Kmart Vacating 1.6M SF in Florida

Kmart store staffers in the Leesburg, FL and Orlando stores scheduled to close tell GlobeSt.com on condition of anonymity the average store size in Florida, including the Big Kmarts, is 100,000 sf with average full-service rent of $15 per sf. That would place the annual rent among the 16 Florida stores scheduled to close at a total $1.6 million. Kmart has 28 stores in Central Florida.

Based on $15 per sf rent, Kmart's total 284 store closings nationally will mean an estimated annual rent savings of $426 million.

In previously published reports, Kmart lawyers reportedly told U.S. Bankruptcy Judge Susan Pierson Sonderby in Chicago closing the 284 stores will save the Michigan corporation a total $550 million this year and $45 million per year beginning in 2003. Sonderby is scheduled to hear Kmart's formal request to close the stores at a March 20 hearing. The stores will remain open until then.

At that time, Kmart could agree to continue paying rent on some of the locations as it prepares its reorganization plan that could envision opening certain stores once the plan is approved by the court, according to Orlando bankruptcy lawyers familiar with comparable Chapter 11 filings.

The Florida stores are at 12151 East Colonial Drive, Orlando; 1715 North Citrus Blvd., Leesburg, FL; Miami (11905 SW 152nd St); Deerfield Beach; Destin; Indian Harbor Beach; Lake Wales; Live Oak; Marianna; Naranja; New Port Richey; Okeechobee; Palm Bay; Port St. Lucie; Punta Gorda; and Sunrise.

For most property owners, Kmart's plans to shut the lights at 284 locations will mean an unexpected cash flow crimp on previously projected annual revenue pro formas on their properties. Kmart's store closings may also mean that property owners may reconfigure their buildings into smaller units to expedite a faster leaseup, area brokers and construction industry estimators tell GlobeSt.com.

"Building owners will have to be flexible and realistic in this situation and in these economic times," Dean Fritchen, senior associate, Arvida Realty Services Commercial Division, Winter Park, FL, tells GlobeSt.com.

"In better (economic) times, they probably could hold out for awhile, looking for that single big user to fill their property. But in these highly competitive times, waiting for a single 100,000-sf tenant could be a long and costly wait. Renting out the property quickly to a half dozen smaller tenants may be more practical and profitable."

Kmart filed for protection from creditors under the U.S. Bankruptcy Code in Chicago on Jan. 22. The company listed assets of $2 billion and liabilities of $17 billion. The largest creditor is Bank of New York, acting as trustee for holders of notes worth $2.4 billion. J.P. Morgan Chase bank is owed $1.5 billion.

Other large creditors are Martha Stewart Living, $13 million; and Dallas-based Fleming Cos., a national food distributor and grocery wholesaler, $78 million. In Orlando, Kmart owes electronics manufacturers Recoton Corp. of suburban Lake Mary, FL, $7 million.

Kmart stock on the New York Stock Exchange closed March 8 at $1.29 per share, up five cents from $1.24 on March 7. The stock's 52-week high-low is $13.55 and 66 cents.