Archive for November 6th, 2008
by David Bodamer November 6th, 2008
Mezzanine lender Dominion Capital Management LLC didn’t anticipate developing shopping centers when it lent $170 million to developer Premier Properties USA Inc. But that is what Dominion is doing since Premier fell into bankruptcy court last spring.
Dominion, a small lender based in Atlanta, foreclosed in April on Premier’s 11 shopping centers, which were in varied stages of development. With them, the lender inherited a pile of problems: anxious first-mortgage holders; millions of dollars in contractors’ liens; and one new center where allegedly faulty construction forced retailers to vacate.
“It saddled us with a lot of problems we’re still solving from Premier,” Dominion principal Ben Easterlin said of the foreclosure. “We are a lender, not a developer.”
Dominion’s travails with the Premier shopping centers highlight the struggles that many lenders will endure in coming years as the souring economy pushes commercial real-estate projects into default on loans. Many early casualties are, like Premier, troubled companies likely to leave behind contorted projects for their lenders to untangle.
Link.
Related Topics: Development, Finance, News, Retail Real Estate |
by David Bodamer November 6th, 2008
This is becoming a common story. Construction was suspended on a $350 million project in Bloomfield Park, Michigan.
“We remain committed to the project,” sad Scott R. Schroeder, Developers Diversified spokesman. He said the developer had put up its 20% stake.
“The construction is significantly under way. We are anxious to get back to work and complete the project as soon as possible,” he said.
Bloomfield Park is a mixed-use retail development that began as an idea in 1992 when Craig Schubiner, president of the Harbor Cos., started assembling 88 acres near Telegraph and Square Lake roads.
Developers Diversified and Coventry joined forces in a development agreement in 2006. The project was expected to open in late 2009.
The project was more than 50% leased when Coventry signed on in August 2006, according to information on its Web site. Confirmed tenants include Ann Taylor, Barnes & Noble, BCBG, Coldwater Creek and Pacific Sunwear.
Related Topics: Development, Mixed-Use, News, REITs, Retail Real Estate |
by David Bodamer November 6th, 2008
Saks Inc. (SKS) is shutting down the unprofitable tween-girls chain Club Libby Lu, five years after buying the upstart business and three years after first exploring its potential sale.
The chain, purchased in 2003 for $12 million, had 11 stores at the time and has since grown to 78 stand-alone shops and 20 locations within department stores once owned by Saks. Club Libby Lu’s closure should be completed in six months.
Some 1,700 employees will be affected by the shutdown of the chain, which had nearly $60 million in sales for the year ended Feb. 2.
“Club Libby Lu is an innovative concept that was a better strategic fit with our traditional department-store business,” said Chairman and Chief Executive Steve Sadove. He added the closure will allow Saks to put its complete attention on its Saks Fifth Avenue business.
Charges of about $11 million will be recorded for the fiscal third quarter ended Saturday, with another $18 million to $27 million in the current quarter.
Link.
Related Topics: News, Retail |
by David Bodamer November 6th, 2008
A private equity firm is buying a 17 percent stake in Whole Foods Market, a much-needed vote of confidence for a chain that is being battered by increased competition and a weak economy.
The news came as the company announced a huge drop in fourth-quarter earnings amid sputtering sales.
Under the terms of the agreement, Green Equity Investors, an affiliate of Los Angeles-based Leonard Green & Partners, will invest $425 million in the company.
“We view it as a strong vote of confidence in our business model and our long-term growth prospects despite the tough current economic environment,” said John P. Mackey, co-founder and chief executive of Whole Foods, in a call with investors on Wednesday. “This equity infusion, combined with our strong cash flow from operations, gives us the financial flexibility to manage through these difficult economic times.”
Link.
Related Topics: Investment, News, Retail |
by David Bodamer November 6th, 2008
That may be overstating things a bit. But Wal-Mart certainly is doing well these days. Wasn’t it a year ago or so that everyone was talking about the Bentonville behemoth stumbling and perhaps hitting the limits of its business model? It seems to be doing extremely well now as we face recession with so many customers trading down. This doesn’t change its growth prospects for future locations–something it’s become very cautious about. But it is obviously good for the chain that it’s existing locations are doing very, very well in today’s climate.
Sales at department stores and specialty retailers are in free fall. They are cutting staff, discounting merchandise and closing stores to survive. But even as the financial turmoil strangled discretionary spending at many stores, it sent struggling consumers into the arms of Wal-Mart — and left it, the world’s largest retailer, poised for a blockbuster Christmas.
“In my mind, there is no doubt that this is Wal-Mart time,” H. Lee Scott Jr., the company’s president and chief executive, said recently at a meeting of analysts and investors in Wal-Mart’s hometown, Bentonville, Ark. Referring to the discount chain’s founder, he added, “This is the kind of environment that Sam Walton built this company for.”
During the nation’s last severe recession, in the early 1980s, Wal-Mart was mainly a regional chain in the Southeast with fewer than 300 stores. Old-line national discount chains like Woolworth’s were fading into irrelevance, but nothing had risen to take their place.
Related Topics: News, Retail |
Taken From Reader Comments
by David Bodamer November 6th, 2008
Herman Brunson raises an excellent question on a previous post, Private Equity Pain. Will creditors rework loans? I think that the whole securitization model complicates the situation because it’s harder to modify loans that are part of CMBS pools. But it does seem like reworking loans would be a better bet than having loans that end up crippling borrowers, no?
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