolio with Kimco’s broader vision. Our strategy is not simply to increase square footage unilaterally but to increase value by emphasizing high-quality assets in supply constrained markets with good long term NOI growth. The evolution of this region is actually a great example of strategy in motion.
Not long ago, our presence in the Northeast was scattered. Kimco had product in upstate New York, central New Hampshire, Vermont, northern Maine, and western Connecticut. But those properties, along with their muted NOI growth and secondary market locations no longer fit our market profile. We’ve since disposed of many of those assets and thus improved the quality of our portfolio. It is more concentrated in terms of location, product type, and quality. We have established a narrower geographical focus along the I-95 corridor and a tighter product focus on retail. We know our strengths, and we play to them. Ultimately, the transformation of this portfolio has emerged from recognition of what we do well.
Concurrently, redevelopments are being planned and executed throughout the region. On Staten Island in New York, we’ve just begun the redevelopment process at our Hylan Plaza on Hylan Boulevard. Our reconfiguration of the center, coming in 2017, will feature additional GLA in a dual-level retail format with high-end anchor tenants including grocery, outlet retail and entertainment. Also in the New York metro area, we’re renovating and adding additional GLA to several of our Long Island assets as well as adding a grocery component to one of our New Jersey assets in North Brunswick. Up in Boston Metro, we’re exploring high density, residential mixed-use developments at two properties acquired with the April purchase. We’re also exploring the addition of multi-story residential to our asset in Flushing, New York.
Adding residential is an intriguing concept that may be especially well suited to the Northeast. Economically, residences add density and thus additional income to a site. And from a practical prospective, being able to live, work, and shop on the same property can be a great convenience for residents and a tremendous benefit for owners. Not only in the cities but in their outskirts, there is a shift toward downsizing as consumers seek urban lifestyles. The heavily populated areas around New York and Boston are being shown to be ideally situated for mixed-use development.
In the near and distant future, we’ll advance the transformation further. Because it’s an exceptionally competitive region filled with well-informed clientele, we will spend a great deal of time nurturing existing and new relationships to source off-market deals for new acquisitions. Additional focus will be targeted towards our existing leasing team to lease space to high-quality tenants and operate our portfolio to its fullest potential. We will continue to do what we do best, which is to operate a best-in-class portfolio, seeking to increase occupancy, and grow NOI. Our aim is continue in this progressive, creative direction and add strength to our Northeast portfolio year after year.