Archive for September, 2009

Landlords Take Tough Stance on Concession; Bank Executives Struggle to Understand Commercial Real Estate Exposure (Wednesday’s News & Notes)

by Elaine Misonzhnik September 30th, 2009

These have been an uneventful few days so far this week, but that gave media outlets covering commercial real estate some time to ponder our current situation. Below, The New York Observer takes a look at the government’s efforts to reform credit rating agencies, while Reuters reports that retail landlords are beginning to say, “No” to rent reduction requests.

  • Inman News offers a useful post on the best strategies for using Twitter as a tool for real estate professionals.
  • In a bit of good news, Retail Sails reports that September retail sales will likely show an increase from last year, albeit a modest one.
  • In a column at the New York Observer, Sam Chandan takes an in-depth look at the Obama administration’s efforts to reform credit rating agencies. The agencies’ lax rating policies played a key role in creating the financial panic that paralyzed Wall Street last fall.
  • On a somewhat related note, Business Insider reveals that two years into the credit crunch, many U.S. bank CEOs still don’t know the extent of their bank’s exposure to commercial real estate risk. This post looks at how JP Morgan head Jamie Dimon was looking zip code by zip code through the country trying to understand the real estate situation. Scary.
  • There is hope, however, the industry may not suffer as much as previously feared. Reuters reports that retail landlords are beginning to deny more calls for rent reductions. If they do grant reduction requests, they ask that tenants offer something tangible in exchange, for example, longer lease terms. That underscores some of what we wrote in our September cover story.
  • And USA Today reports on efforts to revive struggling restaurant chain Boston Market.

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

Citigroup May Close Branches; Dollar General’s IPO; Regulations May Crimp Bank’s Ability to Lend on Commercial Real Estate (Tuesday’s News & Notes)

by David Bodamer September 29th, 2009

I was offline much of yesterday. Here’s a roundup of links and news stories from the past 24 hours or so that you might find to be of interest.

  • Bloomberg reported on Friday that Citigroup is considering shrinking its bank branch network. Currently, it operates 1,001 branches in the United States and Canada. According to the story, “Citigroup, ranked third among U.S. lenders by assets, would narrow its North American retail focus to areas where it has higher branch concentrations, said the person, who declined to be identified because the plans are still under discussion. “
  • Our sister publication Supermarket News reported more details about Dollar General’s upcoming IPO.
  • FinCri Advisor has an interesting story analyzing how new regulatory scrutiny could affect how banks lend on commercial real estate.

    Regulatory scrutiny of commercial lending has ratcheted up, with examiners searching Call Reports for banks that exceed what once were suggested thresholds for CRE or ADC loan concentrations and demanding justification for it. A FinCri Advisor analysis reveals that nearly 2,000 banks fit that category, with FDIC examiners citing CRE lending in 15% of C&D orders this year vs. just 2.8% in 2008.

    Banking analysts expect that is just the beginning. “Wait until next year when this thing starts to blow up,” says Bill Nayda, an economist and principal at Second Pillar Consulting in Glen Allen, Va., which specializes in capital management.

    It’s well worth reading how the new regulations will affect banks going forward, including forcing banks that have high ratios of commercial real estate loans to act.

  • Real Property Alpha posted a CNBC clip featuring comments about how control of real estate has tipped too far into the hands of financial engineers. The argument in the segment is that real estate pros need to be at the helm again.
  • Investment News examines the spate of real estate IPOs. It turns out investors aren’t sold on the idea of funding investment in distressed real estate. Three IPOs had to be postponed as a result.
  • David Stejkowski asks “Are we in a cycle or a reset?”
  • Big Lots has taken advantage of the current climate to score some choice real estate for its stores. BNET profiles how the retailer has gone about pursuing its real estate strategy.
  • Retail Forward predicted a flat holiday shopping season. Now ICSC has released its preliminary forecast and expects sales to rise about 1 percent in November and December.

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

McDonald’s is Everywhere

by David Bodamer September 25th, 2009

GOOD has posted a light map of every McDonald’s in the country. I’m not sure whether to be impressed or scared. According to the blurb that ran with the map, the farthest you can be from a McDonald’s anywhere in the country is 145 miles at a point in North Dakota. I guess the pancakes at McDonald’s aren’t up to snuff.

I’ve copied the image below.

(Click for larger view.)
mcdonalds

It would be also interesting to see a map like this of Subway considering the sandwich chain’s recent boast that it is about to surpass McDonald’s as the most proliferate fast food chain in the world. Currently, Subway operates about 31,800 stores and is rapidly closing in on McDonald’s mark of 32,158 stores.

It also reminds me of an interactive graph of Target’s growth I linked to that chart in February.

1 Comment Related Topics: Development, News, Quirky, Retail |

Social Media Revolution?

by David Bodamer September 23rd, 2009

This video was shown at NRF’s Shop.org summit and then posted at NRF’s blog.

It’s a video packed with some interesting factoids. Does it make the case that a social media revolution is occurring? If so, it has major implications for retailers, but I also think it has implications for landlords. Doesn’t generating buzz for your property on Facebook or Twitter seem like a good idea? It does to me.

I also think it is relevant in the discussion at Real Property Alpha on changes at play in the commercial real estate sector.

2 Comments Related Topics: Management & Leasing, News, Retail, Retail Real Estate, Trends, Video |

Taubman May Turn Over Atlantic City Property to Lender

by David Bodamer September 23rd, 2009

Regional mall REIT Taubman Centers is opting to take a writedown and may relinquish control of The Pier Shops at Caesars in Atlantic City to its lender. In addition to potentially handing in the keys on The Pier Shops, it is taking a writedown on Regency Square in Richmond, Va. The moves will result in a $161 to $169 million hit to its earnings in the third quarter.

In addition, according to Taubman,

“The Company’s conclusion was based on a decision by its Board of Directors, in connection with a review of the Company’s capital plan, to discontinue its financial support of The Pier. The Company intends to immediately begin discussions with the lender of the $135 million non-recourse mortgage loan secured by the leasehold interest in the center, and subject to the lender’s future decisions, will continue management and leasing of the center.”

CityBiz News posted the text from an 8K filing dated Sept. 17 that explains the company’s moves. It also issued a press release on the moves yesterday morning.

According to Bloomberg’s story:

The Pier Shops are about 80 percent occupied, Payne said.

The mall owner has a $135 million mortgage on the New Jersey shore property, according to the company’s statement. Payne said the REIT intends to “immediately” begin discussions with Centerline Capital Group, the debt servicer working on behalf of bondholders who bought securities backed by the loan.

Negotiations could lead to an auction of the property, she said.

“We’re happy to manage it while it goes through this transition,” Payne said. “We’ve got to have them move towards them taking control and ownership of the asset.”

Back in 2005, Atlantic City was abuzz with activity and there was excitement for projects like The Pier that were supposed to transform the city from its seedy past into a mini Las Vegas replete with luxury casinos and first rate retail. Those plans seem to have sputtered out. It’s a big statement about the prospects for the city going forward that Taubman is considering turning the center over to its lenders rather than trying to work a deal to keep the property under its control. Sure, it still wants to manage the property but that’s different than owning it outright.

The Pier is not the only casino-related retail project that Taubman’s involved it that has had issues. It recently pulled out of Macao Studio City–a major project slated to be built in China’s gambling mecca, although it hasn’t ruled out getting back involved in the project. It’s also the retail developer for the mammoth MGM City Center project that flirted with bankruptcy earlier this year.

No Comments Related Topics: Commentary, Development, Finance, International, Investment, Management & Leasing, Mixed-Use, News, REITs, Retail Real Estate, Trends |

Lots of Numbers–Architectural Billings, Holiday Sales, CRE Price Index, Main Street Rents

by David Bodamer September 22nd, 2009

It seems like there has been a flood of numbers reported in the past two days. Here are some of the highlights.

The AIA’s Architectural Billings Index took a tumble, according to an early report. (The number actually isn’t due to be reported until tomorrow according to AIA’s web site.). Calculated Risk has the highlights. A chart of the index is below.

(Click for larger image)
AIA

Retail Forward presented its holiday shopping forecast and it’s a doozie. The research firm says the holiday shopping season could be the second worst in 42 years. The firm is forecasting a flat season on the heels of last year’s 4.5 percent decline.

Here are the firm’s numbers on year over year growth going back to 1998.

1998 — 6.8%
1999 — 8.2%
2000 — 3.9%
2001 — 2.2%
2002 — 2.8%
2003 — 6.0%
2004 — 6.5%
2005 — 6.8%
2006 — 3.1%
2007 — 2.4%
2008 — -4.5%
2009FC — 0.0%

The advance numbers on Moodys/REAL Commercial Property Index show the index fell 5.1 percent in July from the month before. Overall, the index is now down 39 percent from its October 2007 peak. The updated numbers and charts by market and property type will eventually be posted here. For now, check out Calculated Risk’s post. The post features an interesting chart that compares the Moodys index on commercial real estate to the Case-Shiller index of housing prices. I’ve copied that chart below.

(Click for larger image)
caseshiller

Lastly, Cushman & Wakefield released its annual look at the most expensive retail streets in the world and found that rents, unsurprisingly, have fallen. Bloomberg has the skinny.

Manhattan’s Fifth Avenue ranked as the world’s most expensive retail address for the eighth straight year, even as annual rents dropped 8.1 percent in the 12 months through June, to $1,700 a square foot, the New York-based company said today in a report. Rents in Hong Kong’s Causeway Bay declined 15 percent to $1,525. On the Avenue des Champs-Elysees in Paris, they were little changed at $1,009.

…

The average rent in the 274 shopping streets monitored across 60 countries by Cushman & Wakefield fell 23 percent to $213 a square foot from $276 a square foot a year earlier.

Rents declined in 147 locations, the most since Cushman & Wakefield first published its survey in 1986. They were little changed on 76 streets and rose on 51.

…

The biggest regional decrease was in the Asia-Pacific, with rents down 15.1 percent. In central and eastern Europe, they slid 14.7 percent. They dropped 12 percent in the U.S. and Canada and 5.8 percent in Europe as a whole.

No Comments Related Topics: Architecture & Design, Development, Investment, Management & Leasing, News, Research, Retail, Retail Real Estate, Trends |

Real Property Alpha Has A Question For You

by David Bodamer September 22nd, 2009

John Reeder at his Real Property Alpha blog asks an interesting question in his Evolutionary, Not Revolutionary post. I would love to see other people’s thoughts on it. He’s asked for feedback.

I’m re-posting what he wrote as a blockquote below.

The subtitle of this blog contains a mention of incremental innovation. For anybody interested, I explain the concept of incremental innovation in the “Who Am I?” page. It occurred to me this morning that incremental innovation is an evolutionary process. It is not revolutionary, in that incremental innovation does not occur with huge changes in extremely short periods of time. Incremental innovation is drawn out, can take years or longer, and is exemplified by continuous small successive improvements.

Real estate as a sector is often late to the “change” party. However, it does seem like some substantial shifts in the way we do business are underway. I’ve written about this before, but I would be interested to hear how any of the readers of this blog think that real estate as a sector is evolving.

2 Comments Related Topics: Commentary, News, Trends |

Take a Sneak Peek at “The NEW Age of Walmart”

by David Bodamer September 21st, 2009

CNBC will be debuting a new original documentary this Wednesday–“The NEW Age of Walmart.” Here are a few teasers on the documentary. The info on the documentary will look at the changes Walmart has undergone in the last five years and attempt to assess whether the company has transformed itself or has merely been adept at public relations. There are lots of good links on that page looking at the Bentonville, Behemoth.

Indeed, it doesn’t seem all that long ago we were writing regularly about various challenges facing the company. It had some missteps abroad and for a while its sales growth slipped and so did its pace of expansion. More recently, it seems to have righted its ship. So it should be interesting to see what the documentary concludes.

Check out a slew of videos after the jump. Read the rest of this entry »

No Comments Related Topics: Commentary, News, Retail, Retail Real Estate, Video |

Simon: Prices to Return to 2004 Levels; Brokers Turn to Auctions; Boscov’s Emerges from Bankruptcy (Friday’s News & Notes)

by David Bodamer September 18th, 2009

It’s been a couple of days since I did a roundup post. So here are some items from the past few days.

  • David Simon was interviewed on Bloomberg. There’s a write up about his remarks here. For one thing, Simon predicted prices for malls would end up around where they were in 2003 and 2004 when everything is all settled. Simon also said that the company is a logical buyer if General Growth ends up selling assets.
  • Reuters wrote about a rise in property auctions as commercial real estate brokers search for ways to get investment sales volumes growing again. PropertWire also wrote about this trend.
  • Richard Baker is interested in converting NRDC Acquisition Corp. into a REIT. It doesn’t seem that long ago that that people were talking about consolidation and REITs going private. Looks like things are going in the other direction now. REITs have raised a ton of cash with public offerings this year. So maybe some previously private players would like to get in on that action.
  • One of our sister publications, Multichannel Merchant wrote about how retailers are rapidly adopting social media in attempts to reach customers and drive sales. We wrote about landlords nascent efforts in this area last month.
  • Regional department store chain Boscov’s has successfully emerged from bankruptcy. We’ll take the good news in any form it comes. Earlier in the year it seemed like not a day passed without news of mass store closings or bankruptcies. Even worse was when firms that originally planned to restructure decided to liquidate instead. Now we’re seeing some glimmers of hope. A couple of retailers are reducing closures and now Boscov’s successfully navigated its bankruptcy. Let’s hope there’s more of this kind of news ahead.
  • Sears launched a third party marketplace.
  • Another of our sister publications, Supermarket News, has the scoop about longtime Basha’s president and CEO Mike Proulx retiring.

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

Melvin Simon

by David Bodamer September 18th, 2009

As most readers of this site know, Melvin Simon–one of the founders of the nation’s largest mall owner Simon Property Group–passed away Tuesday morning. There have been a few excellent obituaries written including ones by the New York Times and the Wall Street Journal.

The Indianapolis Star also has quite a bit on Simon’s life, death and how he shaped the city. For those in the retail real estate sector one piece in particular is worth checking out that looks at how he influenced the sector. There’s also this nifty interactive graphic that charts the growth of the Simon mall empire from the 1960s to today.

In addition, the paper is live blogging the funeral right now.

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