Archive for January, 2010

Retailers Announce Further Layoffs; Institutional Investors Still Love CRE (Friday’s News & Notes)

by Elaine Misonzhnik January 29th, 2010

And the layoffs continue. Struggling book seller Borders became the latest in a string of big chain retailers to announce staff cuts. This should be of concern to retail real estate owners: a recent report by RBC Capital Markets posits that retail employment levels can be viewed as a leading indicator of retailer health and future store growth.

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CRE Bleeding Slows; More Bankruptcies Coming in the Retail Sector (Thursday’s News & Notes)

by Elaine Misonzhnik January 28th, 2010

This might be hard to believe in the wake of Tishman Speyer and BlackRock’s handover of New York’s Stuyvesant Town/Peter Cooper Village to its lenders, but commercial real estate loans seemed to perform better in the past few months, according to the CoStar Group. Of course, more losses seem inevitable, especially as retailers announce job cuts and continue to close stores. For more on retail and retail real estate, follow the links below:

  • The CoStar Group reports that regional banks observed a slowdown in deterioration of commercial real estate loans in the fourth quarter. Regional and community banks are expected to bear most of the losses from non-performing CRE loans.
  • Meanwhile, The CRE Review posted an amusing analysis of what are likely to be common misconceptions about commercial loan defaults.
  • The Movie Gallery will likely file for Chapter 11 next week, according to The Wall Street Journal. The move could result in up to 1,800 store closings.
  • Bloomberg reports that Macy’s will lay off 1,500 store-level employees in March. Walmart and Hope Depot have already announced plans to lay off thousands of workers this year.

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One Stop Shopping Coming To a Supermarket Near You

by Elaine Misonzhnik January 28th, 2010

The country’s supermarket operators seem to be following a curious new trend, signing deals for store-within-a-store concepts with businesses hawking real estate and auto insurance. Stop & Shop, for instance, has just signed a deal for 17 “micro stores” with RE/MAX of New England. According to the Hartford Courant, the first of these stores will open at a Stop & Shop in North Haven, Conn. RE/MAX officials say they don’t necessarily expect Stop & Shop customers to immediately start using their services, but hope the presence of a RE/MAX store at their local supermarket will help them remember the brand when they do decide to switch digs.

Meanwhile, we hear that auto club AAA is opening up “express” stores at Lucky Supermarkets in Northern California, Nevada and Utah. Now, shoppers who visit a Lucky store will be able to buy auto insurance, plan road trips and even get their passport photos taken while on site. Has anyone heard of similar deals taking place?

No Comments Related Topics: News |

Court Orders Joseph Freed To Hand Over Block 37; CRE Positions Remain in Demand (Tuesday’s News & Notes)

by Elaine Misonzhnik January 26th, 2010

And the saga of the Block 37 development in Chicago continues. This week, a Judge ordered developer Joseph Freed & Associates to hand over the keys to the project to the receiver. But wishing to hold on, Freed tries to secure potential investors in the development.

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

Beer and Fries

by Elaine Misonzhnik January 22nd, 2010

The No. 2 burger chain in the world might be hoping to become No. 1 with the help of a little booze. Burger King will soon begin offering moderately-priced beer at select locations in the U.S., according to a story in The New York Daily News. Earlier this year, the chain already opened its first so-called Whopper Bar in Orlando, Fla.: a restaurant with a smaller footprint than a regular Burger King joint and limited menu options. That location does not yet serve beer. But a Whopper Bar that is about to launch in Miami Beach, Fla. will. Additional Whopper Bars, all featuring beer on the menu, might be in the works for New York, Las Vegas and Los Angeles.

The move likely arose from Burger King’s desire to expand its customer base in a down economy. It follows in the steps of its rival McDonalds’ earlier move into the coffee market, which has proved quite successful. Coffee, however, is not a very controversial product. Burger King’s new strategy, on the other hand, might very well bring in new clients who’ll be delighted to wash down their burgers with a little ale and if the company puts beer on the menu in only a few, strategically chosen locations this might be a smart move. But if this becomes a practice at most Burger King joints, it has the potential to drive away more customers than it brings in. I think it’s a safe bet that many parents won’t feel comfortable bringing their tots to a place where they might run into a drunk or two. And women might be put off by this as well. It wouldn’t be an issue in the daytime, but if I was craving cheap fast food in the nighttime, I’d probably opt to get it from a place that doesn’t serve alcohol as well.

What does everyone else think? Is this a good move for Burger King?

4 Comments Related Topics: Commentary, News, Quirky, Retail |

Target’s Plans: Renovations, Smaller Stores, Going International

by David Bodamer January 22nd, 2010

Target Corp. talked about its plan for the next five to 10 years. The initiatives including spending $1 billion on store renovations, opening smaller stores and expanding into markets including Canada, Mexico or South America. In addition, it is planning on only opening 10 new stores on a net basis in 2010.

But Chairman and Chief Executive Gregg Steinhafel said ahead of a meeting with analysts that Target will apply “the same rigorous financial discipline” in the reforms that have ensured strong returns and prudent use of capital in the past.

In November, the company had warned it could have difficulty meetings analysts’ fiscal fourth-quarter earnings expectations, which were for $1.12 a share at the time. Its third-quarter earnings rose 18%, snapping a streak of eight quarterly declines, as the discount retailer saw profitability improve in both its retail and credit-card operations.

The remodeling, which is meant to boost growth in same-store sales, will include more grocery selections and changes in layout and new merchandise.

For more on the plans, there are stories at the Wall Street Journal, Business Week and the Financial Times.

1 Comment Related Topics: News, Retail, Trends |

January Sales Hold Up; Some Experts Claim CRE Prices Have Hit Bottom (Wednesday’s News & Notes)

by Elaine Misonzhnik January 20th, 2010

It might be a cheerful piece of news, but can we believe it? A Wall Street Journal story looks at the theory that prices on commercial properties are stabilizing and, in fact, might be rising. For an elaborate analysis of this theory and other interesting tidbits on retail real estate, follow the links below.

  • Our sister publication NREI ran a story about investors showing preference for equity infusions into struggling properties. Previously, many industry experts predicted a spike in demand for unsecured notes.
  • A recent Business Week feature looks at how commercial real estate defaults have led to in-fighting among various tranches of creditors.
  • CMBS issuance will likely stay below $15 billion this year, according to Bloomberg.
  • Some industry experts posit a theory that commercial real estate prices have bottomed out, reports The Wall Street Journal.
  • Here, Wall Street Journal writer Christina S.N. Lewis elaborates on the above story.
  • Retailer Daily reports that casual dining chain Uno Restaurant Holdings Corp. has voluntarily filed for Chapter 11 bankruptcy.
  • Finally, RetailSails reports that retailers continued to post decent sales results during the second week of January.

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

Big-Box Retailers Eye Urban Sites; Potential 2010 Closings (Weekend Roundup)

by David Bodamer January 19th, 2010

One of the emerging stories in retail real estate is that healthy retailers are making moves to grab prime locations that have opened up in urban markets. This is especially true of big box players. A few years ago, cities were blocking these efforts. There were talks of legislation to block big-box construction in some places. You don’t hear any of that anymore. It seems that what’s worse than big-box stores in urban locations is having vacant storefronts. As a result, we’ll see more of these kinds of deals take place.

For example, in Chicago Target is reportedly scoping the historic Carson Pirie Scott & Co. building on State Street as a new store. Similarly, in New York, Nordstrom, which is opening a Nordstrom Rack location in Union Square, is looking at another site on Fifth Avenue.

Here are some other news and notes about retail real estate from over the weekend.

  • 24/7 Wall Street has prepared a roundup of 35 large retail companies to see which had the largest fall-offs in same-store sales in 2009 as a way of seeing what chains might be closing stores this year.
  • Cabela’s is supposed to be one of the main attractions of the Meadowlands Xanadu project in northern New Jersey. But the firm’s CEO said last week that the store is “highly unlikely” to ever open. Construction on most of that project’s superstructure seems to be completed. But there’s no indication when–if ever–it’s going to open. Amazing.
  • Sears’ latest strategy to boost its sales includes ramping up its online sales efforts.
  • Seeking Alpha asks “Malls: All Bad or an Opportunity?” The post takes a look at the outlooks of several mall and outlet REITs.
  • Moody’s latest look at CMBS delinquencies shows that defaults continued to rise in December.
  • Square Feet blog does a nice job explaining how real estate receivers work.

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

The Best of Howard Davidowitz

by David Bodamer January 15th, 2010

Yahoo’s Tech Ticker posted a compilation of clips of different interviews they did with Howard Davidowitz in 2009. Howard’s someone Retail Traffic talks to as well partly because he’s doesn’t try to sugar coat anything. He tells you what he really thinks.

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

Commerce Department Says Retail Sales Tanked in December

by David Bodamer January 14th, 2010

According to the Commerce Department, retail sales were negative in December. This is much bleaker data than the same-store sales comps that came out a week ago. The decline was not what economists had expected. Sales were expected to rise 0.5 percent according to economists surveyed by Marketwatch.

The only silver lining here is that retail trade sales were up 5.9 percent over last year. So this December did mark an improvement over last year’s disastrous holiday shopping season. However, a look at business breakout reveals that the types of retailers that shopping center owners rely on had the weakest performance. The best year-over-year seasonally adjusted performers were gasoline stations (+33.6 percent), nonstore retailers (+10.6 percent) and auto and other motor vehicle dealers (+7.6%).

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $353.0 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 5.4 percent (±0.5%) above December 2008. Total sales for the 12 months of 2009 were down 6.2 percent (±0.2%) from 2008. Total sales for the October through December 2009 period were up 1.9 percent (±0.3%) from the same period a year ago. The October to November 2009 percent change was revised from +1.3 percent (±0.5%) to +1.8 percent (±0.2%).

Retail trade sales were down 0.2 percent (±0.5%)* from November 2009, but 5.9 percent (±0.5%) above last year. Gasoline stations sales were up 33.6 percent (±1.5%) from December 2008 and nonstore retailers sales were up 10.3 percent (±1.7%) from last year.

But why were the numbers so far off? Economist Dean Baker had a post up briefly here that seems to be gone now that said economists don’t account for a bias in same-store sales metrics when thinking about retail sales. Moreover, he points out that the December numbers showed a weak result in the general merchandise sector, which isn’t a great sign for retail real estate.

He explains:

The big culprit in this drop was the general merchandise sector (department stores and Wal-Mart), which had a 0.8 percent drop. The likely reason that many economists missed this drop is that they continue to ignore the same store sale bias. There are many fewer stores this year than last. This means that even if overall sales were constant, sales in same stores would rise. This bias will gradually disappear as we move forward and the comparison month in the previous year looks worse, but for now it is still substantial.

Calculated Risk’s monthly take is here.

Click for larger image
Retail Sales December

No Comments Related Topics: Commentary, News, Research, Retail |

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