Kimco's Mill Station Development Now More Than 75% Preleased

Retail REIT Kimco Realty Corp. (NYSE:KIM) is experiencing decent demand for its Mill Station Signature Series Development project. In fact, recently, the company announced addition of a number of retailers to its tenant lineup at this project, including Lowe’s Home Improvement (NYSE:LOW) , Marshalls, TJX’s new HomeSense concept, Burlington and Five Below (NASDAQ:FIVE) .

With these retailers joining Costco (NASDAQ:COST) and AMC Theatre in the tenant roster, the company has been able to achieve more than 75% of preleasing for this $108-million Signature Series development project. The shopping center is being constructed on the site of the previous Owings Mills Mall in Baltimore County, MD. While Costco is slated to open later this year, the other retailers are likely to open their stores throughout the first half of 2019.

Spanning around 620,000-square-foot of space, the Mill Station development will have a dynamic line-up of up to 30 retailers and restaurants. It will have retail outlets and offices interconnected through an extensive walkway network.

The property is likely to command more attention since it is easily accessible, backed by its favorable positioning directly off I-795 and next to the Owings Mills Station stop on Baltimore’s Metro SubwayLink. The site also boasts favorable demography, with a population of 167,000 in the surrounding five-mile area, having average household income of around $95,000. As such, mall traffic is likely to be high and the property is expected to witness decent demand from tenants.

Admittedly, a rapid shift in customers' shopping preferences to online channels has jeopardized traffic flow in malls. In fact, with e-commerce grabbing market share from brick-and-mortar stores, retailers are compelled to reconsider their footprint and eventually opt for store closures, while others unable to cope with competition have been filing bankruptcies.

Amid these, tenants are also demanding substantial lease concessions, which, however, mall landlords find unjustified. Such an environment has cast a pall over retail REITs including Simon Property Group Inc. (NYSE:SPG) , GGP Inc. (NYSE:GGP) , Kimco Realty and others, and the companies’ share prices have been suffering for the past 12 months.

Nevertheless, Kimco is countering the tepid scenario, and the company’s 2020 Vision envisages the ownership of premium assets in major metro markets in the United States as well as a reduction of its non-core portfolio. Particularly, the company is aimed at improving its portfolio mix with development and redevelopment efforts, and experiencing decent demand from high-growth category retailers, including off-price and home improvement.

However, in line with its 2020 vision, the company is making substantial dispositions. While such efforts are encouraging for the long term, the dilutive effect on earnings from high disposition activity cannot be averted in the near term.

Kimco currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s shares have appreciated 7.4% in the past month compared with its industry’s growth of 2.2%.



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