"It's fairly innovative, first because it involves an entire space, instead of carving up smaller spaces," Louis P. Meshon Sr., Kramont's founder and CEO tells GlobeSt.com. "It's also unusual in that we, as landlord, could at some point have a direct relationship with the tenant." He says, "There's a mechanism for that" in the deal he has with Wal-Mart.
Kramont's deal is to sublease the former 122,371 sf discount center at the company's Park Centre in Columbia to Resource Bancshares Mortgage Group Inc. Wal-Mart will convert the discount store, vacant since October of 2000, into a mortgage origination and service center that will house 500 employees.
Kramont will receive about $1.2 million net aggregate additional rent over the term of the lease from Sept. 1 of this year through May 1, 2009.
But Kramont also has an option to acquire Wal-Mart's lease at any time during the balance of the lease term for specified amounts that are tied into an amortization schedule based on Wal-Mart's investment in the transaction, Meshon says.
"Normally, the lease would remain with Wal-Mart, but in this case, Kramont would then have a direct relationship with the subtenant and further increase our annual rental income," he tells GlobeSt.com.
Meshon says the deal is notable not only for attracting non-retail tenants and increasing potential rental pools, but also for reducing the company's exposure to potential volatility in retail markets.
"As far as being a public company, the benefits to investors are that we have an active tenant in that location and secondly, returns can increase as a result of the potential direct relationship," Meshon says.
The deal provides for fixed rentals for Kramont no matter what happens and helps reduce its volatility in the market, Meshon says. He expects to do similar deals in the future.
Kramont, which he started 25 years ago and brought public at the end of 1997, is a self-administered, self-managed equity real estate investment trust that specializes in neighborhood and community shopping centers. The company owns and operates 88 properties with 12 million square feet in 16 states. Meshon expects to double its size within two years.
The company has offices in Atlanta and Virginia and may end up with offices in the Carolinas, which Meshon considers to have similar potential to Florida.
"We are actively seeking acquisitions the Carolinas," he tells GlobeSt.com. "We don't see a slowdown there because, like Florida, it remains a place where people continue to migrate to."
He says, "It has the Research Triangle, it still has a terrific base of employment and a great lifestyle."
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