After an unsuccessful bid to partner with another mall owner to buy Elder-Beerman, Washington Prime posted mostly positive first quarter earnings.
Net income for the first quarter of 2018 was $14 million, or $0.07 per diluted share, compared to $9.3 million, or $0.05 per diluted share, a year ago. The year-over-year increase in net income was primarily attributable to an increase of $8.2 million in net gains related to the sale of restaurant outparcels to an affiliate of Four Corners Property Trust.
Washington Prime owns both the Mall at Fairfield Commons in Beavercreek and the Dayton Mall.
Washington Prime addressed how it plans to combat the after effects of the liquidation of all Elder-Beerman and Bon-Ton Inc. stores, which make up a hefty portion of WP-owned anchor stores. The company feels “pretty good about addressing these stores in a comprehensive fashion sooner rather than later,” said CEO and director Lou Conforti.
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“Since 2015, WPG has completed, commenced or approved 15 department store repositionings ranging between $5 million and $20 million. Most importantly, such projects reflect an average sales volume increase of between two and three times. The liquidation of Bon-Ton Stores was expected, we planned for it and we are currently vetting several wholesale solutions for the 16 stores in our portfolio,” Conforti said.
Tenant driven redevelopment remains one of the company’s “most intriguing value propositions.” Redevelopment efforts include 34 projects currently underway ranging between $1 million and $60 million, with an average estimated project yield of 10 percent, which does not include the derivative impact of the benefit to adjacent space.
Some of these projects include adding breweries and candy stores to Washington Prime malls. Total leasing volume for the core portfolio totaled 1.1 million square feet in the first quarter of 2018. Lifestyle tenancy, which includes food, beverage, entertainment and fitness, accounted for 44 percent of total new leasing activity during the first quarter.
Andrew Feinblatt of Cincinnati-based OnSite Retail Group, said replacing an anchor tenant like Elder-Beerman is difficult. Square footage alone is an issue — as most retailers aren’t looking for massive boxes to lease out right now. Even Target is shifting to more small-format stores.
Still, Feinblatt said he doesn’t think it’s a hopeless situation for local shopping centers. Retailers, especially discount ones like At Home and T.J.Maxx, are still expanding in large spaces. Malls are “being proactive,” trying to bring in more food, drink and entertainment options at their centers, he said.
“It’s about evolution, creativity, it’s an opportunity to get creative to find a solution that appeals to today’s consumer,” he said.
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