Kite Realty Announces Nordstrom Rack Opening In Shenandoah

Retail REIT Kite Realty Group Trust (NYSE:KRG) has announced the opening of Nordstrom (NYSE:JWN) Rack at Portofino Shopping Center in Houston, TX (MSA). The move is aimed at enhancing shoppers’ experience at this property with high-quality merchandising mix.

Specifically, with the occupation of 27,252 square feet of space at this shopping center, Nordstrom Rack joins the cohort of several existing anchors like T.J. Maxx of The TJX Companies, Inc. (NYSE:TJX) , DSW Inc. (NYSE:DSW) , Old Navy of Gap Inc. (NYSE:GPS) and others.

Notably, the Portofino Shopping Center, which is located 30 miles north of downtown Houston in the suburban community of Shenandoah, comes under Kite Realty’s Redevelopment, Repurpose and Reposition (3-R) initiative. The property is slated to benefit from the recent addition of the 13,000 square feet of space which resulted from the construction of two new stand-alone buildings.

With the addition of Nordstrom Rack, the above-mentioned property becomes well poised to draw decent traffic from its affluent neighborhood. In fact, it is close to The Woodlands which has occupied a place in the Top 50 Best Selling Master Planned Communities in the nation.

However, retail REITs have been suffering as mall traffic continues to shrink amid a rapid shift in customers’ shopping preference to e-retail, resulting in an increasing number of retailers joining the dot-com bandwagon. These have made retailers reconsider their footprint and eventually opt for store closures in recent years, while others unable to cope with competition have been filing bankruptcies.

Such an environment has led to tenants demanding substantial lease concessions but mall landlords are finding these unjustified. In addition, when there are substantial store closures in the middle of the lease term, not only are mall landlords hurt but tenants occupying space in the mall are equally affected because their shop visits depend on the mix of specific types of retailers.

Retail REITs are countering these challenges and making concerted efforts to give their properties a facelift through redevelopment, repositioning and improving merchandising mix in an attempt to attract customers. Nevertheless, implementation of such measures requires a decent upfront cost and is hence likely to limit growth in the profit margins of retail REITs in the near term.

Kite Realty is also likely to feel the brunt in the near future. In fact, in the past three months, its shares have declined 23.3% which is wider than its industry’s descend of 10.9%. Currently the stock has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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