Archive for December, 2008

About Those Leases

by David Bodamer December 1st, 2008

Retailers are facing a tough decision as they suffer through a tough spell. What do you do with the leases you signed already? Do you sell the lease to another retailer? Do you keep paying and operate a losing store? Do you shut the store and keep paying rent? Do you pay lease termination fees?

The Wall Street Journal looks at how different retailers are approaching this issue.

Office Depot Inc. already has decided to pay rent for stores but keep them shuttered. The office-supply retailer signed 40 new leases that begin next year, but it doesn’t plan to operate all of the locations.

Part of the problem is that new leases are usually the most expensive to break since they have many years to maturity. Office Depot is likely stuck with the unwanted expansion because retailers negotiate leases about a year in advance.

Office Depot has been here before. In fiscal 2005, the company took a charge of $61 million, including lease-cancellation fees, to close 25 stores and three warehouses. Today, such an outlay would deal a heavy blow to the company, which has leases with varying maturities through 2032. Office Depot’s shares are down 86% this year to $1.92 as investors fret about its ability to survive.

No Comments Related Topics: Management & Leasing, News, Retail, Retail Real Estate |

CBRE Adjusts View

by David Bodamer December 1st, 2008

At the helm is President Brett White, a former broker who runs the company from its headquarters in West Los Angeles.

“Conditions have deteriorated on a scale and with a speed that no one could have predicted just a few months ago,” White said in a letter to clients this month after third- quarter profit fell 60% from the same period a year earlier.

“Market conditions of unprecedented strength are roiling the world’s financial markets,” White went on to say. “The global economy is either in, or close to, recession and 2009 is not likely to be a year of great recovery.”

White insisted, however, that the company had quickly responded to the downturn by reducing expenses and would be positioned to grab a bigger share of the real estate market when the economy eventually improved.

Link.

No Comments Related Topics: Investment, News, Trends |

Black Friday Discounts Too Deep?

by David Bodamer December 1st, 2008

The New York Times reports that deep discounts by retailers may have gotten people to shop, but not helped retailers turn a profit.

But while spending was up, there were troubling signs in the early numbers. The bargains that drove shoppers to stores were so stunning, analysts said that retailers — already suffering from double-digit sales declines the last two months — would probably see their profits erode even further.

…

The National Retail Federation, adding up sales Thursday through Saturday and projected sales for Sunday, said that each shopper spent about 7 percent more this year than last year. Shoppers spent an average of $372.57 Friday though Sunday, according to the federation, a trade group.

…

Analysts said the discounts that drew in shoppers over the weekend were so steep that many ailing chains might be no better off in the long run.

“You’re looking at discounts of 50 to 70 percent off,” said Matthew Katz, managing director in the retail practice of Alix Partners, an advisory and restructuring firm. “You have to sell two to three times as much to break even.”

No Comments Related Topics: News, Retail |

Big Box Reuse

by David Bodamer December 1st, 2008

Slate has a nice story and slideshow about big box stores being converted into other uses including a church, a library and even a museum about Spam.

spam

No Comments Related Topics: Development, News, Quirky, Retail Real Estate |

GGP Gets Two-Week Extension

by David Bodamer December 1st, 2008

General Growth negotiated a two-week extension in $900 million in loans it had coming due last Friday. It is working to secure a longer extension or else sell the properties.

General Growth Properties Inc. said late Sunday that its lenders have granted the heavily leveraged Chicago mall operator a two-week “interim extension” on $900 million of debt, allowing General Growth a bit of breathing room as it struggles to avoid bankruptcy.

The real estate investment trust said it and the syndicate of lenders “are continuing their discussions” on a longer-term extension to the loan, which technically came due Friday.

Past links and stories:

No Comments Related Topics: News, REITs, Retail Real Estate |

Queens Lawmakers Propose “Doorbuster Bill”

by David Bodamer December 1st, 2008

In response to the tragedy last week in which Jdimytai Damour, a Wal-Mart worker in Long Island, was trampled and died on Black Friday, Queens lawmakers are discussing legislation that would mandate retailers (and presumably mall owners) have greater security in place during Doorbuster specials.

New York City Councilman James Gennaro (D- Fresh Meadows) held a midday news conference on the steps of City Hall to announce his plans to craft a “Doorbuster Bill” that would require retailers to enact greater security measures during major sales.

Hours later, in response to a Newsday inquiry, Nassau Executive Thomas Suozzi said he and the legislature’s Presiding Officer Diane Yatauro will meet today to “discuss possible legislation to prevent something so tragic from happening again.” The statement gave no details.

A spokesman for Suffolk County Executive Steve Levy also said Sunday officials will research the need for a similar local law.

It should be noted that most retailers and malls already do heighten security during the holiday season. However, as the Wal-Mart incident shows, when you whip people into a frenzy, no amount of security will suffice. Doorbuster specials–selling a handful of items at deep discounts, say 10 laptops or plasma TVs–spur large crowds. In a recessionary environment, people are even more desperate to save money.

No Comments Related Topics: Management & Leasing, News, Retail, Security |