WEST FARM REDEVELOPMENT CROSSES MILESTONE, BUT OPPORTUNITY REMAINS
Redevelopment continues to be one of Kimco’s major value creation strategies. We are excited about our redevelopment pipeline that invests resources back into our real estate. The rewards of redevelopment go much further than the key metrics of value creation, solid returns on our investment, and higher occupancy rates. The sales performance of our retailers strengthen, renewal rents grow, retention improves, and new opportunities arise. In short, redevelopment ensures the viability of our assets now and reinvigorates them long into the future. Our redevelopment project at West Farm Shopping Center in Farmington, Conn., is a prime example of the many benefits of this strategy.
West Farm was built in 1978. The 185,000-square-foot property is centrally located within the state along the intersections of Route 9 and I-84. This superregional retail hub is anchored by the adjacent Westfarms Mall that drives further traffic to the area. Farmington is part of the affluent area known as the Farmington Valley, which has the highest income zip codes in Central Connecticut.
But during the height of the financial crisis in late 2008, like many other shopping centers across the country, our asset was being stress tested. Linens ‘N Things filed for bankruptcy and closed its doors in August of that year. Although the Linens ‘N Things lease was guaranteed by a creditworthy entity, we still faced the challenge of filling vacant anchor space at a time of muted leasing activity. Three years later, Borders filed for bankruptcy and closed its doors. Less than 60 percent of the center was occupied at the time.
Although initially the situation did not seem ideal, there was excitement about the project for three compelling reasons. We had great real estate, we had a fully executed Nordstrom Rack lease for the Linens ‘N Things space, and we had an experienced team ready to capitalize on the redevelopment opportunity.
By spring of 2012, the project launched with the opening of the state’s first Nordstrom Rack, shortly followed by the opening of two more national tenants, The Children’s Place and Panera Bread. And this August, nearly five years after Linens ‘N Things closed, LA Fitness opened as the final pillar of our redevelopment effort.
The results of the redevelopment project are noteworthy. The center is now 98 percent leased, filled by nearly all national tenants. Rents of replacement tenants during the redevelopment phase are up 29 percent on a weighted average basis over their predecessors. Sales are up on average 8.0 percent year over year (for tenants that report sales), surpassing that of U.S. retail sales (excluding autos), which increased 4.8 percent in the same time. And we’ve renewed over 23,000 square feet during this period with renewal rents up 33 percent versus the then existing contract rents.
We continue to see opportunity to add value to West Farm through renewals, new tenancy, and right sizing. Most notably, we are working on a project to right size Sports Authority by creating a 10,000-15,000-square-foot junior anchor that complements the rest of the tenancy. We also have one remaining vacancy of 4,100 square feet that we are working on.
Momentum is strong at West Farm, and we have a positive outlook on the outcome of this redevelopment project. We’ll leave you with before and after photos of the center, as well as its site plan and aerial.