A big-box tenant vacates, now what?

When Kmart opted last fall to terminate its lease at McCain Plaza in Little Rock, Ark., the discount retailer left behind a 90,000 sq. ft. stand-alone box. That posed a dilemma for Cleveland-based Developers Diversified Realty, a REIT and owner of the 294,000 sq. ft. center that opened in 1991.

Jim Blair, project manager for Developers Diversified, and his team conducted a series of pricing exercises over a four-month period in an attempt to figure out what type of tenant mix would add the most value to the shopping center anchored by Burlington Coat Factory, Cinemark and T.J. Maxx.

Blair ultimately decided that the best move financially for the company was to tear down the existing box and start fresh rather than try to find prospective tenants for the existing space. A 25,500 sq. ft. space for Bed, Bath & Beyond will be delivered Aug. 14. Developers Diversified is negotiating with two other prospective tenants, possibly a sporting goods store and an office supply store, to fill out the balance of the project.

Last year, Developers Diversified, completed 10 redevelopment projects at an aggregate cost of $16 million and had five additional projects under construction at a projected cost of $4.2 million. The company's portfolio includes approximately 230 shopping centers in 41 states, totaling 57 million sq. ft. of GLA.

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