Archive for November, 2008
by David Bodamer November 26th, 2008
There’s been some buzz recently that customers might not be able to redeem gift cards because of store closures and bankruptcies. That might be true with some retailer branded cards, but largely is not a problem. In any case, to allay fears, Jones Lang LaSalle has taken the step of guaranteeing its gift cards.
The company, which operates 120 malls and shopping centers, said it will guarantee gift cards between Friday and Jan. 21 sold by national retailers that are its tenants, if they declare Chapter 7 bankruptcy.
Cards that no longer hold value will be replaced with a mall gift card of equal value by Feb. 1, the company said. If they cannot verify the value of the card, Jones Lang LaSalle will offer a $20 mall card, unless the face value shows a lesser amount. Mall gift cards are issued by banks, rather than retailers, the company said.
Jones Lang LaSalle said it issued the pledge in response to an e-mail that is circulating, which claims gift card buyers may get stuck holding worthless cards if chains close their doors.
Dwellgo also looked at the email that’s been circulating, which lists a lot of retailer names and claims consumers won’t be able to redeem gift cards at many of them.
The email that we received noted massive retail store closures, yet after further examination contained both truth and sometimes total lies. As well, the stores listed had already made announcements of bankruptcy or store closings prior to the 2008 financial crisis.
What remains unknown at this time is how the events of the downturn and credit crisis over the last 6 months will affect retailers moving forward. We’re definitely hearing comments ranging from caution to outright worry from our Commercial Real Estate brethren (and I’m speaking about the US, not specifically Austin here).
A final note on giftcards for retailers who have announced bankruptcy…Federal law does allow for companies to stop honoring gift cards when they file for Chapter 11 bankruptcy protection, but of course not all businesses do. Gift cards may continue to be accepted while the retailer reorganizes or card redemption may be temporarily suspended and resumed later. Financial experts have stated that to be safe, it’s a good idea to redeem giftcards soon after receiving them, especially in these uncertain economic times.
Related Topics: Management & Leasing, News, Retail |
by David Bodamer November 25th, 2008
Bill Ackman’s keeping busy. Target may have rejected his ambitious real estate plan. Now Ackman’s got a new project–General Growth Properties.
This helps explain why General Growth’s stock has started to recover in recent days. After hitting an all-time low of $0.24 per share, the stock has gained ground this week. As I write this, it’s up to $1.69 per share.
After the close yesterday, Bill Ackman’s Pershing Square Capital hedge fund disclosed a 7.5% stake (20,080,690 shares) in embattled REIT General Growth Properties Inc. (NYSE: GGP).
Pershing Square purchased the subject shares and the swaps, for a total consideration of $9,261,789. Trading data reveled with the filing, showed the firm was buying common stock in the $0.35-$0.51 range in November. Shares of GGP closed at $1.00 yesterday, with a 52-week low recently set at $0.24.
In the filing, the hedge fund noted that they expect to conduct discussions from time to time with management or others about the company.
Related Topics: Investment, News, REITs, Retail Real Estate |
by David Bodamer November 25th, 2008
There was a shooting this past weekend in a mall in Seattle–a possible gang-related incident. It does not appear to be an instance where someone was specifically targeting a mall and trying to wreak violence. In other words, it was the kind of incident that even the best security measures would be hard to prevent.
The story did prompt the Seattle Post-Intelligencer to look at what kinds of security malls have in place in the region. It makes for an interesting read.
The crime at Southcenter could have happened anywhere, Pacific Place general manager Lynn Beck said.
“It’s an unfortunate reminder that we all need to do certain things to be prepared,” she said.
…
“People come here to shop, they come here for entertainment,” Beck said. “Does every business need metal detectors? It becomes a difficult question. You want to keep the environment welcoming, friendly.”
…
Security officers at Bellevue Square are purposely visible, she said, and available for addressing skirmishes or directing shoppers to a particular store.
To augment its security staff in busy periods, Kemper Development hires police officers through Puget Sound Executive Services, which helps place Bellevue police officers and Washington State Patrol officers.
Northgate Mall contracts with Los Angeles-based Andrews International for security. Andrews’ officers patrol by vehicle outside and on foot and on scooters inside. They provide security escorts and monitor surveillance systems.
The mall’s “tenant awareness” program trains businesses on how to watch for suspicious activity and report it to security, said Sarah Bonds, area marketing director for Simon Property Group, which owns the Northgate and Tacoma malls.
…
But Doug Reynolds, director of security for the Mall of America in Minnesota, provided some insight into how security works at the nation’s largest retail and entertainment complex.
To keep 42 million shoppers per year safe, security officers use closed-circuit TV surveillance, radios, pepper spray and collapsible batons. A few months ago, Mall of America security officers began training in the defensive martial arts techniques of Krav Maga.
Related Topics: Management & Leasing, News, Retail Real Estate, Security |
by David Bodamer November 24th, 2008
REIT Wrecks brings us a nice rundown of the carnage in commercial mortgages that’s unfolded after Henry Paulson’s sudden about face on how he was going to use the TARP money. The article talks about how what’s going on with the CMBX indices seems like an overreaction.
The default rate on commercial mortgages remains near its historical low, although it is increasing. Overall, the number of commercial mortgages packaged into securities that are 30 days or more past due rose to 0.64% in October from 0.39% at the end of last year. That is the highest delinquency rate in two years but still far from the kind of carnage that occurred during the commercial real-estate collapse of the early 1990s. Back then the cumulative default rate on loans made in 1986 reached 36%.
The trading levels of CMBS bonds imply a cumulative loss rate of as much as 40% on top-rated bonds, which means that at least 70% of the underlying loan pool would have to go into default, [emphasis added] said Richard Parkus, head of CMBS research at Deutsche Bank Securities Inc. But he, like other market observers, views that as an unlikely scenario. …
The spreads between the CMBX, a credit market index that tracks the values of commercial real-estate bonds, widened to another record level Thursday. And CMBS bonds with triple-A ratings now yield more than 14 percentage points above yields on 10-year U.S. Treasury notes, according to Trepp, a New York company that tracks the commercial real-estate-finance market. That compares with a 1.5 percentage point spread one year ago and an 8.3 percentage point spread just one week ago.
Related Topics: Finance, News, Trends |
by David Bodamer November 24th, 2008
Target Corp. said it decided not to pursue various real-estate structure ideas proposed by activist investor Pershing Square Capital Management, calling the potential value of the deal “highly speculative.”
Last month, the hedge fund led by William Ackman set forth a plan for Target to spin off the land it owns into a separate, publicly traded real-estate investment trust in order to unlock its value. Earlier this week he revised the plan to satisfy Target’s various misgivings. Unlike retailers that lease most or all of their outlets, Target owns 85% of the real estate for its stores, giving it control over store designs and remodeling.
On Friday, the box-box retailer also expressed concern about the costs, strategic and operating risks and loss of financial flexibility in executing such a deal amid the current economic environment. In addition, Target again noted the proposed structure could have had an adverse impact on its debt ratings.
“Target does not share Pershing Square’s perspective that execution of this proposed transaction will generate measurable shareholder value over time and believes the risks, particularly in light of the serious challenges facing our retail and credit-card segments in 2008 and 2009, are significant,” Chief Executive Gregg Steinhafel said.
Link.
Related Topics: Investment, News, REITs, Retail, Retail Real Estate |
by David Bodamer November 24th, 2008
Restaurant chains with a bulk of their locations in malls and retail centers are bracing for a holiday shopping season that is expected to bring fewer potential customers past their doors.
Many restaurant chains have some units in malls, whether in the food court, elsewhere in the mall or as freestanding locations in the parking lot. However, some have a greater percentage of their stores in malls than others, and thus are more susceptible to traffic declines, especially during the all-important holiday shopping season.
Among those are California Pizza Kitchen Inc., which has about 89% of its 251 restaurants in or near retail centers and malls, and Cheesecake Factory Inc., with two-thirds of its stores in or near shopping centers. Most Red Robin Gourmet Burgers Inc. restaurants are also tied to retail centers, while Kona Grill Inc.’s 20 restaurants are also primarily within shopping centers. P.F. Chang’s China Bistro Inc. and Ruby Tuesday Inc. are also exposed to downturns in retail traffic, analysts say.
“These aren’t necessarily brands you make a reservation to,” Oppenheimer & Co. restaurant analyst Matthew DiFrisco said. “They live off the flow of traffic going to lifestyle centers and malls, and are trying to intercept you while you’re out shopping.”
Link.
Related Topics: News, Retail |
by David Bodamer November 21st, 2008
Mortgages on offices, shopping malls and hotels that were based on projections of soaring income during the real estate boom are roiling the bond market.
A $209 million loan made by JPMorgan Chase & Co. to finance the Westin La Paloma Resort & Spa in Tucson, Arizona, and the Westin Hilton Head Island Resort & Spa in South Carolina, is near default after cancellations sapped revenue, according to Standard & Poor’s. In southern California, the owner of the Promenade Shops at Dos Lagos missed two payments, according to analysts at Deutsche Bank AG.
Both loans were given to borrowers based on estimates that rents and hotel revenue would rise, and then were packaged with similar debt into a $1.16 billion bond sold by JPMorgan to investors. So-called pro-forma loans outstanding total more than $40 billion, according to Barclays Capital, all of which were put into securities. Concern that the Westin Portfolio and Promenade debt may be the first of many of those loans to default sent yields on commercial-mortgage backed securities to record highs relative to benchmark interest rates.
“These kinds of loans written during the height of the real estate boom could be the first to have problems,” said Christopher Sullivan, who oversees $1.3 billion as chief investment officer at United Nations Federal Credit Union in New York. “They were underwritten with outlandish expectations on rents and property appreciation that will turn out to be fiction.”
Link.
Related Topics: Finance, News |
by David Bodamer November 20th, 2008
This was hinted at earlier in the week. Steve & Barry’s is liquidating.
Three months after purchasing apparel chain Steve & Barry’s out of bankruptcy, the new owners will liquidate the remaining 173 stores after plans to operate the chain fell victim to slumping retail sales and difficulty in getting financing.
Investment firms Bay Harbour Management and York Capital Management, which had bought the company for $168 million in August, plan to liquidate their holdings by early 2009, according to the company’s Chapter 11 bankruptcy filing on Wednesday in Manhattan.
“This is the hardest environment in 30 years for retailers,” said Peter Schaeffer, a partner with corporate restructuring and investment adviser Carl Marks. “Chances of companies that have filed for bankruptcy coming out whole is difficult.”
Previous entries:
- September 17, 2008, Steve & Barry’s to Keep 173 Stores, Shut 103 Others
- September 4, 2008, Why Did Steve & Barry’s Avoid Data Collection?
- August 14, 2008, Steve & Barry’s Landlords Fight Sale
- August 5, 2008, Steve & Barry’s Sells for $163M
- July 14, 2008, More Retailer News
- July 14, 2008, Playing Serious Catch-Up
- July 8, 2008, The Fate of Steve & Barry’s
- July 1, 2008, Steve & Barry’s May Close Stores
- June 23, 2008, Steve & Barry’s Cash Crunch
Related Topics: News, Retail |
by David Bodamer November 20th, 2008
Hampton’s new Target will be molded in a new company prototype, a hybrid discount store with an expanded grocery format that will help it remain competitive with Wal-Mart, which began rolling out a similar store strategy within the last year.
“It’s a mix between a general merchandise Target and a Super Target,” Anderson said. “We find that what our guest is looking for is to have the most things under one roof.”
Employees of the existing Hampton Target location will be relocated to the new store. None are expected to lose their jobs.
The company recently finished a re-model and expansion project at its Newport News store, expanding the grocery section and improving its pharmacy, among other things. Target also has two stores in the Williamsburg area.
Link.
Related Topics: News, Retail |
Holiday Sales Predictions
by David Bodamer November 26th, 2008
There are a lot of different numbers floating around for what the holiday season might look like. Here’s a rundown of the various predictions as well as what the same organizations projected last year versus what they actually measured.
ICSC bases its projections on the same-store sales figures for the November/December period. ICSC is projecting same-store sales to grow 1.0 percent. Last year, the trade organization projected an increase of 2.5 percent. The actual increase it measured during the period was 2.1 percent.
Retail consulting firm America’s Research Group also bases its projections on same-store sales for November/December. In a joint report with UBS, it projected same-store sales to decline 1.0 percent. It is the first time in the 23 years of compiling the survey that America’s Research Group has a projected a decline. Last year, it projected a 1.8 percent increase vs. the actual 2.1 percent increase.
So ICSC’s projection last year was a bit high and America’s Research Group was a bit low. If that pattern holds true again, same-store sales could be flat.
Meanwhile, ShopperTrak, a firm that compiles foot traffic counts at malls, bases its projections on total retail sales for November/December. The group is projecting an increase of 0.1 percent. Last year, the group projected a 3.6 increase. The actual increase, according to the group, was 4.5 percent. The group is also projecting a 9.9 percent drop in foot traffic compared with last year.
Retail consultant TNS Retail Forward also measures retail sales for the November/December period. This year, the projection is for an increase of 1.5 percent. That would make it the weakest holiday since 1991 in the group’s estimation. Last year, the firm’s projection was a 3.3 percent increase. The actual increase, according to TNS, was 2.7 percent.
The National Retail Federation measures total retail sales for November/December. The group is projecting a 2.2 percent increase this season. Last year, the group projected a 4.0 percent increase. The actual increase, according to NRF’s tally, was 3.0 percent.
Lastly, consulting firm Deloitte looks at sales for the three-month period from November to January. This year, it is projecting growth from 2.5 to 3.0 percent. Last year, the firm projected an increase during that period of between 4.5 and 5.0 percent. The actual increase, according to Deloitte’s numbers, was 3.4 percent.
So, there it is. Every group, not surprisingly, is projecting a weaker holiday shopping season than last year. Last year, almost every group–except for America’s Research Group–ended up being too bullish in its projections. If that’s any guide, the season may be even worse than these numbers suggest.
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