Shopping centers with Kmart Corp as a tenant may face empty stores and lost rental income amid growing fears the retailer may be forced into a bankruptcy filing or to shut many stores as it struggles for survival.

Kmart, which has recently been battered by falling earnings, ratings downgrades and a plunging share price, is expected to shutter at least 250 to 300 of its 2,100 stores in the United States.

Finding replacements for beleaguered retailer Kmart Corp.'s stores should not be hard for landlords but they are unlikely to get the same price as they would have to offer lower rents to attract new tenants, analysts say.

Prospective tenants would include other discount retailers like main competitor Wal-Mart Stores Inc. and Target Corp. or home improvement stores like Home Depot Inc. or grocery stores like Safeway Inc. , said Ross Nussbaum, retail real estate analyst at Salomon Smith Barney.

"There's really a fairly wide universe of users out there who could take the space," said Nussbaum. "This is pretty raw space. It's really just a matter of a paint job and some new fixtures and lighting and you're there."

Whether the landlords can maintain rents may be the hard part.

"That's the million dollar question," Nussbaum said. "(Maintaining the rents) depends on the location, the age of the asset and the competition in the market."

SHOPPING CENTER OWNERS HIT

On Tuesday, Salomon Smith Barney cut its rating on shopping center owner Kimco Realty Corp. to "neutral" from "outperform" on fears that it would have to re-lease empty Kmart stores at rents below those it currently gets from Kmart. About 13 percent of Kimco's rents come from Kmart.

Shares of Kimco fell $1.18, or 3.7 percent, to $30.37 on the New York Stock Exchange Tuesday. The stocks fallen about 4.7 percent in the last week.

Other shopping center owners that have Kmart as a tenant include Glimcher Realty Trust and Developers Diversified Realty , who have both played down their reliance on the discount giant. A little more than two percent of its rents come from Kmart, Glimcher said in a statement last week. Developers Diversified said last week 2.8 percent of its rents come from Kmart.

Shares of Glimcher fell 3 cents to $17.72 on the NYSE Tuesday and shares of Developers Diversified fell 14 cents to $18.52. Glimcher stock has dropped about two percent in the last week, while shares of Developers Diversified are about flat.

Other property owners who could be left with empty stores include Malan Realty Investors Inc. . Last week Fitch said it affirmed its "AAA" rating on Malan Mortgage Securities after it downgraded its rating on Kmart.

Shares of Malan fell 1 cent to $5.96 Tuesday. The stock has fallen almost two percent in the last week.

HOPING FOR WAL-MART

Shopping center owners may be hoping to lure Kmart's main competitor Wal-Mart, but it is not a sure thing. Kmart is the No. 2 U.S. discount chain behind Wal-Mart.

"Wal-Mart's become the obvious hope," said John Roberts, REIT analyst at J.J.B. Hilliard, W.L. Lyons. "Any company that lost a Kmart may want to replace it with a Wal-Mart.

The Kmart stores, however, may not be big enough to house a Wal-Mart, analysts say and Wal-Mart is unlikely to move into a shopping center if it already has a store nearby.

Another option is carving up former Kmarts into three or four smaller stores to attract tenant's who cannot fill the large spaces Kmart usually occupies.

If Kmart does not file for bankruptcy but does decide to close stores, it faces two options on its real estate. It can either pay the rents and leave the space empty or it can sublease the space to other tenants.

Kimco owns 13 Kmart stores that are currently empty even though they still must pay the rent, said Merrill Lynch REIT analyst Steve Sakwa. It would rather have a tenant whose store is open in the space even if it meant a lower rent, he said.

"It doesn't do them any good, there's no foot traffic, Sakwa said.

But with their current problems, Kmart may choose to sublet stores at a discount so they aren't forced to pay the full rent for space they are not putting to use, he said.

"Perhaps given their financial troubles (Kmart) will either close stores via bankruptcy or be more willing to sublease stores to other tenants just to get off the hook," Sakwa said.

If history is a guide, the shopping centers should be able to weather the Kmart storm even if it does file for bankruptcy, said Lou Taylor, REIT analyst at Deutsche Banc Alex. Brown, pointing to their survival after shopping center anchors Bradlees and Montgomery Ward both declared bankruptcy after a lackluster holiday season in 2000 and shut their doors for good.

"It's a very fluid environment," Taylor said. "Everyone was very concerned last year with the liquidation of Bradlees and the liquidation of Wards. What proved to happen was that a number of other formats stepped in and took their place."