Archive for August, 2009

Fed Concerned About Commercial Real Estate; the Myth of Abercrombie & Fitch (Weekend Roundup)

by David Bodamer August 10th, 2009

So far, August has been a slow month for news and commentary on the retail real estate space. There haven’t been enough items to justify daily roundup posts. (I am still trying to keep the Twitter feed active if you are looking for more regular updates.)

Here are some retail and retail real estate items from the past few days that might be of interest.

  • Someone snapped a photo of the construction of one of Microsoft’s coming stores. It is not the most exciting of photos. It just shows Microsoft’s logo and the logo of some of its products on a temporary construction wall. I guess at least it’s proof that these stores are really coming.
  • Agnes Crane posted a commentary on a Reuter blog that is a commercial real estate death watch. The post is in part a response to the notion that the Federal Reserve Bank has said it is majorly concerned with the state of the sector. Federal Reserve Chairman Ben S. Bernanke is declining to declare that the economy or financial markets are healed because of his concerns about commercial real estate financing.
  • I don’t typically link to stories from American City Business Journals because you need a subscription to read the full pieces. But there were two today that I wanted to pass along. One story is a retail leasing roundtable with a series of experts in the Dallas market. The other examines alternative tenants retail owners are bringing into properties to replace troubled stores.
  • Calculated Risk looked at second quarter investment in offices, malls and lodging late last week
  • Seeking Alpha tried to debunk the myth of Abercrombie & Fitch. The site says that aside from 2005–when the chain had a rousing year of sales–it has largely struggled and posted negative year-over-year comps. It argues that Abercrombie & Fitch’s reputation as an “iconic retailer”, then, is largely undeserved.

No Comments Related Topics: Commentary, Finance, Investment, Management & Leasing, News, REITs, Research, Retail Real Estate, Trends |

July Same-Store Sales Roundup

by David Bodamer August 6th, 2009

June same-store sales came in negative and more or less matched June’s numbers. According to Retail Metrics, same-store sales fell 4.7 percent. Retail Forward’s stats show a 4.6 percent decline. (Retail Forward’s data includes 32 retailers and the results can be viewed in in this PDF.) ICSC’s data, meanwhile, shows a 5.0 percent decline, based off 33 retailers. (The report can be downloaded here if you’re a member of ICSC.) ICSC’s data charted from 1993 to the present can be viewed below. Retail Sails also has a summary looking at 34 retailers.

(Click for larger image)
july

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Barry Gosin on the State of Commercial Real Estate

by David Bodamer August 6th, 2009

Barry Gosin, CEO of Newmark Knight Frank, was on CNBC yesterday morning. In contrast to Jim Cramer’s euphoria on Tuesday evening we have Barry Gosin’s sobriety yesterday morning. Gosin talks a lot about the refinancing issues I alluded to yesterday.

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Sears Makes Interactive Play to Boost Back-to-School Sales

by David Bodamer August 6th, 2009

campus

In an interesting post at the Big Fat Marketing Blog, PROMO editor at large Brian Quinton looks at a new facebook app that Sears has rolled out to try and boost back-to-school purchases for college students.

He writes:

One of the tools, Sears Campus Gift Getter, is a Facebook elaboration of the GiveTogether feature the retailer launched on its main Web site last May. Students can log onto Facebook to register and set up a wish list of items. Friends and family can then register on Facebook, access those wish lists, and select items for purchase and shipment to the student. For big-ticket items, they can use the GiveTogether platform to pool their contribution with other givers and send a larger or more expensive item as a gift.

A Dorm Room Designer tool in the Campus Ready portfolio lets incoming students collaborate with friends and prospective roommates to lay out the basic furnishings of their college room. Users can choose from a range of room shapes and sizes, add doors and windows, and then place the four basic furniture items—bed, dresser, desk and chair—in the room.

With the basic items placed, Facebook users can then access an expandable menu of other Sears furnishings from small appliances and beauty items to clothing and wellness and entertainment products. These product listings open up to show a thumbnail picture of the item, a price, and icons for more information and for adding the item to the user’s room list, wish list or shopping cart. Some items such as selected laptops and mini-fridge appliances can also be dragged into the virtual room and placed.

Check out the whole post.

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The State of Florida Retail Real Estate

by David Bodamer August 5th, 2009

Our roundtable discussion of suburban Florida markets starts with a pithy quote: “Fortunately, our centers are not in Florida.”

That hurts. Florida has been in pain for a while. The bursting of the housing bubble has hit hard and the state entered into a recession in advance of the rest of the country. There is lots of vacant commercial and residential real estate up and down the entire state. So had bad is it really?

A walk through some recent Marcus & Millichap market reports gives us some results to chew on. Here are stats from five Florida markets–Tampa, Orlando, Miami-Dade County, Palm Beach County and Broward County–showing vacancy and rental trends by sub-market. The numbers show declines across the board, but the pace of declines is slowing in some markets. For example, in Orlando the vacancy rate is expected to end 2009 at 10.4 percent. That’s 200 basis points above where it ended 2008, which is greater than 250 basis point jump between 2007 and 2008. In Broward County, the firm is projecting the vacancy rate to end 2009 at 11.3 percent. That marks a 170 basis point rise from 2008, which is half the 340 basis point increase from 2007 to 2008.

In other markets, however, 2009 is looking rougher than 2008. In Tampa, Marcus & Millichap expects the vacancy rate to end the year at 10.3 percent–a 250 basis point jump from 2007. Between 2007 and 2008 the vacancy rate rose just 140 basis points. In Palm Beach County, the vacancy rate is expected to hit 10.7 percent, up 270 basis points from 2008. The year prior, the vacancy rate rose 250 basis points. Lastly, in Miami-Dade County, the vacancy rate is predicted to reach 8.5 percent by the end of the year. That’s a 180 basis point increase from 2008 on top of a 160 basis point increase in the previous 12 months.

You can view larger versions of the charts by clicking on the images.

Orlando

PalmBeach

Miami

Broward

Tampa

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Jim Cramer Boosts Commercial Real Estate

by David Bodamer August 5th, 2009

It’s very brief at the beginning of this clip, but yesterday Jim Cramer talked about REITs being “on fire” and disagrees with a story from two days ago in the Wall Street Journal that talked about the REIT rally facing some challenges. He skirts answering the question about commercial real estate’s fundamentals. He instead centers on the idea that commercial real estate stocks have been rising steadily for months and that these are the “facts” that we should be focusing on. He later says the papers are “dead wrong” on commercial real estate in reference to the spate of “commercial real estate is the next shoe to drop” stories.

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Thoughts on the Commercial Real Estate Crisis; Simon’s Results; Friendly’s New Format (Tuesday’s News & Notes)

by David Bodamer August 4th, 2009

The torrent of retail real estate and commercial real estate stories and posts has suddenly died down a bit. There are still seemingly a few stories a day proclaiming that commercial real estate is the “next shoe to drop.” I’ve grown weary of linking those here.

The numbers have been grim. The latest example is the collapsing Massachusetts Institute of Technology Center for Real Estate (MIT/CRE) index. Still, the chorus has grown way too loud. Seeking Alpha even argues that the record price drops represent good news for the sector. We may have hit bottom, which means prices may begin to rise. Prices are down now about 40 percent from 2007 peaks. I don’t think that stable assets will fall much further than that. Distressed assets will fetch fire sale prices. But that is to be expected. And, frankly, that will be part of the industry’s recovery. Some buyers coming in and scoring assets on the cheap will enjoy some lovely returns.

There is no way all the debt coming due in the next few years will be refinanced. But, again, that needs to play out. Worthy borrowers should be able to get debt. However, it’s clear that some very unworthy deals were getting done in the latter stages of the boom. Those need to blow up in order for a recovery to occur. This is one reason I’m lukewarm on the notion that the government needs to step in and offer more aid to the commercial real estate sector or needs to go to lengths to get the securitization machine started again. Banks that made bad loans need to recognize losses. Borrowers that shouldn’t have gotten financing need to default. Will expansion of TALF and other measures that have been discussed end up aiding the worthy or the unworthy?

For instance, commercial real estate loans are going bad at a very fast rate according to this chart. Loans are going bad. They’re going bad because vacancies are rising and incomes from properties aren’t enough to meet interest payments. In other words, there’s a real reason loans are going bad. It’s not about liquidity. It’s about the recession. The argument for bailouts has centered on the notion that commercial real estate is a victim of the credit crunch.

The idea being put out there is that worthy borrowers can’t get loans because liquidity isn’t flowing. But even if there were no credit crunch would banks be refinancing loans on failing properties? I don’t think that sounds like such a great idea. Worthy borrowers should be able to get loans. But the fact is there just an awful lot of loans that should be going bad. Not everything should be getting refinanced. Doing that only will prolong this crisis for the sector. The sooner that bad assets and unqualified owners are weeded out, the better it’s going to be for the survivors.

Llenrock blog, incidentally, has an interesting theory as to why there seems to be a standstill on the refinancing front–and it may not just be due to a lack of liquidity. I’ll quote them here:

The reason this is interesting to the world of commercial real estate, is that currently, the credit markets are frozen because nobody is certain of the potential outcomes of their decisions. Ideally, with that information, players in this “game” can assess the outcomes of different choices, weighing the options of others into the assessments of their own choice. In this game, as in all game theory, the only concern of each individual player is maximizing his own payoff, without any concern for the other player’s payoff. With that in mind, let’s see if we can apply it to what is currently going on in the world of commercial real estate finance.

The post goes on to speculate that both sides are trying to maximize their results. Banks don’t want to modify loans if they don’t have to. Borrowers want to try and get a better deal. The result is a standstill because neither side is blinking just yet. It’s another interesting thing to think about in the current situation.

Those are just some of my thoughts on a relatively slow day. Anyway, here are some news and notes from the past two days on retail and commercial real estate.

No Comments Related Topics: Commentary, Finance, Investment, Management & Leasing, News, REITs, Research, Retail, Retail Real Estate, Trends |

Back-to-School Shopping; J.C. Penney’s Manhattan Debut; Postal Service Consolidation (Weekend Roundup)

by David Bodamer August 3rd, 2009

It was a pretty quiet weekend on the retail real estate front. Here’s just a handful of items that caught my eye.

  • Retail Sails provided an update on how the back-to-school shopping season is unfolding. There are a bunch of interesting charts in the post. It looks at NRF’s data and America’s Research Group’s findings. It’s a great roundup of what the analysts are saying right now.
  • Retail’s BIG Blog looked at J.C. Penney’s Manhattan opening. JC Penney made its New York debut on Friday. Mayor Bloomberg showed up as did J.C. Penney Chairman and CEO Myron E. (Mike) Ullman III. So this wasn’t your run of the mill J.C. Penney debut.
  • We’ve seen tons of store closures already this year. But there’s another big entity looking at closing locations that could hurt some shopping centers. The U.S. Postal Service is looking at consolidating 3,243 of its 4,851 largest branches.
  • Is it too soon to start speculating about the holiday shopping season? Apparently not. The Wall Street Journal looked at the very, very early start to the holiday shopping season. I posted on this once before.
  • Lastly, the New York Times looked at the trend of high-end retailers offering big discounts.

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Ann Taylor to Close 30 More Stores in 2009

by David Bodamer August 3rd, 2009

Any Taylor will close 30 more stores than it had previously projected.

The original plan, laid out in January 2008, called for cutting 13 percent of AnnTaylor staff at headquarters and closing 117 stores.

Krill said on Thursday the company now plans to close an additional 30 stores, but aims to relocate those stores’ best workers to other stores. Any job losses resulting from store closures are not included in the 160, Krill said.

She reiterated the company’s plan to open 14 new stores this year.

Numbers below have been updated.

Read the rest of this entry »

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Malls R Us

by David Bodamer August 3rd, 2009

Check out this trailer about a new documentary about malls. And it’s not what you think. It’s not a film that bemoans America’s mall culture. It sounds like it’s a bit conflicted. Some of it sounds like it celebrates malls and the role they play as gathering places. Some of the commentary goes so far as to call malls “holy places.” There’s bound to be some criticism as well–perhaps looking at the effect malls have had on the development of America’s downtowns.

There’s a review of the film in the Chicago Tribune as well as some information on the filmmaker’s Web site along with the distributor’s site.

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