Burger King Puts Itself on the Block

Private equity deals appear to be coming back in vogue in the retail sector. Earlier today, The Street reported that Burger King has been discussing buyout possibilities with several private equity players. In the past two years, the chain has been trying out new strategies in an effort to catch up with its main rival, McDonald’s, and the desire to go private might be tied to the greater freedom afforded retailers who don’t have to report to Wall Street. Burger King has gone through a buyout and a subsequent IPO before: in 2002, it sold itself to the consortium of TPG Capital, Bain Capital and Goldman Sachs. The partners put Burger King back on the public market in 2006.

Right now may be a good time to market itself to prospective buyers, as private equity players are sitting on mountains of cash that need to be spent. But buyout specialists are no longer as indiscriminate as they once were. Before they spend their money, they want to make sure the retailer they pick up is not going to become a money loser. For example, Saks Fifth Avenue recently put itself on the block as well. But so far, it has failed to secure a buyer because private equity worries about the outlook on luxury goods in the current environment.

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And The Winners Are …

I’m pleased to announce here the winners of Retail Traffic’s 21st Annual Superior Achievement in Design & Imaging Awards.

The judging took place recently in Chicago. Overall, the jury tabbed seven projects–three as winners and four others as honorable mention recipients. In addition, we decided to recognize two other projects that fell just short in the judging with special Editor’s Choice merits.

The big winner this year was RTKL, which took home the Grand SADI for its Dolce Vita Tejo project in Lisbon, Portugal, which was the winner in the New Enclosed Center category. Judges were impressed not only with the aesthetics of the project, but also with the integration of sustainable technology into the design. The entire project is covered by one of the largest ethylene tetraflouroethylene roof structures in the world. The material allows sunlight to pass through while keeping heat out, enabling the center to make maximum use of natural lighting while keeping cooling costs low.

In addition, RTKL was also the winner in the Renovated or Expanded Enclosed Center category for its Chadstone Shopping Centre renovation in Melbourne, Australia.

GHA design studios was this year’s other winner taking home the top prize in the New Fast/Casual Dining category for its Carrefour Laval Food Court in Lava,l Canada.

The award winners and editor’s choice projects can be viewed below and a full write-up of the awards with project details will appear in the September/October issue of Retail Traffic.

New Enclosed Center
Winner
Grand SADI Winner

Dolce Vita Tejo
Lisbon, Portugal
RTKL

Dolce Vita Tejo

Dolce Vita Tejo

Dolce Vita Tejo

Dolce Vita Tejo

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Blackstone Pays Back Former Fund Investors (Monday’s News & Notes)

Investors in commercial real estate funds that lost money in the current downturn can take heart: their fund managers might be forced to recoup at least some of their losses. Bloomberg reports that private equity firm the Blackstone Group has returned $3 million to investors in its Blackstone Real Estate Partners International LP, as a result of so-called “clawback” provisions. Next quarter, Blackstone might end up paying more than $15 million to investors in another real estate fund. For this and other stories about retail and retail real estate, follow the links below:

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Thoughts on Strategic Defaults (Friday’s News & Notes)

This Wall Street Journal piece about commercial property owners opting for strategic defaults is a couple days old, but it’s triggered some interesting responses.

The story recounts how some commercial real estate owners have opted to just stop making mortgage payments on some properties and turn them over to lenders and draws parallels with the trend of “jingle mail” on the residential side.

These companies all have piles of cash to make the payments. They are simply opting to default because they believe it makes good business sense.

“We don’t do this lightly,” said Robert Taubman, chief executive of Taubman Centers Inc. The luxury-mall owner, with upscale properties such as the Beverly Center in Los Angeles, decided earlier this year to stop covering interest payments on its $135 million mortgage on the Pier Shops at Caesars in Atlantic City, N.J.

Taubman, which estimates the mall is now worth only $52 million, gave it back to its mortgage holder.

“Where it’s fairly obvious that the gap is large, as it was with the Pier Shops, individual owners are making very tough decisions,” he said.

Yves Smith at the Naked Capitalism blog suggests that the tone of the article seems to give commercial real estate owners more of a pass on making these decisions than on individual homeowners who also may be walking away from mortgages.

She writes:

“The rich are different than you and me.” And the fact that they have more money means their defaults are couched as pure business decisions. But mere homeowners, told to view their house as an investment, are now castigated if they act as any professional would and cut their losses.

So is there a double standard in place? Are commercial owners being given a pass while homeowners are being lambasted for passing the buck on bad decisions?

It does appeal to my sensibilities to say that all property owners should be held to the same standards. Either we say it’s OK for everyone to employ strategic defaults or its not. I don’t think homeowners should be judged differently than commercial property owners when it comes to this. And if banks are willing to restructure loans for commercial owners, they should be willing to work with homeowners as well.

Just my two cents.

Here are some other news and notes from the past couple of days.

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CBL to Launch Mobile App

In the wake of all the fanfare surrounding Simon Property Group’s partnership with the Shopkick mobile app, CBL & Associates announced it will soon launch its own mobile app for iPhone, iPad and iPod Touch users. The mall owner feels mobile marketing is the way of the future and has been talking to app developers for the past few months. It finally settled on Slicker Interactive LLC as its partner. CBL’s mobile app, mallMerlin, will be launched at the majority of CBL’s malls by the beginning of next year.

The app will mimic the natural way people shop, according to CBL’s spokesperson. The content will be customized to the individual shopper and his/her location within the center and will include special promotions, high-definition video and in-mall navigation tools. CBL’s retail tenants will be able to participate in the program free of charge, but will have to pay a fee if they opt to upgrade their content by, for example, offering digital coupons.

Madison Marquette was the first mall owner in U.S. to launch a property-specific mobile app earlier this year, for its Asbury Park center.

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Dollar Stores Rule Retail Universe (Tuesday’s News & Notes)

The dollar stores continue to be the bright light in the still struggling retail sector. Dollar Tree appears to be looking at major expansion–up to 7,000 stores nationwide. Meanwhile, Dollar General’s recent strategies have made it a formidable rival for Walmart. For these and other stories about retail and retail real estate, follow the links below:

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CMBS Market Continues Revival (Friday’s News & Notes)

On back-to-back days we’ve now gotten word of big CMBS offerings by JP Morgan

On Thursday, Bloomberg reported that JPMorgan Chase & Co. plans to sell $1 billion of commercial mortgage-backed bonds in what would be the biggest offer of 2010.

JPMorgan’s sale, the largest this year of the debt, would grant hedge fund H/2 Capital Partners LLC, the buyer of the bottom $50 million slice, primary authority over troubled loans, according to people familiar with the transaction who declined to be identified because negotiations are private. Goldman Sachs Group Inc. and Citigroup Inc. gave those rights to investors of the highest-rated portions in a $788.5 million offering on Aug. 4.

Today, news of another offering emerged.

JPMorgan Chase & Co. is marketing $484.6 million of bonds backed by a loan to Centro Properties Group, the Australian shopping center owner seeking to refinance $2.7 billion of debt from its U.S. business.

The loan is secured by 72 retail properties owned by the Glen Waverley, Australia-based company, according to people familiar with offering who declined to be identified because terms are private. Shopping centers in Texas account for 39 percent of the pool, while properties in New York and New Jersey represent 21 percent.

Things are slowly improving.

Here are a few other headlines from the past couple days worth checking out.

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Consumers Are Cutting Back … Or Maybe Not? (Wednesday’s News & Notes)

It remains impossible to gauge what’s going on with the consumer.

Two stories hit my inbox almost simultaneously earlier today. One talks about how consumers are resisting even the deepest discounts and lays out an ominous picture.

Wal-Mart Stores Inc.’s chief financial officer, Tom Schoewe, told journalists that its deep price cuts in May and June, including the cheap ketchup and soda, weren’t enough to bring people in the door and get them to buy other things.

The cuts targeted 22 foods and other essentials at an average savings of 30 percent. The original price for the big bottle of ketchup was $2.42.

“If low-income shoppers are passing that up, that goes to show you how tapped-out they are,” said Ken Perkins, president of research firm RetailMetrics.

One key measure of revenue dropped at Walmart for the fifth quarter in a row, dragged down by its U.S. namesake stores. Customers are having a hard time stretching their dollars to the next payday, and food-stamp use is still rising, the company said.

Middle-income shoppers are not faring much better. And stores can’t even count on shoppers with jobs because of layoff fears. As for the affluent, they’re holding up better, but wild stock-market swings have them a bit spooked as well.

Sounds grim.

Yet the other piece, cites Westfield co-Managing Director Peter Lowy’s comments from the firm’s second quarter earnings call and lays out a much rosier picture.

“From an operating point of view, we’re not planning on a double dip,” Westfield co-Managing Director Peter Lowy said in a telephone interview today. “The real issue for us is not whether you’ve got 4 percent GDP growth or 3 percent or 2.5 percent, but the fact that we still have growth. Growth in sales from our retailers means we’re in a better position this year than we were last year.”

Confidence among U.S. consumers rose in August, a sign the biggest part of the U.S. economy may soon stabilize.

Westfield management are “more optimistic about retail sales in the U.S. by quoting positive trends in leasing, arrears and sales,” Rhett Kessler, a fund manager at Pengana Capital, which holds Westfield shares, said in an e-mail. “This represents a big change, particularly given their large exposure to this market.”

Let’s hope Westfield is right.

Here’s some other news and notes from recent days.

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Free Speech and Malls

freespeech
Last week brought the latest ruling in the ongoing saga about free speech in malls. A California court ruled that conversation rules at Westfield’s Roseville Galleria violate the Constitution.

At the property, Westfield bars any conversations between strangers that do not have to do with the mall itself. The case stemmed from a 2007 incident during which a youth pastor was kicked out of the property after he talked with three women about faith. The pastor sued the mall and won the ruling last week. Westfield is appealing that decision.

This is far from the first time that the issue of free speech and malls has been taken to the courts. At the heart of the debate has always been the tension between the concepts that malls are the modern equivalent of town squares, yet at the same time are clearly private property. Town squares, of course, have a rich history as places for public discourse, which can include controversial subjects and political and religious debates. But malls are places of commerce and under no obligation to provide forums for open debates and discussions.

An editorial in the Sacramento Bee echos the idea that malls should not try and limit speech and assembly:

Although they are private businesses, malls have become the current-day version of the public square, where Americans come to shop, to people-watch, mingle and, yes, even talk to strangers about something other than the latest hot gadget or which store has the best deals.

Indeed, malls are designed that way, with fountains, play areas and other public spaces.

Mall operators can’t have it both ways. They can’t go all out to lure as many people as possible, then unreasonably regulate how they can behave.

On the other hand, private property owners do have the right to dictate the rules of what happens within their properties. And mall owners have for years tried to regulate speech. Ultimately, they are places of commerce. And they do not want activities occurring that are going to intimidate people or distract them from shopping.

The debate goes at least as far back as the late 1960s. And it has been revisited for all sorts of reasons.

California’s ruling comes down squarely on the side of seeing malls as public places. But mall owners have won the argument in many other courts. So there is no clear precedent one way or the other on how courts rule in these issues. For example, a court in California in 2007 ruled that shopping malls can’t ban protesters from calling for boycotts of mall businesses. But the State Supreme Court in Connecticut in 2004 ruled a mall there had legally prohibited union members from distributing literature.

Other incidents that have become the subject of court cases include one where a mall patron in Albany in 2003 was kicked out of a mall for wearing a T-shirt with the words “Peace on Earth” and “Give Peace a Chance”. Antiwar protesters were also at the heart of the 1994 case called New Jersey Coalition Against War In The Middle East v. J.M.B. Realty and the Green Party won a ruling in 2000 after it was banned from a New Jersey property.

So what’s the right answer? My hunch is that mall owners aren’t about to change their attitude on this issue. They do not want their properties to become forums for open political or religious debates or rallies. They want their properties to be neutral spaces. The question is whether that stance is realistic any longer.

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A Glimpse At Florida’s Retail Climate

A glance at the retail fundamentals in Florida reveals a dramatically different retail scene from market to market.

What the different markets in the state have in common is that a low amount of new construction will ease pressure on rents everywhere. The lack of new supply will help keep vacancies under control and help keep rents from falling further. In fact, in Miami, rents have actually increased slightly in 2010.

The other commonality in Florida’s markets is the question of unemployment. Throughout the state, unemployment rates are hovering at or above 10 percent. That is casting a pall over the retail picture in many markets.

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