This column, Strolling the Agora, will continue to be written as the mood hits, even though Shopping Center Digest has ceased publication
By Murray Shor
At first glance, the fact that internet sales are booming should have a crushing impact on future dealmaking, already staggered by record-setting vacancies and lackluster leasing and development. This is despite the fact that many soothsayers are seeing signs on the horizon of improvement across-the-board-- and they expect positive holidays sales due in part to the early start of door-busters and deep discounting right after Thanksgiving Day celebrations.
First the hard facts. E-commerce spending is expected to jump 13.7% this quarter up to $51.4 billion. Certainly for many consumers and for many types of merchandise, there are distinct advantages over buying at the store.
The shift from brick-and-mortar to the internet by shoppers, according to some analysts, is to avoid the hassles of crowded malls, long waits, lines at the checkouts, and battling others for very popular “hot items,” the early AM or late-night hours for “special deals,” and the increased stress of limited “deep discount” merchandise in high-demand.
And, they point out, many of these deals are available only on the internet, top retailers are offering free shipping to home or convenient store locations, and free shipping for returned merchandise.
Though many retailers are predicting record sales at the stores beginning late Thanksgiving Day, as many consumers are opting out of battling Black Friday frenzy in favor of hitting their keypads and picking up the deals without stirring out of their homes.
And then, others point to the latest technology being used to drive customers to the stores. “Top retailers like Target, Toys ‘R’ Us, for example, are using new apps on Iphones that enable savvy shoppers to download coupons and sales flyers that are redeemed in the stores,” said one consultant. “It’s all about using every vehicle available to sell merchandise”
To some dealmakers in the industry, the opposing effort to enable customers to shop from home and avoid the stores, could hamper future leasing efforts by reducing the need for brick-and-mortar outlets.
Different Approach
However, one seasoned veteran takes a different approach. “We are so deep into the fecal quagmire which is our current and ongoing economy that it’s impossible to isolate any one factor as an impacting reason for a hit on sales.”
He pointed out that he is currently leasing “a well-located strip center adjoining a new Walmart Supercenter…and a forecast of growing e-commerce will not change my leasing efforts.”
Another leasing executive stressed that “we are constantly improving our language in the lease terms. We had a problem involving overages, for example,” she explained, “where some retailers were deducting from store sales merchandise bought over the internet that were returned to a local store. So we’re defining and refining this area.”
One leading broker in the Mid-Atlantic region said he’s already seen an increase in retail deals over the last month or so. “Granted,” he said, “we’re talking of a small number, but when there had been almost zero deals before, even a little uptick in the last quarter—and compared with last year—is a sign for joy.”
One landlord expanded on the problems of definition in a lease clause when it comes to defining and apportioning online sales. “If we grant any tenant the right to terminate a lease because of tenant’s inability to exceed a particular sales threshold, we require that the definition of ‘sales’ includes online revenue derived from zipcodes.”
Optimistic Future
“Yep, we’ve been going through the toughest period I’ve ever seen in some 40 years,” said one West Coast leasing rep. “But I’ve also been hitting a few dealmaking events around the country and there is a growing optimism for the future of this industry.
“You can’t deny there is an impact from online retailing. But even the strongest proponents of e-commerce admit that there’s no replacement for getting the customer into a store, having the opportunity to take advantage of impulse buying, of the advantages of touching the merchandise, trying it on, instant gratification. You’re never going to get this same impact from a computer and 2-dimensional pictures.”
A New York-based owner with close to 100 neighborhood centers around the country, who has recently acquired several properties, was extremely upbeat on mainstream shopping. “We’re constantly in a state of flux. One period we were all rushing to the suburbs, now there’s a trend to in-fill closer to main population centers, and even into the CBDs of cities. I look at the demographics and the projections showing steep growth, and I can’t see but a strong demand for more stores and centers—once we get out of the economic slump and the high unemployment. Internet sales, just another challenge that we can and will cope with.”
Wednesday, November 24, 2010
Monday, October 25, 2010
To Reach New Customers, Discount, Outlet And Off-Price Retailers May Soon Be Expanding Their Criteria To Make Deals
This column, Strolling the Agora, will continue to be written as the mood hits, even though Shopping Center Digest has ceased publication
By Murray Shor
Just two months ago we highlighted the trend of more luxury retailers seeking cost-conscious shoppers by looking for stores in areas and locations they once avoided, the outlet shopping centers, and secondary and tertiary markets.
And we stressed that this relatively minor niche of less than 220 projects, by some estimates, is dwarfed by the number of over 100,000 mainstream malls and centers that encompass the shopping center/retail chain world of the US and Canada. To make an impact in this market, retailers must deal with the two main landlords responsible for the bulk of these centers: Simon Property Group with its Chelsea division and Tanger Factory Outlets.
Yet a new approach being taken by one of the poshiest of merchandisers, Neiman Marcus, has the potential to bring this type of retailer into almost every local market available. It could expand opportunities even to every deal-hungry broker in the field.
First, what Neiman Marcus is doing. It is starting a new spinoff of outlet stores to be called Last Call Studio with lower-priced merchandise that never was being sold in its Last Call outlet stores. This outlet merchandise may still be too expensive for many customers. So, the Studio stores will carry clearance goods from its mainstream stores, namebrand apparel, and lower-end merchandise ordered from vendors specifically for these units.
The first protoype store—about half the size of a more traditional unit-- opened recently in Dallas, with others in Rockville, MD, and Paramus, NJ.
Possible Locations
Targeted as possible locations for this division will be suburban areas and strip centers, storefronts, possibly even vacant downtown locations that could never attract luxury retailers because the numbers never added up. However, with high-end shoppers heading for the outlets and discounters—which may still carry too high a ticket for many moderate households—and the reduced clearance merchandise and inventory available from many liquidators and vendors who have cut back on manufacturing, there is pressure to find customers willing to spend limited income for quality merchandise with a high-end label.
As one highly-regarded consultant stressed: “From a modest out-of-sight, out-of-mind liquidation tool, it has now really morphed into a strategic and financial necessity for these companies.”
Another maven pointed to the recession and the insistence by shoppers for even more value-oriented merchandise.
Other luxury retailers, such as Nordstrom, Saks 5th Ave, Lord & Taylor, Bloomingdale’s, and the like, have been operating outlet stores for years, or have recently entered this market.
Great Potential
“Looking at the decision by Neiman Marcus to follow the consumer to where she lives—rather than wait for her to drive an hour or so and make a day of outlet shopping,” one leading broker pointed out, “opens up a great potential for dealmaking. Many brokers have specialized in finding tenants for Moms and Pops, for local operators within a limited market to fill vacancies in very local strip centers. They may never have made a call on a luxury retailer.
“Now, suddenly,” he continued, “it’s a whole new ballgame. If other leading retailers decide to give it a try, the potential number of tenants that can be approached increases exponentially.”
No question, the number of vacancies have been increasing across the board due to the closings of many stores by stressed retailers, and the cutback on expansion by many others as a reaction to the high unemployment and pessimism of consumers. Though it may not be a deluge by healthy apparel chains seeking locations, there is the potential.
“And isn’t this,” said one senior real estate officer, “what drives many dealmakers? The potential.”
Other Interesting Activity
Joe’s Jeans, based in Commerce, CA, says it wants to expand its outlets division, now with 14 stores, in addition to its full-price stores. Contact CEO Marc Crossman.
_________________________________
General Growth Properties has appointed hedge fund manager William Ackman to become its chairman when it emerges from bankruptcy next month. It is being split into two units; GGP will retain about 185 malls, the Howard Hughes Corp will consist of the master-planned communities and other non-income-producing properties.
__________________________________
Walmart says it plans to grow its total square footage by between 3 and 4% during the fiscal year, adding up to about 35 million sq. ft. of new stores. It expects its sales growth in 2012 to grow 4-6%.
By Murray Shor
Just two months ago we highlighted the trend of more luxury retailers seeking cost-conscious shoppers by looking for stores in areas and locations they once avoided, the outlet shopping centers, and secondary and tertiary markets.
And we stressed that this relatively minor niche of less than 220 projects, by some estimates, is dwarfed by the number of over 100,000 mainstream malls and centers that encompass the shopping center/retail chain world of the US and Canada. To make an impact in this market, retailers must deal with the two main landlords responsible for the bulk of these centers: Simon Property Group with its Chelsea division and Tanger Factory Outlets.
Yet a new approach being taken by one of the poshiest of merchandisers, Neiman Marcus, has the potential to bring this type of retailer into almost every local market available. It could expand opportunities even to every deal-hungry broker in the field.
First, what Neiman Marcus is doing. It is starting a new spinoff of outlet stores to be called Last Call Studio with lower-priced merchandise that never was being sold in its Last Call outlet stores. This outlet merchandise may still be too expensive for many customers. So, the Studio stores will carry clearance goods from its mainstream stores, namebrand apparel, and lower-end merchandise ordered from vendors specifically for these units.
The first protoype store—about half the size of a more traditional unit-- opened recently in Dallas, with others in Rockville, MD, and Paramus, NJ.
Possible Locations
Targeted as possible locations for this division will be suburban areas and strip centers, storefronts, possibly even vacant downtown locations that could never attract luxury retailers because the numbers never added up. However, with high-end shoppers heading for the outlets and discounters—which may still carry too high a ticket for many moderate households—and the reduced clearance merchandise and inventory available from many liquidators and vendors who have cut back on manufacturing, there is pressure to find customers willing to spend limited income for quality merchandise with a high-end label.
As one highly-regarded consultant stressed: “From a modest out-of-sight, out-of-mind liquidation tool, it has now really morphed into a strategic and financial necessity for these companies.”
Another maven pointed to the recession and the insistence by shoppers for even more value-oriented merchandise.
Other luxury retailers, such as Nordstrom, Saks 5th Ave, Lord & Taylor, Bloomingdale’s, and the like, have been operating outlet stores for years, or have recently entered this market.
Great Potential
“Looking at the decision by Neiman Marcus to follow the consumer to where she lives—rather than wait for her to drive an hour or so and make a day of outlet shopping,” one leading broker pointed out, “opens up a great potential for dealmaking. Many brokers have specialized in finding tenants for Moms and Pops, for local operators within a limited market to fill vacancies in very local strip centers. They may never have made a call on a luxury retailer.
“Now, suddenly,” he continued, “it’s a whole new ballgame. If other leading retailers decide to give it a try, the potential number of tenants that can be approached increases exponentially.”
No question, the number of vacancies have been increasing across the board due to the closings of many stores by stressed retailers, and the cutback on expansion by many others as a reaction to the high unemployment and pessimism of consumers. Though it may not be a deluge by healthy apparel chains seeking locations, there is the potential.
“And isn’t this,” said one senior real estate officer, “what drives many dealmakers? The potential.”
Other Interesting Activity
Joe’s Jeans, based in Commerce, CA, says it wants to expand its outlets division, now with 14 stores, in addition to its full-price stores. Contact CEO Marc Crossman.
_________________________________
General Growth Properties has appointed hedge fund manager William Ackman to become its chairman when it emerges from bankruptcy next month. It is being split into two units; GGP will retain about 185 malls, the Howard Hughes Corp will consist of the master-planned communities and other non-income-producing properties.
__________________________________
Walmart says it plans to grow its total square footage by between 3 and 4% during the fiscal year, adding up to about 35 million sq. ft. of new stores. It expects its sales growth in 2012 to grow 4-6%.
Thursday, October 14, 2010
Higher Vacancies May Be Hurting The Landlords, But It Is Also A Great Dealmaking Opportunity For Discounters And Off-Pricers
This column, Strolling the Agora, will continue to be written as the mood hits, even though Shopping Center Digest has ceased publication.
By Murray Shor
Considering the stubborn, low level of consumer confidence caused by the continuing high unemployment rate, it is no surprise that vacancies have been increasing all around the country, and that some retailers are focusing on Canada where there is a more positive emergence from the recession.
However, selective dealmaking is picking up here in the US in disparate locations as a result of the depressing numbers. Especially for brokers in prime metro areas, the opportunities are there.
First the bad news: According to the market research company Reis Inc, which tracks these data, the vacancy rate at shopping centers in the last quarter rose to 10.9%, the highest level since ’91, and closing in on the record 11.1% set the year before. The rent asked by landlords dropped almost 20 cents per sq. ft. to $19.07, but the effective rents are even lower, $16.58.
For the larger malls, where average rents are hovering around $38, vacancies rose only .2% to 8.6%, down from 9% the previous quarter.
Now The Good News
O.K., now the good news. With the cutbacks from high-end and full-price retailers—who are the foundation of fashion-oriented malls and the CBDs of major cities—there is an accelerated push from the discounters and off-price retailers: TJMaxx, Target, Nordstrom Rack, Syms and its recently acquired Filene’s Basement (now called fbSY), H&M, Century 21. According to one dealmaker “They consider this a great opportunity for discount deals in prime locations they could never afford before, and to reach affluent consumers who shunned them in the past.”
A prime example, of course, is Wal-Mart Stores, which will be opening dozens of smaller units of 30-60,000 sq. ft. in cities around the country, eventually rolling out the concept of focusing on food and consumer basics to hundreds of these units. And then, who knows?
These promotional tenants have greater access than ever before to luxury- and designer-branded merchandise because vendors have excess inventory and limited outlets for distribution. One estimate is that the number of top designers now selling to TJX Companies has jumped 25%. The off-pricers and discounters, therefore, are buying this top-quality merchandise, and using it to draw in customers in new stores along New York’s Fifth Avenue—and even Harlem—Chicago’s Miracle Mile, Beverly Hills, and maybe even Rodeo Drive. Certainly in the plushier malls in Las Vegas, they’ve been operating for some time now.
Educating The Affluent
These merchandisers are educating their new, fashion- and trend-oriented customers that they can continue to buy quality and at a cheaper price, and strengthen customer loyalty for the future, when the economy—hopefully—returns to what we consider normal. In the meantime, they have locked-in prime real estate at discounted prices—though they may be paying some of the highest rents they have ever paid before--and helped tear down the old barriers blocked them from locating in the A and A+ plus malls, or fashionable locations in some of the most prime urban centers. Though they much prefer long-term deals, in some instances they are willing to settle for six months, with options and some built-in increases.
These stores could be considered “pop ups”, which are becoming a more common trend.
As we’ve pointed out several times in the past, these locations are becoming more common, and the type of deal that appeals to both landlord and tenant. For the landlord, it provides a rent-paying tenant in a vacant store, that can be converted to a long-term tenant, either this retailer or another, perhaps even a competing merchant, at the expiration of the short-term lease. For the tenant, an inexpensive way to test a new concept, polish and refine the presentation, and react to feedback from customers before rolling it out in a mass expansion. Or kill the concept before it does too much damage.
And, of course, they are ideal for retailers that can exploit special events or holidays: Halloween, Back To School, Presidents Day, etc.
Other Interesting Activity
Dollar Tree says it will buy Canadian retailer Dollar Giant for about C$52 million, adding 85 units to its 3,961 stores in 48 states. VP of leasing is Todd B. Littler, (757) 321-5283, tlittler@dollartree.com .
____________________________________________________
GNC Acquisition Holdings is planning an IPO to raise some $350 million to add about 4,800 company-owned and franchised vitamin and herbal supplement shops; future plans are to expand to China. The Pittsburgh-based chain’s website is www.gnc.com , 1-800-766-7099.
_____________________________________________________
Loblaw Companies is launching The Mobile Shop in more than 500 of its supermarkets across Canada in a bid to become a major retailer of mobile phones. Contact Maria Forlini, VP-Telecom, (905) 459-2500, www.loblaw.ca .
_____________________________________________________
Gymboree Corp, which operates some 650 children’s apparel stores, has accepted a bid to be acquired by Bain Capital for $65.40 per share, or about $1.8 billion. Director of real estate is Kathleen Hinkley, (415) 278-7993, Email: Kathy Hinkley@gymboree.com .
______________________________________________________
Investors are being drawn to a number of real estate investment trusts that are outperforming most stock market offerings, especially those involved in shopping malls, office building and apartment buildings. In our industry, the top performer is Taubman Centers Inc, which during the third quarter returned 18.5%.
By Murray Shor
Considering the stubborn, low level of consumer confidence caused by the continuing high unemployment rate, it is no surprise that vacancies have been increasing all around the country, and that some retailers are focusing on Canada where there is a more positive emergence from the recession.
However, selective dealmaking is picking up here in the US in disparate locations as a result of the depressing numbers. Especially for brokers in prime metro areas, the opportunities are there.
First the bad news: According to the market research company Reis Inc, which tracks these data, the vacancy rate at shopping centers in the last quarter rose to 10.9%, the highest level since ’91, and closing in on the record 11.1% set the year before. The rent asked by landlords dropped almost 20 cents per sq. ft. to $19.07, but the effective rents are even lower, $16.58.
For the larger malls, where average rents are hovering around $38, vacancies rose only .2% to 8.6%, down from 9% the previous quarter.
Now The Good News
O.K., now the good news. With the cutbacks from high-end and full-price retailers—who are the foundation of fashion-oriented malls and the CBDs of major cities—there is an accelerated push from the discounters and off-price retailers: TJMaxx, Target, Nordstrom Rack, Syms and its recently acquired Filene’s Basement (now called fbSY), H&M, Century 21. According to one dealmaker “They consider this a great opportunity for discount deals in prime locations they could never afford before, and to reach affluent consumers who shunned them in the past.”
A prime example, of course, is Wal-Mart Stores, which will be opening dozens of smaller units of 30-60,000 sq. ft. in cities around the country, eventually rolling out the concept of focusing on food and consumer basics to hundreds of these units. And then, who knows?
These promotional tenants have greater access than ever before to luxury- and designer-branded merchandise because vendors have excess inventory and limited outlets for distribution. One estimate is that the number of top designers now selling to TJX Companies has jumped 25%. The off-pricers and discounters, therefore, are buying this top-quality merchandise, and using it to draw in customers in new stores along New York’s Fifth Avenue—and even Harlem—Chicago’s Miracle Mile, Beverly Hills, and maybe even Rodeo Drive. Certainly in the plushier malls in Las Vegas, they’ve been operating for some time now.
Educating The Affluent
These merchandisers are educating their new, fashion- and trend-oriented customers that they can continue to buy quality and at a cheaper price, and strengthen customer loyalty for the future, when the economy—hopefully—returns to what we consider normal. In the meantime, they have locked-in prime real estate at discounted prices—though they may be paying some of the highest rents they have ever paid before--and helped tear down the old barriers blocked them from locating in the A and A+ plus malls, or fashionable locations in some of the most prime urban centers. Though they much prefer long-term deals, in some instances they are willing to settle for six months, with options and some built-in increases.
These stores could be considered “pop ups”, which are becoming a more common trend.
As we’ve pointed out several times in the past, these locations are becoming more common, and the type of deal that appeals to both landlord and tenant. For the landlord, it provides a rent-paying tenant in a vacant store, that can be converted to a long-term tenant, either this retailer or another, perhaps even a competing merchant, at the expiration of the short-term lease. For the tenant, an inexpensive way to test a new concept, polish and refine the presentation, and react to feedback from customers before rolling it out in a mass expansion. Or kill the concept before it does too much damage.
And, of course, they are ideal for retailers that can exploit special events or holidays: Halloween, Back To School, Presidents Day, etc.
Other Interesting Activity
Dollar Tree says it will buy Canadian retailer Dollar Giant for about C$52 million, adding 85 units to its 3,961 stores in 48 states. VP of leasing is Todd B. Littler, (757) 321-5283, tlittler@dollartree.com .
____________________________________________________
GNC Acquisition Holdings is planning an IPO to raise some $350 million to add about 4,800 company-owned and franchised vitamin and herbal supplement shops; future plans are to expand to China. The Pittsburgh-based chain’s website is www.gnc.com , 1-800-766-7099.
_____________________________________________________
Loblaw Companies is launching The Mobile Shop in more than 500 of its supermarkets across Canada in a bid to become a major retailer of mobile phones. Contact Maria Forlini, VP-Telecom, (905) 459-2500, www.loblaw.ca .
_____________________________________________________
Gymboree Corp, which operates some 650 children’s apparel stores, has accepted a bid to be acquired by Bain Capital for $65.40 per share, or about $1.8 billion. Director of real estate is Kathleen Hinkley, (415) 278-7993, Email: Kathy Hinkley@gymboree.com .
______________________________________________________
Investors are being drawn to a number of real estate investment trusts that are outperforming most stock market offerings, especially those involved in shopping malls, office building and apartment buildings. In our industry, the top performer is Taubman Centers Inc, which during the third quarter returned 18.5%.
Monday, October 4, 2010
Is There A Trend For Supermarkets To Become Regular Tenants In A Regional Mall? Don't You Believe It
This column, Strolling the Agora, will continue to be written as the mood hits even though Shopping Center Digest has ceased publication
By Murray Shor
Been hearing a little rumble here and there about supermarkets becoming important tenants in regional malls, taking advantage of the large number of big-box vacancies available and seeing that as an opportunity to expand their base. Don’t you believe it.
I don’t doubt that in some isolated instances it could happen, such as discounter Aldi now
taking several locations in the Chicago market. Nor do I dispute that some surveys report those in a trade area may put a supermarket high on their list of tenants they’d like to see in their neighborhood mall.
However, what people say is not what people generally do, especially when answering a survey. But, go on to reality.
First, people shopping for their weekly groceries are not going to push a shopping cart loaded with perishables such as meats, frozen foods, milk and butter through a mall while checking out the latest fashions at Victoria Secrets or Ann Taylor. Nor would any of these stores want a customer browsing through the racks with a cart of melting ice cream.
And maneuvering those carts up an escalator?
Little Cross-Shopping
Result: There would be very little cross-shopping—even if the mindset were there. Supermarket shopping is a chore; mall cruising and browsing, entertainment—except, maybe during the stressful holiday seasons. Just one minor reason mall landlords may not welcome these tenants with open arms.
Now get into the logistics, for a moment—and the high value placed mall management places on parking spaces, especially those nearest to store access and the main entrances to the main mall. Supermarkets require heavy traffic, and their customers require substantially more parking spaces than those normally shopping at a mall; the distance between the car and store has to be substantially shorter. Question: Know anyone willing to push a loaded cart 200 yards to a parked car?
Then comes the large number of 18-wheelers coming in to replenish a supermarket
on a daily basis; this traffic is much heavier than similar vehicles replenishing merchandise for other tenants because some stock turns at foodstores go into double-digits; some departments require daily replenishment. These vehicles have to be kept away from the large numbers of personal SUVs; the result is a completely different and more demanding traffic pattern.
Those adherents saying it’s a good idea for this type of tenant to head for the malls point to some of the big-box discounters, warehouse clubs, and other promotional merchants carrying groceries who are already common in malls—Target, CostCo, Walmart, BJ’s, and the like. Yes, they carry groceries among their merchandise, but not a full-line of products: meats, fresh fish, frozen foods, produce, etc., etc.
It’s true that some of these big-box users are attached to the mall, but many of them do not have direct access, and their parking spaces essentially just serves their stores. In this situation, a supermarket could be a likely candidate to take the space.
We’re talking here, however, of a supermarket being an integral part of the mall, rather than an add-on.
How It Can Work
Supermarket operators are not known for paying high rents. The average mall rent paid across the nation for non-anchor tenants is around $38 per sq. ft. And to this add one-third to cover the CAM charges and other ad-ons—another item supermarketers are not known to contribute to without complaint. If you know a supermarket chain willing to pay those dollars, lemme know and I have a number of great mall locations they should look at.
No way these experienced, tight-fisted operators would agree to these expenses, and whatever else may be included in the Reciprocal Easement Agreements made between the owner-developer and the department store anchors.
Landlords do understand supermarket customers hit their shopping centers on a weekly basis, much more frequently than they would if it were a regional mall. So they’d like to build on this loyalty to place and bring the customer to their properties more frequently. This is why many malls have a separate, service-oriented strip center next to their major malls, and containing a supermarket, maybe a liquor store, barber shop/beauty parlor/nail salon, stationery store, dry cleaner, and the like.
Separate access, but visible, lower rental and operating costs than locating in a mall, less hassle for shopper merchant and landlord, and a win-win for all concerned.
______________________________
Other Interesting Activity
American Theatre Corp and Cinema Grille are looking for big-box vacancies in shopping centers that are suitable for theatre use. Contact David Postle, depostle@msn.com .
_______________________________
Doctors Express, a health-clinic franchise based in Towson, MD, recently made some 74 franchise agreements in 21 states and expects to have 35 operating by year-end. A visit to a hospital’s Emergency Room costs about $575; at DE’s urgent-care centers, the cost is about $125.
Sites are being sought mainly in community and neighborhood centers. Contact Jennifer Watson, Baum Realty Group, Jennifer@baumrealtygroup.com .
_______________________________
JC Penney Co says its new-store expansion over the next five years will be targeting mall and off-mall locations, and expects to boost its sales by $1 billion over the next five years. It had opened about 150 of these units before the recession hit, and has an ongoing program to complete renovations of about 400 units by the year 2014.
___________________________________
General Growth Properties will no longer have a member of the founding family, the Bucksbaums, since brothers Martin and Matthew built their first center in their home town of Cedar Rapids. Those running the bankrupt development company chose not to give Chief Executive John Bucksbaum a seat on either of the two new boards being created; the reason given is that he failed to inform them that the family trust failed to inform them of the $100 million of loans made by the family trust to two GGP executives to cover margin calls on their company stock.
__________________________________
More information on Expanding Retailers, Directory of Major Malls, and products that can improve your dealmaking, marketing, and operations may be obtained from our website, www.shoppingcenters.com .
By Murray Shor
Been hearing a little rumble here and there about supermarkets becoming important tenants in regional malls, taking advantage of the large number of big-box vacancies available and seeing that as an opportunity to expand their base. Don’t you believe it.
I don’t doubt that in some isolated instances it could happen, such as discounter Aldi now
taking several locations in the Chicago market. Nor do I dispute that some surveys report those in a trade area may put a supermarket high on their list of tenants they’d like to see in their neighborhood mall.
However, what people say is not what people generally do, especially when answering a survey. But, go on to reality.
First, people shopping for their weekly groceries are not going to push a shopping cart loaded with perishables such as meats, frozen foods, milk and butter through a mall while checking out the latest fashions at Victoria Secrets or Ann Taylor. Nor would any of these stores want a customer browsing through the racks with a cart of melting ice cream.
And maneuvering those carts up an escalator?
Little Cross-Shopping
Result: There would be very little cross-shopping—even if the mindset were there. Supermarket shopping is a chore; mall cruising and browsing, entertainment—except, maybe during the stressful holiday seasons. Just one minor reason mall landlords may not welcome these tenants with open arms.
Now get into the logistics, for a moment—and the high value placed mall management places on parking spaces, especially those nearest to store access and the main entrances to the main mall. Supermarkets require heavy traffic, and their customers require substantially more parking spaces than those normally shopping at a mall; the distance between the car and store has to be substantially shorter. Question: Know anyone willing to push a loaded cart 200 yards to a parked car?
Then comes the large number of 18-wheelers coming in to replenish a supermarket
on a daily basis; this traffic is much heavier than similar vehicles replenishing merchandise for other tenants because some stock turns at foodstores go into double-digits; some departments require daily replenishment. These vehicles have to be kept away from the large numbers of personal SUVs; the result is a completely different and more demanding traffic pattern.
Those adherents saying it’s a good idea for this type of tenant to head for the malls point to some of the big-box discounters, warehouse clubs, and other promotional merchants carrying groceries who are already common in malls—Target, CostCo, Walmart, BJ’s, and the like. Yes, they carry groceries among their merchandise, but not a full-line of products: meats, fresh fish, frozen foods, produce, etc., etc.
It’s true that some of these big-box users are attached to the mall, but many of them do not have direct access, and their parking spaces essentially just serves their stores. In this situation, a supermarket could be a likely candidate to take the space.
We’re talking here, however, of a supermarket being an integral part of the mall, rather than an add-on.
How It Can Work
Supermarket operators are not known for paying high rents. The average mall rent paid across the nation for non-anchor tenants is around $38 per sq. ft. And to this add one-third to cover the CAM charges and other ad-ons—another item supermarketers are not known to contribute to without complaint. If you know a supermarket chain willing to pay those dollars, lemme know and I have a number of great mall locations they should look at.
No way these experienced, tight-fisted operators would agree to these expenses, and whatever else may be included in the Reciprocal Easement Agreements made between the owner-developer and the department store anchors.
Landlords do understand supermarket customers hit their shopping centers on a weekly basis, much more frequently than they would if it were a regional mall. So they’d like to build on this loyalty to place and bring the customer to their properties more frequently. This is why many malls have a separate, service-oriented strip center next to their major malls, and containing a supermarket, maybe a liquor store, barber shop/beauty parlor/nail salon, stationery store, dry cleaner, and the like.
Separate access, but visible, lower rental and operating costs than locating in a mall, less hassle for shopper merchant and landlord, and a win-win for all concerned.
______________________________
Other Interesting Activity
American Theatre Corp and Cinema Grille are looking for big-box vacancies in shopping centers that are suitable for theatre use. Contact David Postle, depostle@msn.com .
_______________________________
Doctors Express, a health-clinic franchise based in Towson, MD, recently made some 74 franchise agreements in 21 states and expects to have 35 operating by year-end. A visit to a hospital’s Emergency Room costs about $575; at DE’s urgent-care centers, the cost is about $125.
Sites are being sought mainly in community and neighborhood centers. Contact Jennifer Watson, Baum Realty Group, Jennifer@baumrealtygroup.com .
_______________________________
JC Penney Co says its new-store expansion over the next five years will be targeting mall and off-mall locations, and expects to boost its sales by $1 billion over the next five years. It had opened about 150 of these units before the recession hit, and has an ongoing program to complete renovations of about 400 units by the year 2014.
___________________________________
General Growth Properties will no longer have a member of the founding family, the Bucksbaums, since brothers Martin and Matthew built their first center in their home town of Cedar Rapids. Those running the bankrupt development company chose not to give Chief Executive John Bucksbaum a seat on either of the two new boards being created; the reason given is that he failed to inform them that the family trust failed to inform them of the $100 million of loans made by the family trust to two GGP executives to cover margin calls on their company stock.
__________________________________
More information on Expanding Retailers, Directory of Major Malls, and products that can improve your dealmaking, marketing, and operations may be obtained from our website, www.shoppingcenters.com .
Sunday, September 26, 2010
After 37 Years Of Focusing On New Developments And Expansion In The Industry, Shopping Center Digest Suspends Publication
This column of Strolling the Agora appears in the September 27, 2010 issue of SHOPPING CENTER DIGEST.
After a long and successful journey of 37 years, full of great times, personal connections and fascinating memories, we have decided it’s time to flick the switch and say “Good night, Mrs. Calabash, wherever you are.” This will be the last issue of Shopping Center Digest “The Locations Newsletter,” as we decide to go on to other things.
It was our good fortune to enter this industry during its vibrant heyday, when “every cornfield had the potential to become a new mall” and we were lucky enough to experience a part of this exploding growth.
Some comments from our archives: John Z. Stec, VP, Fabric-Centers of America: “When I joined Fabri-Centers of America, Inc. I was a one-man Real Estate Department and I couldn’t have done without the help of SHOPPING CENTER DIGEST. Now that we have grown to over 693 fabric stores and will open 25-30 superstores this year, we depend even more on your newsletter than ever before.”
Or, Charles R. Lebovitz, President & CEO, CBL & Associates Properties, Inc: “You have eliminated the frills and are giving us the nuts and bolts of what is happening in our industry. We make certain that our key personnel see each issue so they can take advantage of the information…If something new breaks, we can find it first in SHOPPING CENTER DIGEST.”
Or, Ronald H. Erickson, VP-Real Estate, Friendly Ice Cream Corp: “I am glad there is somebody in our industry like yourself willing to call it like it is…Keep calling it as you see it—somebody has to speak up!”
Many Deals Offered
However, every trip has a beginning, a middle, and an end. And there is a welcome freedom—after some 40 years of pressure from demanding deadlines, the herding and hassle of business travel, being held captive too often in exhibit booths, that it’s time to listen to another drummer.
So as I review this passage from the late ‘60s, I recall the brainstorm that brought me to Al Sussman—the first head of the International Council of Shopping Centers—and showed him a dummy for a new magazine concentrating on all aspects of our shopping center/retail chain industry, and a proposal to partner in this endeavor. He reached into his desk drawer to bring out a similar dummy for a publication he had envisioned before heading the trade association; he couldn’t act on it then due to the then thought that a not-for-profit trade association shouldn’t publish a profit-making magazine containing advertisements.
However, the concept was quickly picked up then by Joseph Shore (no relation) of Communication Channels, Inc, and we partnered for a couple of years on Shopping Center World, now known as Retail Traffic. Then came the inspiration to go on my own with a newsletter focusing only on development and leasing with a faster, more organized delivery of information; and so was born the twice-monthly Shopping Center Digest. Several years later, attitudes changed and ICSC began publishing Shopping Centers Today.
Not Possible Today
The industry has changed numerous times over the years, and I recall numerous flashbacks and snippets resulting in deals that could not happen today.
I remember a flight sitting between Herb Brown, then head of real estate for Kinney Shoe, and a developer neither of us knew, who was planning a new shopping center. My lap served as the table for his leasing plan. By the time we landed, the “deal was done:” location, rent, fixture allowance, and leaving it up to the home offices to tie down the remaining minor details.
Or the cabanas around the pool at The Fountainbleau in Miami, with landlords and tenants concentrating on site plans and leasing plans, wheeling and dealing in their bathing suits, and then jumping into the water to cool off before heading to their next appointment three cabanas down.
Or when Spring Conventions moved annually in a triangle from North to South To West, and when the number of attendees was small enough that ICSC one year bought out Disneyland for one night of free entertainment as an event for all registrants. Or in Toronto when some of the larger landlords were unhappy with the accommodations and set up their leasing suites out of the city at Inn on the Park and ICSC was forced to run regular buses for registrants. Some later left the organization and it took years before they were all lured back.
Strong-Minded Individuals
And the creative, strong-minded individuals who built the foundation for this industry. Those earlier years were ones of zest with flamboyant, self-motivated, hard-driving individuals who towered over other entrepreneurs.
Len Farber and his “If you have an idea, and I have an idea, we share them and now we both have two ideas.”
After moving to Florida from the North, he headed on his yacht to summer around Martha’s Vineyard and Nantucket, having his captain drop him off at strategic points along the Inland Waterway and picking him up further north at the end of a day’s “wheeling and dealing.” And when he sold his last shopping mall: “Now I can afford to live the way I always have.”
Mel Simon, relocating from New York to Indianapolis to begin brokering deals on strip centers, then sending for brothers Fred and Herb to begin building their empire founded on strong relationships; this later became Simon Property Group. An important thank-you event was their annual, two-day Christmas Party, one day for the company, close friends and locals, and the other for the rest of the industry, including some competitors if they wanted to show up.
And there was Ed DeBartolo Sr. of DeBartolo Properties Management, with his annual weekend golf outing in Tampa for retailers, where business was not discussed—unless the tenant really insisted, and then out came the leasing plans. This was when leasing people for landlords got “a piece of the action”—usually 1%; so when the company sold a mall for $40 million and Ed Sr. dropped $400,000 in cash on Cal Gaeta’s desk, he was very thankful, knew he couldn’t go further up in the organization—and used the money to start his own company.
Or Al Taubman of Taubman Development Co, who other landlords credited with “teaching us how to build two-level malls.” To him, no big deal: “Put a one-level mall over another, cut a few holes in the floor between the levels for visibility, and put in some staircases and escalators for vertical access.”
Or the class act of Bill Cafaro of The Cafaro Company. You went into his hospitality suite at the Spring Convention and it was immaculate with linen napkins, tablecloths, silverware, fine dining and service, “the place experienced dealmakers went for lunch.”
You were a guest in his home.
And the kindness and helping hand of George Zamias, who began his career shining shoes, and when Marc Greenberg hit the age of passage when he “had to start his own thing”—and couldn’t convince him to reconsider, said “OK, I understand. Now, what do you need and how can I help you?”
And Milt Cooper of Kimco, when even though developers were willing to pay 21% interest during the recession of 20 years ago, they still couldn’t get traditional lenders to finance new projects; he went to Wall Street and engineered the re-birth of Real Estate Investment Trusts for shopping centers—which began major mergers and acquisitions leading to the formation of today’s behemoth owner-developers.
The Leasing Women
In the earlier days there were few women involved in dealmaking; this was really an all-male, old boys’ network. But there was Ann Hicks, a tough, direct women with Homart Development Co—shopping center arm of Sears—who turned down the offer to head the division because she didn’t want to relocate to Chicago from Dallas. And “I had to be as tough as you guys or you would’ve cut me off at the knees.”
And Elizabeth “Betty” Jarvis, who credited her years of training under a demanding Al Taubman while heading his leasing department with giving her the experience, and guts and strength to become the industry’s first female mall developer.
The route into the more rewarding responsibilities of dealmaking for women then usually began at the mall level through the marketing departments; today they come into this venue from many different doorways, and there may be as many hard-driving, creative women on both sides of the negotiating table as there are men.
And So Many Others
Irv Wolf at Monumental Properties, who referred to his office area as the Zoo, because the other offices in his area were manned by people named Fox, Katz, and Lyons. He spent his last years as a top expert witness, as he said, “testifying against some of the deals I made.”
He also mentored Rene Daniels, who did such a great job filling vacancies at all their malls that he “leased himself out of a job;” the projects became so valuable to investors that Monumental sold them all and Rene started his own consulting firm representing owner-developers, and gives back to the industry by teaching each year at ICSC’s University of Shopping Centers.
Dick Shur at Spencer Gifts and then Waldenbooks—the very funny, frustrated Borscht Belt comic who never introduced himself when you picked up the telephone, just started on his latest joke. But was also one of the toughest, most knowledgeable dealmakers on the tenant side.
Ken McGuire of Bresler’s 33 Flavors, who insisted he was not in the ice cream business but was a real estate guy working for an ice cream chain. After we started SCD, he told me, “Murray, you should take advertising” and then reserved the front cover for each of our magazine format issues until the company was sold about 15 years later.
Don Fitch of Zale Corp, very laid-back and low-key, who made more deals while on the golf course than any of his competitors who spent 10-12 hours at their desks and telephones.
Bob Congel of The Pyramid Cos, who said lawsuits from citizens fighting his projects were “just a normal part of doing business,” and once started construction on a regional mall before obtaining control of the property, and opened it within 11 months of groundbreaking.
Andy Murphy, Joe Moss, and the others of The Rat Pack who needed only one drink and a cigar to launch into “Danny Boy” and “Irish Eyes Are Smiling”—and were always eager to drop everything to talk the deal.
And on, and on, and on.
Important Events, Changes
The period beginning early in December was a milestone-- as important for dealmakers each year as the Spring Convention; it was another opportunity to build relationships and informal networks. Monday night in New York was scheduled for separate strategy and social dinners for landlords and retailers, then getting together for New England Development’s dessert party. Tuesday was the Kinney Party for “just a few thousand of your closest friends,” followed that evening by The Brown Boys’ reception (Herb and Howard), then the next day by Melville’s Party at Tavern on the Green, with limited seating, a small enough restaurant that there was a legitimate reason to limit the number of invitations.
Whereas a good portion of the industry now closes down that month as far as dealmaking is concerned, and attention focuses on holiday sales to determine expansion plans and how many new stores retailers will open the following year, in the past this period was busy, fertile territory. Leasing and development was an ongoing process; during these weeks was the time to correct lease problems, maybe try a new clause or approach, run it up the flagpole to see if anyone salutes.
And so it went during the ‘60s, ‘70s, ‘80s.
Ancients And Dinosaurs
Today, with decision-making on new locations now being determined by “the head office” and real estate committees, where responsibilities and much of the heavy-lifting have been farmed out to local brokers and numerous real estate networks that don’t know what’s going on outside their immediate trade area, where the location goes to who’s willing to pay the most without regard to its impact on the entire project, and you can’t understand the deal without looking at a computer printout, a transformation has taken place.
However, one cannot ignore what’s taking place in around our industry; there’s the economy, the fact that stubborn, high unemployment has caused consumers to stop spending, retailers to fold and cut back on expansion, that there are so few new markets left that are ripe—at this time—to support new development, and that there are so many other, less risky opportunities in foreign countries. Admittedly, there is a diminished relevancy to focus on new and expanding shopping centers, and expanding retailers.
Dealmaking today has become more business-like, more routine, more dependant on numbers spit out by the software program, more de-personalized. And certainly less creative.
Or, as those few ancients and dinosaurs still active say, “It’s not as much fun anymore.”
(And one final note of clarification. Shopping Center Digest has been closely aligned with the Directory of Major Malls since its inception over 31 editions ago. But it is now—and for many years—a completely independent publication separate from Shopping Center Digest. It is a primary Source to the shopping center/retail chain industry and continues to expand its depth of research and detail on its coverage of the major shopping centers and malls throughout the US and Canada—the ONLY such resource now available. Please visit www.shoppingcenters.com for online access to the almost 7,000 major shopping center listings and the latest product announcements from the Directory of Major Malls.)
To find out more about Expanding Retailers, Directory of Major Malls, or our other products, please go to our website, www.shoppingcenters.com .
After a long and successful journey of 37 years, full of great times, personal connections and fascinating memories, we have decided it’s time to flick the switch and say “Good night, Mrs. Calabash, wherever you are.” This will be the last issue of Shopping Center Digest “The Locations Newsletter,” as we decide to go on to other things.
It was our good fortune to enter this industry during its vibrant heyday, when “every cornfield had the potential to become a new mall” and we were lucky enough to experience a part of this exploding growth.
Some comments from our archives: John Z. Stec, VP, Fabric-Centers of America: “When I joined Fabri-Centers of America, Inc. I was a one-man Real Estate Department and I couldn’t have done without the help of SHOPPING CENTER DIGEST. Now that we have grown to over 693 fabric stores and will open 25-30 superstores this year, we depend even more on your newsletter than ever before.”
Or, Charles R. Lebovitz, President & CEO, CBL & Associates Properties, Inc: “You have eliminated the frills and are giving us the nuts and bolts of what is happening in our industry. We make certain that our key personnel see each issue so they can take advantage of the information…If something new breaks, we can find it first in SHOPPING CENTER DIGEST.”
Or, Ronald H. Erickson, VP-Real Estate, Friendly Ice Cream Corp: “I am glad there is somebody in our industry like yourself willing to call it like it is…Keep calling it as you see it—somebody has to speak up!”
Many Deals Offered
However, every trip has a beginning, a middle, and an end. And there is a welcome freedom—after some 40 years of pressure from demanding deadlines, the herding and hassle of business travel, being held captive too often in exhibit booths, that it’s time to listen to another drummer.
So as I review this passage from the late ‘60s, I recall the brainstorm that brought me to Al Sussman—the first head of the International Council of Shopping Centers—and showed him a dummy for a new magazine concentrating on all aspects of our shopping center/retail chain industry, and a proposal to partner in this endeavor. He reached into his desk drawer to bring out a similar dummy for a publication he had envisioned before heading the trade association; he couldn’t act on it then due to the then thought that a not-for-profit trade association shouldn’t publish a profit-making magazine containing advertisements.
However, the concept was quickly picked up then by Joseph Shore (no relation) of Communication Channels, Inc, and we partnered for a couple of years on Shopping Center World, now known as Retail Traffic. Then came the inspiration to go on my own with a newsletter focusing only on development and leasing with a faster, more organized delivery of information; and so was born the twice-monthly Shopping Center Digest. Several years later, attitudes changed and ICSC began publishing Shopping Centers Today.
Not Possible Today
The industry has changed numerous times over the years, and I recall numerous flashbacks and snippets resulting in deals that could not happen today.
I remember a flight sitting between Herb Brown, then head of real estate for Kinney Shoe, and a developer neither of us knew, who was planning a new shopping center. My lap served as the table for his leasing plan. By the time we landed, the “deal was done:” location, rent, fixture allowance, and leaving it up to the home offices to tie down the remaining minor details.
Or the cabanas around the pool at The Fountainbleau in Miami, with landlords and tenants concentrating on site plans and leasing plans, wheeling and dealing in their bathing suits, and then jumping into the water to cool off before heading to their next appointment three cabanas down.
Or when Spring Conventions moved annually in a triangle from North to South To West, and when the number of attendees was small enough that ICSC one year bought out Disneyland for one night of free entertainment as an event for all registrants. Or in Toronto when some of the larger landlords were unhappy with the accommodations and set up their leasing suites out of the city at Inn on the Park and ICSC was forced to run regular buses for registrants. Some later left the organization and it took years before they were all lured back.
Strong-Minded Individuals
And the creative, strong-minded individuals who built the foundation for this industry. Those earlier years were ones of zest with flamboyant, self-motivated, hard-driving individuals who towered over other entrepreneurs.
Len Farber and his “If you have an idea, and I have an idea, we share them and now we both have two ideas.”
After moving to Florida from the North, he headed on his yacht to summer around Martha’s Vineyard and Nantucket, having his captain drop him off at strategic points along the Inland Waterway and picking him up further north at the end of a day’s “wheeling and dealing.” And when he sold his last shopping mall: “Now I can afford to live the way I always have.”
Mel Simon, relocating from New York to Indianapolis to begin brokering deals on strip centers, then sending for brothers Fred and Herb to begin building their empire founded on strong relationships; this later became Simon Property Group. An important thank-you event was their annual, two-day Christmas Party, one day for the company, close friends and locals, and the other for the rest of the industry, including some competitors if they wanted to show up.
And there was Ed DeBartolo Sr. of DeBartolo Properties Management, with his annual weekend golf outing in Tampa for retailers, where business was not discussed—unless the tenant really insisted, and then out came the leasing plans. This was when leasing people for landlords got “a piece of the action”—usually 1%; so when the company sold a mall for $40 million and Ed Sr. dropped $400,000 in cash on Cal Gaeta’s desk, he was very thankful, knew he couldn’t go further up in the organization—and used the money to start his own company.
Or Al Taubman of Taubman Development Co, who other landlords credited with “teaching us how to build two-level malls.” To him, no big deal: “Put a one-level mall over another, cut a few holes in the floor between the levels for visibility, and put in some staircases and escalators for vertical access.”
Or the class act of Bill Cafaro of The Cafaro Company. You went into his hospitality suite at the Spring Convention and it was immaculate with linen napkins, tablecloths, silverware, fine dining and service, “the place experienced dealmakers went for lunch.”
You were a guest in his home.
And the kindness and helping hand of George Zamias, who began his career shining shoes, and when Marc Greenberg hit the age of passage when he “had to start his own thing”—and couldn’t convince him to reconsider, said “OK, I understand. Now, what do you need and how can I help you?”
And Milt Cooper of Kimco, when even though developers were willing to pay 21% interest during the recession of 20 years ago, they still couldn’t get traditional lenders to finance new projects; he went to Wall Street and engineered the re-birth of Real Estate Investment Trusts for shopping centers—which began major mergers and acquisitions leading to the formation of today’s behemoth owner-developers.
The Leasing Women
In the earlier days there were few women involved in dealmaking; this was really an all-male, old boys’ network. But there was Ann Hicks, a tough, direct women with Homart Development Co—shopping center arm of Sears—who turned down the offer to head the division because she didn’t want to relocate to Chicago from Dallas. And “I had to be as tough as you guys or you would’ve cut me off at the knees.”
And Elizabeth “Betty” Jarvis, who credited her years of training under a demanding Al Taubman while heading his leasing department with giving her the experience, and guts and strength to become the industry’s first female mall developer.
The route into the more rewarding responsibilities of dealmaking for women then usually began at the mall level through the marketing departments; today they come into this venue from many different doorways, and there may be as many hard-driving, creative women on both sides of the negotiating table as there are men.
And So Many Others
Irv Wolf at Monumental Properties, who referred to his office area as the Zoo, because the other offices in his area were manned by people named Fox, Katz, and Lyons. He spent his last years as a top expert witness, as he said, “testifying against some of the deals I made.”
He also mentored Rene Daniels, who did such a great job filling vacancies at all their malls that he “leased himself out of a job;” the projects became so valuable to investors that Monumental sold them all and Rene started his own consulting firm representing owner-developers, and gives back to the industry by teaching each year at ICSC’s University of Shopping Centers.
Dick Shur at Spencer Gifts and then Waldenbooks—the very funny, frustrated Borscht Belt comic who never introduced himself when you picked up the telephone, just started on his latest joke. But was also one of the toughest, most knowledgeable dealmakers on the tenant side.
Ken McGuire of Bresler’s 33 Flavors, who insisted he was not in the ice cream business but was a real estate guy working for an ice cream chain. After we started SCD, he told me, “Murray, you should take advertising” and then reserved the front cover for each of our magazine format issues until the company was sold about 15 years later.
Don Fitch of Zale Corp, very laid-back and low-key, who made more deals while on the golf course than any of his competitors who spent 10-12 hours at their desks and telephones.
Bob Congel of The Pyramid Cos, who said lawsuits from citizens fighting his projects were “just a normal part of doing business,” and once started construction on a regional mall before obtaining control of the property, and opened it within 11 months of groundbreaking.
Andy Murphy, Joe Moss, and the others of The Rat Pack who needed only one drink and a cigar to launch into “Danny Boy” and “Irish Eyes Are Smiling”—and were always eager to drop everything to talk the deal.
And on, and on, and on.
Important Events, Changes
The period beginning early in December was a milestone-- as important for dealmakers each year as the Spring Convention; it was another opportunity to build relationships and informal networks. Monday night in New York was scheduled for separate strategy and social dinners for landlords and retailers, then getting together for New England Development’s dessert party. Tuesday was the Kinney Party for “just a few thousand of your closest friends,” followed that evening by The Brown Boys’ reception (Herb and Howard), then the next day by Melville’s Party at Tavern on the Green, with limited seating, a small enough restaurant that there was a legitimate reason to limit the number of invitations.
Whereas a good portion of the industry now closes down that month as far as dealmaking is concerned, and attention focuses on holiday sales to determine expansion plans and how many new stores retailers will open the following year, in the past this period was busy, fertile territory. Leasing and development was an ongoing process; during these weeks was the time to correct lease problems, maybe try a new clause or approach, run it up the flagpole to see if anyone salutes.
And so it went during the ‘60s, ‘70s, ‘80s.
Ancients And Dinosaurs
Today, with decision-making on new locations now being determined by “the head office” and real estate committees, where responsibilities and much of the heavy-lifting have been farmed out to local brokers and numerous real estate networks that don’t know what’s going on outside their immediate trade area, where the location goes to who’s willing to pay the most without regard to its impact on the entire project, and you can’t understand the deal without looking at a computer printout, a transformation has taken place.
However, one cannot ignore what’s taking place in around our industry; there’s the economy, the fact that stubborn, high unemployment has caused consumers to stop spending, retailers to fold and cut back on expansion, that there are so few new markets left that are ripe—at this time—to support new development, and that there are so many other, less risky opportunities in foreign countries. Admittedly, there is a diminished relevancy to focus on new and expanding shopping centers, and expanding retailers.
Dealmaking today has become more business-like, more routine, more dependant on numbers spit out by the software program, more de-personalized. And certainly less creative.
Or, as those few ancients and dinosaurs still active say, “It’s not as much fun anymore.”
(And one final note of clarification. Shopping Center Digest has been closely aligned with the Directory of Major Malls since its inception over 31 editions ago. But it is now—and for many years—a completely independent publication separate from Shopping Center Digest. It is a primary Source to the shopping center/retail chain industry and continues to expand its depth of research and detail on its coverage of the major shopping centers and malls throughout the US and Canada—the ONLY such resource now available. Please visit www.shoppingcenters.com for online access to the almost 7,000 major shopping center listings and the latest product announcements from the Directory of Major Malls.)
To find out more about Expanding Retailers, Directory of Major Malls, or our other products, please go to our website, www.shoppingcenters.com .
Saturday, September 4, 2010
"The Deals Keep Coming," And Even More Shopping Centers Will Soon Be Changing Hands--Bringing More Opportunities To Local Brokers
This column of Strolling the Agora appears in the September 6, 2010 issue of SHOPPING CENTER DIGEST
There are numerous reasons for the surge in the number of shopping centers that have been changing ownership recently—and each contributes to the accelerating trend of the marked increase in real estate mergers and acquisitions.
Whether it’s due to cash-strapped landlords forced to sell distressed properties, pent-up capital finally pushing investors to begin financing deals, owners walking away from projects now worth less than their mortgages and adding to the available supply, mortgage-holders foreclosing on delinquent properties, the growing money supply, foreign-capital rushing to invest in real estate, all of the above—and perhaps some reasons not covered—throughout US and Canada, new names are replacing those of the former owners.
Among some of the more active acquirers in numbers of deals are RioCan and Cedar Shopping Centers, Kimco and BIG, Inland Real Estate Group, Edens & Avant, Weingarten. Since they’re mainly targeting grocery-anchored, neighborhood projects, rather than large regional malls, it is understandable why they are in the forefront of done deals.
If the buyers have cash readily available, they don’t have to search for the deals.
The Deals Keep Coming
From Edward Sonshine, CEO of RioCan, which is acquiring projects in the US and Canada and has some $500 million in its pipeline: “If you’re a cash buyer, it’s amazing…it just keeps coming at us.” In the US, “the properties are in great shape but the owners are a bit stressed.” The fact that the Canadian dollar and economy are stronger now than in the US, he added, doesn’t hurt.
The company has acquired centers in PA, NJ, VA, and TX, and now has 15 US projects, with expectations that the number will climb to 25 by the end of 2010.
Weingarten is on target to acquire $75-$125 million in deals this year; executives said they could have acquired more properties this year but were expecting cap rates—which they estimated at 6.25%-7.25% for grocery-anchored centers in major markets—would improve even more in 2011 and 2012 as banks and lenders have to deal with more defaults from financially troubled owners.
Specific regions are being targeted by some landlords: Weingarten in Florida, and other metro areas it considers in its 10 prime target areas; Edens & Avant, the Washington, DC, area, for example.
Back To Lenders
Though many of the former owners may be having substantial money problems—according to one source, distressed commercial properties may reach $200 billion—that is not always the case. Nor are those returning properties to the mortgage holders always without capital; sometimes the landlords have the cash but decide it makes better business sense to give up the project.
For example, Taubman Centers stopping paying on its $135 million mortgage on the Pier Shops at Casesars in Atlantic City, NJ, because it estimated it was worth now—because of vacancies and depressed real estate values—only $52 million.
Similarly, Simon Property Group walked away from Palm Beach Mall in West Palm Beach, FL; Macerich ditto on Valley View Center in Dallas, TX; Vornado on Del Monte Square in San Francisco, CA.
Perhaps the biggest and most flipped project of all is the $2 billion, Xanadu complex in the New Jersey Meadowlands; there the five lenders headed by Colony Capital have taken it over with intentions of finally completing it. The overwhelming cost of the development led to the bankruptcy and demise of The Mills, which first proposed the project; it was approved in 2003 and was to have been completed in 2007.
Sound Business Decision
Some consider the defaults a sound business decision. “In many cases,” said one financial maven, “it’s a strategic move” and hasn’t hurt many of the companies. At this writing, shares of Macerich are up 51%, Simon 42%, Vornado 40% and Taubman 35%.
Several of these REITs are also taking advantage of low interest rates to refinance their debt—Simon, Kimco, Vornado, etc—putting them into a better position to acquire good properties in the near future. Or selling some of their properties at high prices: Kimco sold 33 assets in Florida, Southern California, and the DC area for $370 million; Simon acquired a portion of 2.3 million sq. ft. Galleria Mall in Houston for $260 million. And of ccourse, its recent $2.3 billion acquisition of the 21 outlet centers from Prime Outlets.
And for others, who have acquired some of the foreclosed shopping centers, they have been able to do so at substantially below their replacement cost.
World Properties acquired the 1.4 million sq.ft. Cincinnati Mall for $10.5 million, $7.50 per square foot; Moison Investment Co purchased the 847,000 sq. ft. Charlestown Mall outside of Chicago for $9.5 million, $11 per sq. ft.
Those in the industry eager to buy anticipate that the second half of this year will be even better. National Retail Properties has invested $38.6 million in 10 centers so far this year—less than it anticipated—but expects the second half of the year to be better. CEO Craig Macnab said “…our activity in the second half looks like it may allow us to reach our targeted acquisition goal of $170 million this year.”
Coming To Market
Several consultants closely watching the availability of properties, expect that “in hard-hit markets such as California, Arizona, Las Vegas—there will be more distressed centers coming to market that are priced to sell. “And,” said one, “more class A, B and C assets, which will result in more competition from knowledgeable investors and landlords.”
They see many new opportunities on the near horizon. With most of these shopping centers trading hands having substantial vacancies, experienced dealmakers anticipate an increase in third-party management for established companies with track records in management and leasing, and an opportunity for local brokers with a strong knowledge of the immediate market—and solid relationships in the trade area--to bring new tenants to these centers.
More information on SHOPPING CENTER DIGEST, EXPANDING RETAILERS, the weekly SCD Eflash, the DIRECTORY OF MAJOR MALLS and our products may be obtained from our website, www.shoppingcenters.com .
There are numerous reasons for the surge in the number of shopping centers that have been changing ownership recently—and each contributes to the accelerating trend of the marked increase in real estate mergers and acquisitions.
Whether it’s due to cash-strapped landlords forced to sell distressed properties, pent-up capital finally pushing investors to begin financing deals, owners walking away from projects now worth less than their mortgages and adding to the available supply, mortgage-holders foreclosing on delinquent properties, the growing money supply, foreign-capital rushing to invest in real estate, all of the above—and perhaps some reasons not covered—throughout US and Canada, new names are replacing those of the former owners.
Among some of the more active acquirers in numbers of deals are RioCan and Cedar Shopping Centers, Kimco and BIG, Inland Real Estate Group, Edens & Avant, Weingarten. Since they’re mainly targeting grocery-anchored, neighborhood projects, rather than large regional malls, it is understandable why they are in the forefront of done deals.
If the buyers have cash readily available, they don’t have to search for the deals.
The Deals Keep Coming
From Edward Sonshine, CEO of RioCan, which is acquiring projects in the US and Canada and has some $500 million in its pipeline: “If you’re a cash buyer, it’s amazing…it just keeps coming at us.” In the US, “the properties are in great shape but the owners are a bit stressed.” The fact that the Canadian dollar and economy are stronger now than in the US, he added, doesn’t hurt.
The company has acquired centers in PA, NJ, VA, and TX, and now has 15 US projects, with expectations that the number will climb to 25 by the end of 2010.
Weingarten is on target to acquire $75-$125 million in deals this year; executives said they could have acquired more properties this year but were expecting cap rates—which they estimated at 6.25%-7.25% for grocery-anchored centers in major markets—would improve even more in 2011 and 2012 as banks and lenders have to deal with more defaults from financially troubled owners.
Specific regions are being targeted by some landlords: Weingarten in Florida, and other metro areas it considers in its 10 prime target areas; Edens & Avant, the Washington, DC, area, for example.
Back To Lenders
Though many of the former owners may be having substantial money problems—according to one source, distressed commercial properties may reach $200 billion—that is not always the case. Nor are those returning properties to the mortgage holders always without capital; sometimes the landlords have the cash but decide it makes better business sense to give up the project.
For example, Taubman Centers stopping paying on its $135 million mortgage on the Pier Shops at Casesars in Atlantic City, NJ, because it estimated it was worth now—because of vacancies and depressed real estate values—only $52 million.
Similarly, Simon Property Group walked away from Palm Beach Mall in West Palm Beach, FL; Macerich ditto on Valley View Center in Dallas, TX; Vornado on Del Monte Square in San Francisco, CA.
Perhaps the biggest and most flipped project of all is the $2 billion, Xanadu complex in the New Jersey Meadowlands; there the five lenders headed by Colony Capital have taken it over with intentions of finally completing it. The overwhelming cost of the development led to the bankruptcy and demise of The Mills, which first proposed the project; it was approved in 2003 and was to have been completed in 2007.
Sound Business Decision
Some consider the defaults a sound business decision. “In many cases,” said one financial maven, “it’s a strategic move” and hasn’t hurt many of the companies. At this writing, shares of Macerich are up 51%, Simon 42%, Vornado 40% and Taubman 35%.
Several of these REITs are also taking advantage of low interest rates to refinance their debt—Simon, Kimco, Vornado, etc—putting them into a better position to acquire good properties in the near future. Or selling some of their properties at high prices: Kimco sold 33 assets in Florida, Southern California, and the DC area for $370 million; Simon acquired a portion of 2.3 million sq. ft. Galleria Mall in Houston for $260 million. And of ccourse, its recent $2.3 billion acquisition of the 21 outlet centers from Prime Outlets.
And for others, who have acquired some of the foreclosed shopping centers, they have been able to do so at substantially below their replacement cost.
World Properties acquired the 1.4 million sq.ft. Cincinnati Mall for $10.5 million, $7.50 per square foot; Moison Investment Co purchased the 847,000 sq. ft. Charlestown Mall outside of Chicago for $9.5 million, $11 per sq. ft.
Those in the industry eager to buy anticipate that the second half of this year will be even better. National Retail Properties has invested $38.6 million in 10 centers so far this year—less than it anticipated—but expects the second half of the year to be better. CEO Craig Macnab said “…our activity in the second half looks like it may allow us to reach our targeted acquisition goal of $170 million this year.”
Coming To Market
Several consultants closely watching the availability of properties, expect that “in hard-hit markets such as California, Arizona, Las Vegas—there will be more distressed centers coming to market that are priced to sell. “And,” said one, “more class A, B and C assets, which will result in more competition from knowledgeable investors and landlords.”
They see many new opportunities on the near horizon. With most of these shopping centers trading hands having substantial vacancies, experienced dealmakers anticipate an increase in third-party management for established companies with track records in management and leasing, and an opportunity for local brokers with a strong knowledge of the immediate market—and solid relationships in the trade area--to bring new tenants to these centers.
More information on SHOPPING CENTER DIGEST, EXPANDING RETAILERS, the weekly SCD Eflash, the DIRECTORY OF MAJOR MALLS and our products may be obtained from our website, www.shoppingcenters.com .
Saturday, August 14, 2010
Luxury Retailers Head For Outlets, Simon Cuts Out 3 Centers In Bid For Greater Dominance, And We Take A Close Look At This Important Niche Of Outlet Centers
This column of Strolling the Agora appears in the August 16, 2010 Issue of SHOPPING CENTER DIGEST
It has been some time since we last took a good luck at the outlet market, a small but extremely part of the mainstream shopping center/retail chain industry, especially since some of the leading high-end retailers— Neiman Marcus, Nordstrom, Lord & Taylor— now are moving into this niche which has been an important focus of many of their competitors for years.
And, also, since the mighty Simon Property Group, whose Chelsea Property Group is the largest outlet landlord, has been awaiting approval from the Federal Trade Commission to become even larger with a $700 million acquisition of Prime Outlets from The Lightstone Group. After an antitrust review, SPG recently agreed to cut three projects out of Prime’s portfolio, still leaving it with a total of 63 outlet centers after the acquisition; the next largest landlord, Tanger Factory Outlet Centers, has half the number of outlets.
And then when you get into the next tier of owner-developer, you get one just barely into double-digit projects and then many others in single digits.
At a quick glance, some may see why the FTC was concerned about a possible monopoly or overwhelming dominance in specific markets by a single landlord. With the revision of its pending acquisition, SPG is hoping for a quick conclusion.
Excluded from the deal, now, are Prime Outlets’s Livermore Valley project in Livermore, CA; within about 65 miles of this project, SPG’s Chelsea already has three competing centers in Vacaville and Gilroy. Then cut out of the deal also are Prime’s St. Augustine, FL, property, where Chelsea has one also; and then, in the Dallas-Ft. Worth market, there would be two other competing centers, Prime’s Grand Prairie, TX, and Chelsea’s in Allen, TX. Outlet centers draw from a much wider trade area than the 5-15 miles for a regional mall.
No Great Impact
When we start taking a close look at this segment of our industry—if we’re talking only of an actual number of projects without talking of GLA--it doesn’t make a great impact on the estimated 100,000 shopping centers that make up our industry. According to the International Council of Shopping Centers, as of June 2009, there were 216 outlet centers ranging from a small 16,000 sq. ft. up to 844,000 sq. ft.
According to another source, Outletbound.com, there are 275 outlet centers; it had published a directory but that was discontinued after its 13th edition.
As a side issue, we’re not even getting into any of the value-oriented or hybrid projects such as the Mills centers, many of which were in the range of 1.5 million sq. ft., and acquired by SPG after The Mills’s bankruptcy—we’re just sticking with this niche, the outlet industry.
But yet, it is growing in importance in today’s environment and continuing, stubborn recession, as many luxury retailers--unable to attract free-spending customers--must find other venues in which to sell their merchandise without diminishing the brand through heavy discounting. To such as Saks Inc, its Off 5th outlet enables it to reach shoppers who may rarely, if ever, venture into one of its pricier mainstream stores.
More On The Way
When Lord & Taylor opened its first outlet store in February in Elizabeth, NJ, sales were so strong that company executives quickly agreed to open two more units by year’s end.
Bloomingdale’s is opening its first outlet store Aug 20 in Woodbridge, VA, and has three more in the pipeline before the end of the year.
Michael Gould, CEO of Macy’s, parent of Bloomingdale’s, said: “The outlet is a different channel and, for the most part, a different customer.”
Lord & Taylor’s CEO Brendan Hoffman was quoted as saying these types of stores are “a way to further expand your relationship with your existing customer…and to reach out to a new customer, who isn’t as affluent and who may be younger.”
So when we’re describing the tenants who are flocking to this niche, the type of retailer we’re speaking of is specializing in apparel, mainly women’s wear, men’s wear, shoes, with a smaller segment going into accessories, housewares and kitchen products, gifts, jewelry.
Lower Prices
Historically—and still—outlet prices are 30%-70% lower than that of merchandise sold at its full-price stores; according to those in the industry, these prices are 30%-50% lower for merchandise made especially for outlet stores that are comparable in quality to that of full-price stores, but not available there.
When outlet centers first grabbed the attention of the industry some 30 years ago [we published an annual directory, Factory Outlet World, and then discontinued it after several editions], most of these stores where operated by the manufacturers at their factories, thereby, factory outlet stores. For many years, the commentary was that the newly built outlet centers had retailers who sold “seconds and irregulars” and “distressed out-of-season” merchandise, and that the stores were the dumping ground for marked-down leftovers that had been rejected by mainstream customers.
That is no longer the case, say many in the industry, especially within the last few years, with Polo, ALDO, Diane von Furstenberg, Perry Ellis, Armani, Yvs St. Laurent, and the like operating profitable multiple stores for many years.
Also, the first centers built were in secondary and tertiary markets, far away from urban centers; this was because tenants did not want to compete with their full-price stores, and the manufacturers were afraid of competing against their main customers, the department stores and mainstream specialty stores. Though this is no longer that important a requirement, new projects usually are still located outside of metro markets and in tourist destination centers.
Many of the most successful of these projects cater to day-shoppers who are bused in for a whirlwind spree at luxury stores, such as Chelsea’s Woodbury Commons in Central Valley, NY, which opened 25 years ago and where annual per sq. ft. sales are in the four digits.
More information on Shopping Center Digest, Expanding Retailers, the weekly SCD Eflash, and Directory of Major Malls may be obtained from our website, www.shoppingcenters.com
.
It has been some time since we last took a good luck at the outlet market, a small but extremely part of the mainstream shopping center/retail chain industry, especially since some of the leading high-end retailers— Neiman Marcus, Nordstrom, Lord & Taylor— now are moving into this niche which has been an important focus of many of their competitors for years.
And, also, since the mighty Simon Property Group, whose Chelsea Property Group is the largest outlet landlord, has been awaiting approval from the Federal Trade Commission to become even larger with a $700 million acquisition of Prime Outlets from The Lightstone Group. After an antitrust review, SPG recently agreed to cut three projects out of Prime’s portfolio, still leaving it with a total of 63 outlet centers after the acquisition; the next largest landlord, Tanger Factory Outlet Centers, has half the number of outlets.
And then when you get into the next tier of owner-developer, you get one just barely into double-digit projects and then many others in single digits.
At a quick glance, some may see why the FTC was concerned about a possible monopoly or overwhelming dominance in specific markets by a single landlord. With the revision of its pending acquisition, SPG is hoping for a quick conclusion.
Excluded from the deal, now, are Prime Outlets’s Livermore Valley project in Livermore, CA; within about 65 miles of this project, SPG’s Chelsea already has three competing centers in Vacaville and Gilroy. Then cut out of the deal also are Prime’s St. Augustine, FL, property, where Chelsea has one also; and then, in the Dallas-Ft. Worth market, there would be two other competing centers, Prime’s Grand Prairie, TX, and Chelsea’s in Allen, TX. Outlet centers draw from a much wider trade area than the 5-15 miles for a regional mall.
No Great Impact
When we start taking a close look at this segment of our industry—if we’re talking only of an actual number of projects without talking of GLA--it doesn’t make a great impact on the estimated 100,000 shopping centers that make up our industry. According to the International Council of Shopping Centers, as of June 2009, there were 216 outlet centers ranging from a small 16,000 sq. ft. up to 844,000 sq. ft.
According to another source, Outletbound.com, there are 275 outlet centers; it had published a directory but that was discontinued after its 13th edition.
As a side issue, we’re not even getting into any of the value-oriented or hybrid projects such as the Mills centers, many of which were in the range of 1.5 million sq. ft., and acquired by SPG after The Mills’s bankruptcy—we’re just sticking with this niche, the outlet industry.
But yet, it is growing in importance in today’s environment and continuing, stubborn recession, as many luxury retailers--unable to attract free-spending customers--must find other venues in which to sell their merchandise without diminishing the brand through heavy discounting. To such as Saks Inc, its Off 5th outlet enables it to reach shoppers who may rarely, if ever, venture into one of its pricier mainstream stores.
More On The Way
When Lord & Taylor opened its first outlet store in February in Elizabeth, NJ, sales were so strong that company executives quickly agreed to open two more units by year’s end.
Bloomingdale’s is opening its first outlet store Aug 20 in Woodbridge, VA, and has three more in the pipeline before the end of the year.
Michael Gould, CEO of Macy’s, parent of Bloomingdale’s, said: “The outlet is a different channel and, for the most part, a different customer.”
Lord & Taylor’s CEO Brendan Hoffman was quoted as saying these types of stores are “a way to further expand your relationship with your existing customer…and to reach out to a new customer, who isn’t as affluent and who may be younger.”
So when we’re describing the tenants who are flocking to this niche, the type of retailer we’re speaking of is specializing in apparel, mainly women’s wear, men’s wear, shoes, with a smaller segment going into accessories, housewares and kitchen products, gifts, jewelry.
Lower Prices
Historically—and still—outlet prices are 30%-70% lower than that of merchandise sold at its full-price stores; according to those in the industry, these prices are 30%-50% lower for merchandise made especially for outlet stores that are comparable in quality to that of full-price stores, but not available there.
When outlet centers first grabbed the attention of the industry some 30 years ago [we published an annual directory, Factory Outlet World, and then discontinued it after several editions], most of these stores where operated by the manufacturers at their factories, thereby, factory outlet stores. For many years, the commentary was that the newly built outlet centers had retailers who sold “seconds and irregulars” and “distressed out-of-season” merchandise, and that the stores were the dumping ground for marked-down leftovers that had been rejected by mainstream customers.
That is no longer the case, say many in the industry, especially within the last few years, with Polo, ALDO, Diane von Furstenberg, Perry Ellis, Armani, Yvs St. Laurent, and the like operating profitable multiple stores for many years.
Also, the first centers built were in secondary and tertiary markets, far away from urban centers; this was because tenants did not want to compete with their full-price stores, and the manufacturers were afraid of competing against their main customers, the department stores and mainstream specialty stores. Though this is no longer that important a requirement, new projects usually are still located outside of metro markets and in tourist destination centers.
Many of the most successful of these projects cater to day-shoppers who are bused in for a whirlwind spree at luxury stores, such as Chelsea’s Woodbury Commons in Central Valley, NY, which opened 25 years ago and where annual per sq. ft. sales are in the four digits.
More information on Shopping Center Digest, Expanding Retailers, the weekly SCD Eflash, and Directory of Major Malls may be obtained from our website, www.shoppingcenters.com
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