Kmart officials told GlobeSt.com in December that the firm was negotiatingwith landlords for lowered rents or other trimmings to cut costs at thevarious store sites. A senior Kmart official said that those talks wouldhave a lot to do with which store closed in each state.
Following Tuesday's announcement, various corporations and real estateinvestment trusts told their shareholders how the bottom line would beaffected by the closures. There had been a nearly yearlong warning. Kmarthad declared Chapter 11bankruptcy in early 2002, and had almost immediatelyclosed 284 stores, and had said it would close more in the future to try tostay solvent.
Tuesday, companies such as Malan Realty Investors of Bingham Farms and KimcoRealty Corp. and New Plan Excel Realty Trust of New York all told investorswhat Kmart stores were closing within the company. Malan only had one Kmartthat closed, a 117,791-sf in Milwaukee that brought in about $400,000 ayear. Another 16 properties are still leased to Kmart by Malan. The companyhas so far lost 11 Kmart stores to closing.
Kimco lost nine Kmart stores in the recent round of closings, as well asthree that it owns through a partnership. Already one location has beenleased to Costco. Through the above-mentioned negotiations, Kimco was ableto grant a five-year rent reduction at six more Kmart locations. Sevenproperties that Kimco had formerly leased to Kmart sold for almost $41million, bringing a net gain to the company of about $1 million, said Kimcoofficials, affirming that the company is sufficiently planning for Kmart'stroubles.
Rent reduction negotiations were also successful for New Plan at six Kmartlocations, saving those stores. However, New Plan learned another sixstores, now leasing collectively for more than $2.2 million in Georgia,Indiana, New York and Texas, will be closed in this recent round. AnotherNew Plan lease was rejected by Kmart at the Transit Road Plaza in New York.New Plan had already included a 4-cent per share loss in its previouslyissued earnings guidance to cover the costs of its Kmart closings. The REITstill has 29 Kmart stores still operating.
Laura Mahle, a spokeswoman for Kmart, told GlobeSt.com that most of the 326stores were leased. "We expect to find out from the court Jan. 28 if theclosures are allowed by the bankruptcy court," she said. "Once the storesclose, they will revert back to the landlords." A very minor amount of thestores are owned by Kmart, and will be sold, she said. No details areavailable on those property sales, Mahle said. "These closings will help usmoving closer to being a profitable and financially sound company, making usbetter as a retailer," Mahle said.
Up to 15,000 employees will lose their jobs due to the store closings. Kmartwill have 1,500 stores left across the US, the Caribbean and Guam after theclosures. The company hopes to emerge from bankruptcy by April 30.
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