Archive for January, 2010

Life Insurers Shine; Retailer Comings and Goings; Succession Planning (Wednesday’s News & Notes)

by David Bodamer January 13th, 2010

Industry activity is picking up again. There’s been a noticeable rise in the number of stories about retail real estate and retailers in recent days. With retailers, the post-holiday shopping strategic decisions about store openings and closings have begun. And there’s another round of those sorts of announcements in today’s links, among others.

  • Bloomberg wrote a report on a recent study from Barclays that shows that life insurers have largely avoided the losses tied to commercial real estate mortgages and CMBS. Life insurers, it seems, did not get swept up in the euphoria of the boom. Their lending volumes fell or stayed flat and they didn’t get as loose with underwriting standards. That conservatism is now paying off in spades. They were equally conservative in how they invested in CMBS, staying away from the riskiest bits.
  • Walmart announced that its Sam’s Club chain will close 10 locations. Trans World Entertainment is also closing stores. Trans World is closing 137 stores this quarter and expects to end the year with 553 stores nationwide.
  • New York & Company, meanwhile, has its eyes on expansion. The chain plans to roll out 20 to 25 outlet stores in response to a successful pilot program it had been running with one outlet-based location. Also in the expansion game is Chick-fil-A which intends to open 78 new stores in 2010.
  • RetailSails posted results of the first week of post holiday sales. Activity was down a bit resulting in a bit of a lull for retailers.
  • There’s a lot of talk about commercial real estate being a “train wreck.” But according to the Wall Street Journal, commercial real estate was a gravy train for Bank of America last year thanks to its involvement in public real estate equity offerings. The bank booked more than $200 billion in revenue on such deals last year.
  • Our news analysis this week looks at a trio of succession planning stories at U.S. retail real estate firms. Australian limited property trust Centro Properties Group also has a change at the top. There, Robert Tsenin is replacing Glenn Rufrano as the firm’s global CEO. Rufrano has been lauded for the job he did in taking over as CEO amid Centro’s major credit issues and finding a solution with banks that has enabled the firm to focus on property operations. He’s also now on General Growth’s board. That might be something to keep an eye on.

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

Guest Post: “Why Do Commercial Real Estate Blogs Die? And Why the Heck Am I Still Here?”

by David Bodamer January 13th, 2010

This is a re-post from one of my favorite commercial real estate blogs–David Stejkowski’s The Dirt Lawyer’s Blog.

It’s a rumination on commercial real estate blogs. There are some out there. I have many linked in my blogroll down in the right column. I’ve been blogging here at TrafficCourt since late 2006 and definitely seen some blogs come and go and waited for robust commercial real estate blog culture to develop. There are definitely some quality blogs out there including the ones David mentions in this post. I read the posts and follow the Twitter feeds of many of these bloggers and learn a lot in the process.

However, one of the things that I believe hurts us Read the rest of this entry »

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The Scariest Retail Sales Chart Ever

by David Bodamer January 12th, 2010

This comes courtesy of The Business Insider. It contrasts drops in retail sales in various recessions and shows what we’ve experienced since late 2007 is unlike anything we’ve seen previously.

No Comments Related Topics: News, Research, Retail |

Tales of Distressed Properties; Was “Originate-to-Distribute” Lending Model Flawed? (Tuesday’s News & Notes)

by David Bodamer January 12th, 2010

Seems like I’m in a neverending game of catchup these days. Here are some interesting recent news and notes from around the retail real estate world.

  • Chris Macke, CEO of Chicago-based General Equity Real Estate, contributed a commentary to our sister publication NREI evaluating whether the “originate-to-distribute” model of lending was a culprit or a scapegoat in the lending mess we’ve seen in recent years. Macke argues that pinning the distress on a single source misses the point a bit. There were systemic problems at work, including issues with credit rating agencies.
  • A Las Vegas Sun piece looks at the unfinished Summerlin mall outside Las Vegas. It’s a General Growth project that the paper calls a “monument to the recession.” It is both the victim of General Growth’s financial straits as well as the steep drop in the fortunes of the Las Vegas economy.
  • Tesco is making an interesting move into China where it has built a 30,000-square-meter shopping mall. It’s the first mall the retailer has opened.
  • In the first big mass store closing announcement of the year, Foot Locker says it will close 117 stores.
  • The tales of distressed properties keep piling up. The Boston Herald reports on the Hanover Mall, which will be sold at a foreclosure auction on February 4.Walton Street Capital had a $87.5 million loan for the mall and was reported as being close to a default a month ago. Meanwhile, CoStar has a report on two properties in Florida going into receivership. Lastly, the Arizona Republic looks at the troubled histories of many of the components of the massive CityNorth project in Phoenix.
  • Embattled Opus Corp. has a new CEO. Timothy Becker, principal and co-founder of Maplewood-based Lighthouse Management Group Inc., is now the CEO of the firm, replacing Mark Rauenhorst, who had stepped down in October.
  • An ugly fight has broken out over the estate of Melvin Simon. According to the Indianapolis Business Journal, Melvin Simon’s daughter Deborah filed court papers Thursday afternoon charging her father was coerced into approving a new estate plan in February 2009 that dramatically increased the amount of his fortune going to her stepmother, Bren.
  • BNET has an analysis showing that grocers did very well this holiday shopping season.

No Comments Related Topics: Commentary, Development, Finance, Investment, Mixed-Use, News, Research, Retail, Retail Real Estate, Trends |

Views on Commercial Real Estate’s 2010 Outlook

by David Bodamer January 11th, 2010

It’s early January and the forecast pieces are out in force. Reuters, quoting research from CBRE, says we have to wait until 2011 before we see any growth in commercial real estate.

Time, meanwhile, calls commercial real estate a slow motion train wreck. That’s an interesting characterization of what’s going on. It’s a better turn of phrase than the oft-used “next shoe to drop” formulation. Commercial real estate has been dropping for well more than two years now. We’ve felt a great deal of pain already. There is more pain to come. But there’s not going to be some moment where it all clicks and everything just start collapsing. Moreover, I think it’s more likely than not that some winners begin to emerge amid the carnage. There are situations when you have properties that are not distressed in the conventional sense (i.e., vacant and not generating cashflow). You have properties that are distressed because they were overvalued and overleveraged. Some astute players are going to make a lot of money on those kinds of properties and I think that starts sooner rather than later.

A piece from the Associated Press concludes that it remains a tenant’s market in 2010. That seems a given. Vacancies are high. There’s not a lot of demand in any sector. Tenants that want locations are going to get sweet deals.

REITWrecks posted a pair of Bloomberg videos featuring Mort Zuckerman and Barry Sternlicht. The blog adds some of additional commentary to the mix. Zuckerman thinks major markets may have bottomed. Sternlicht, meanwhile, thinks the deep involvement of the government in commercial real estate–and rules that are enabling banks from realizing losses on commercial real estate–are keeping things in a holding pattern. REITWrecks concludes the post with the witty line: We’ll all be better off when the government tells the banks to just “confess that we made a mess”.

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

Retailers Hit a Home Run in December

by David Bodamer January 7th, 2010

After a weak November, retailers bounced back in a big way in December. ICSC, Retail Forward, Retail Metrics and RetailSails have all done the math in comparing results from various chains and the verdict is that many retailers had a very merry Christmas and largely beat expectations. Retail Forward, Retail Metrics and RetailSails concluded that same-store sales jumped 3.0 percent in the month while ICSC’s figures showed a 2.8 percent improvement. That made December the best month for retailers since July 2008 or April 2008, depending on whose numbers you look at.

ICSC’s tally shows that same-store sales rose 2.8 percent in December, the third time in four months that ICSC’s index has risen. The result is a nice rebound from the 0.3 percent drop in December. Overall, ICSC says the two-month figure for the holiday shopping season showed a 1.8 percent gain in same-store sales. The numbers beat ICSC’s initial projections, which predicted about a 1 percent increase for the November/December period. Read the rest of this entry »

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The Colliers/FirstService Merger; Receiverships and Foreclosures (Thursday’s News & Notes)

by David Bodamer January 7th, 2010

Here are some key stories on retail and retail real estate from the past two days.

  • There are two stories worth checking out from our sister publication NREI. There’s a report that looks at the recently announced merger between Colliers International and FirstService Real Estate Advisors that will create a brokerage behemoth on par with CB Richard Ellis and Jones Lang LaSalle. Another worthwhile piece examines the latest trends in CMBS delinquencies based on a report from Trepp LLC.
  • CoStar has a piece looking at how the New Year has started with a flurry of foreclosures and receiverships on retail properties.
  • Macy’s announced plans to close five stores. The closures are the result of an annual effort to close underperforming locations.
  • We have our first retail bankruptcy of the year. Ski Market, a retailer of outdoor products and winter sports gear filed for Chapter 11 bankruptcy protection. The chain operates seven locations.
  • The Los Angeles Times examined what’s happening with big-box vacancies in California, a trend we covered on a national basis in a feature we posted yesterday.

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Are Regional Mall REITs Really Safer Bets Than Shopping Center REITs?

by David Bodamer January 6th, 2010

A Wall Street Journal story today contrasts the performances of shopping center REITs and regional mall REITs. The story looks at the stark differences in Dow Jones’ indexes of shopping center REITs and mall REITs where it notes that regional malls sported gains of 60.6 percent in 2009 while shopping centers logged a weak total return of negative 1.6 percent.

The Wall Street Journal concludes that “The disparity between strip centers and regional malls reflects two key differences: the tenant mix and locations. Investors are concerned that the business model being followed by many strip-center operators is flawed and could haunt them longer term.”

Yet is that really the answer? NAREIT’s property specific indexes, which I’ve charted below for the three retail segments it tracks, show a similar result. But I’ve also included the total returns for those indexes going back to 1994. One thing that jumps out immediately is that the big gain regional mall REITs experienced this year came after the same segment suffered a brutal 2008 and a smaller fall in 2007. NAREIT’s figures indicate that regional mall REIT total returns were down 60.6 percent in 2008 in contrast to just a 38.8 percent drop for shopping center REITs. And if you fall 60 percent one year and rise 60 percent the next, it doesn’t mean you’re back where you were. It means you’re still 36 percent below where you were at the peak. In other words, regional mall REITs, because they fell further, didn’t need to post huge absolute gains in order to post impressive gains in percentage terms. Isn’t that part of the answer here? Moreover, the growth in 2009 doesn’t fully repair the damage done in the drops of 2007 and 2008.

retail reits
(Click for larger image.)

The Journal’s thesis also directly contradicts what is more commonly argued–that neighborhood shopping centers, because their tenant base consists of necessity retailers like supermarkets, dry cleaners, hair salons, etc., are more recession resistant than regional malls that have tenants that rely more on discretionary spending.

Lastly, the bankruptcy of General Growth Properties–the second largest regional mall player–has to be factored into the mix here as well, does it not? In 2008 the REIT’s stock tanked as fears about its bankruptcy surged. Many thought it would not be the only regional mall REIT to go down. The bankruptcy filing did take place in 2009. But so far General Growth has weathered the restructuring process rather well. And no other REITs have followed it into bankruptcy. In fact, GGP’s stock trading in OTC market is now at about $12.00 per share–up from a low of $0.32 per share. The fact that the worst fears did not materialize for General Growth and for other regional mall REITs had to play a role here. Investors that were freaked out about regional mall REITs have come back. I think that too partially explains the good year regional mall REITs had.

The story also says, “Last year, investors punished the retail REIT sector.” But NAREIT’s numbers show that retail REITs as a whole posted a positive total return of 27.2 percent in 2009. That doesn’t sound very punishing. It was 2008 when retail REITs got punished. That year, total returns were down 48.8 percent from the year prior.

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

New Year’s Roundup

by David Bodamer January 5th, 2010

I’m ringing in the New Year with a bad cold. Overall it’s been pretty quiet on the retail real estate front since Christmas. Here are a few news and notes from the past week or so in case you missed them. Also, we posted a Year in Review last week that you should check out if you haven’t seen it yet.

  • Talbots, which had some debt issues, has amended its secured revolving loan agreement with shareholder Aeon Co. to repay all of its outstanding third-party bank debt. The amendment is part of a larger plan for Talbots to merge with holding company BPW Acquisition Corp.
  • Development on new shopping centers may have slowed in the United States, but internationally the building boom continues. For example, in Turkey nearly 100 shopping centers will be opened within three years, 63 of them in 2010.
  • There’s been a lot of changes in top leadership at major retail real estate firms in recent weeks. We’ve seen changes at Developers Diversified, CBL & Associates Properties and now Cafaro Corp. where Anthony M. Cafaro Sr. and vice president John J. “Jay” Cafaro are retiring. In all cases these are planned successions taking place. The Cafaro transition has been in the works for a long time. We wrote a case study about the plan back in 2007.
  • The company formerly known as Ritz Camera has emerged from bankruptcy with a new business plan. The chain will now be known as Ritz Camera & Image and expanded its scope will go beyond just selling cameras, camera equipment and photos.
  • Guru Focus interviewed Ben Johnson, the author of the new book Money Talks, Bullshit Walks: Inside the Contrarian Mind of Billionaire Mogul Sam Zell. It is an unauthorized biography. In the interview, Johnson talks about how he pulled the book together. Johnson was formerly the editor of Shopping Center World, which is what Retail Traffic used to be called.
  • Kevin Maggiacomo, President and CEO of Sperry Van Ness, posted a lengthy New Year’s Message to his blog that doubles as a 2010 forecast and outlook. It’s worth reading.
  • There was a terrible mall shooting in Finland. A Kosovan-born gunman killed his ex-girlfriend and four other people. His ex-girlfriend worked at the mall, although she was not at the mall at the time. He shot four at the property, killed his ex-girlfriend at her apartment and then later killed himself.

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

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