Archive for the ‘Management & Leasing’ Category

Navigating The Uncertainty of FAS13

There has been a flurry of analysis in the past couple months about Financial Accounting Standards 13 (FAS 13), proposed new lease accounting standards from the U.S. Financial Accounting Standards Board and the International Accounting Standards Board. The standards would require all lease liabilities to be accounted for on corporate balance sheets as capital leases rather than as operating leases.

We tried to summarize some of the implications for retail real estate in a recent piece. Our sister publication NREI also examined the issue in a piece in September.

But there are several other good primary reports out there that folks in the industry should find of interest. Read the rest of this entry »

Simon Launches iPhone App

Simon Property Group unveiled an iPhone app for its centers this week. The app is available through the iTunes app store and is compatible with iPhones, iPads and iPod Touch devices. It is supposed to integrate with user’s Facebook, Twitter and Foursquare accounts.

Simon says the app will focus on providing consumers with on-the-go access to retailer promotions and what’s going on at their local Simon property including new store openings and experiential events. Customers will also be able to check the balance of their Simon Giftcard, help them locate their cars in mall parking lots or garages, sign up for Simon emails that alert them to special deals, and enjoy other benefits.

Earlier this year, Simon already signed up for a mobile app at 25 of its centers that gives shoppers access to discounts when they walk into a Simon property or into one of the participating stores at its centers.

So far, CBL & Associates Properties has been the only other major retail REIT to unveil a proprietary mobile app. Many other property owners are trying to figure out how to take advantage of the new mobile technology.

Mall Vacancy Declines! (Tuesday’s News & Notes)

This is news landlords have been eagerly waiting for: New York-based research firm Reis Inc. just reported that the vacancy rate for U.S. malls fell for the first time in three years in the third quarter, to 8.8 percent from 9.0 percent the quarter prior. The vacancy rate for strip centers didn’t budge, but neither did it increase. (Here’s a version of the story with a graph, courtesy of Calculated Risk).

Yet Reis researchers caution the retail real estate industry against too much optimism. Many long-term leases are set to expire in the fourth quarter, they say, and it’s likely that in the current subdued retail environment, many tenants will not renew. For more stories on retail and retail real estate, follow the links below:

Let the Holiday Sales Speculation Begin! (Wednesday’s News & Notes)

With ICSC and the NRF each providing their holiday sales forecasts, the real fun now begins as people search for clues as to how the season will truly play out.

For what it’s worth, ICSC is projecting same-store sales to rise between 3 percent and 3.5 percent over the November/December period while the NRF thinks total sales will rise 2.3 percent to $447.1 billion. In addition, Retail Forward has projected a same-store sales increase of 2.5 percent and Deloitte has projected total sales to rise 2.0 percent. (ShopperTrak and NPD Group will release their projections within the next couple of weeks as well.)

Reuters chose to focus on the positive and highlighted the fact that if these projections come to fruition it would mark the strongest holiday sales season since at least 2006.

The New York Times opted for a different tactic and looked at the seasonal hiring patterns. It appears retailers will not take on a ton of temporary workers for the holidays. (As a side note, while Reuters explicitly called the back-to-school sales “better than expected”, the Times described them as “disappointing.” For the record, the consensus was that August sales were stronger than expected and we don’t get the final September numbers until tomorrow.)

Lastly, the Wall Street Journal is saying that the success of the holiday shopping season for many retailers will hinge on discounting.

The shift back into discounting mode is an about-face from the previous holiday season and earlier this year, when lean inventories allowed retailers to hold the line on prices. But retailers were forced to roll out promotions to bring customers into their stores when shopping sputtered out in late spring and summer.

The September price wars were particularly evident in the teen sector. Aéropostale Inc., a heavily promotional retailer, saw more competition this season as its higher-priced peers took deep discounts. It responded with select hoodies on sale for $14.99, the same low level it offered on Black Friday last year, says John Morris, an analyst at BMO Capital Markets.

“There’s no doubt that the current climate is more promotional,” said Aéropostale Co-CEO Mindy Meads at a conference last month. “In select categories, (our competitors are) hitting a little harder, which is causing us to promote harder.”

Here are some other highlights from around the retail real estate world.

Presenting GGP’s New Board

General Growth Properties announced its new board. And, as reported last week, the Bucksbaum family is not on it.

Bruce Flatt will serve as the chair of the new board. Flatt is currently CEO of Brookfield Asset Management Inc. Another notable name is Adam Metz, the CEO that has led GGP through its restructuring and who plans to stay on board for for at least one more year after the restructuring is completed. In addition, Mary Lou Fiala will be on the board. Fiala is the former president and COO of shopping center REIT Regency Centers.

The full board is below.

# Ric Clark – Chief Executive Officer of Brookfield Properties
# Mary Lou Fiala – Former Chairman and current member of the Board of Trustees of International Council of Shopping Centers (ICSC); Member of the Board of Directors at Macquarie Global Growth Trust; Member of the Board of Directors at Build-A-Bear Workshop; Member of the Board of Directors at Flat Out Crazy, an Asian restaurant; Former President and Chief Operating Officer of Regency Centers Corporation
# Bruce Flatt – Senior Managing Partner and Chief Executive Officer of Brookfield Asset Management
# John Haley – Current member of GGP’s Board of Directors; Retired Partner, Transaction Advisory Services (TAS) at Ernst & Young LLP
# Cyrus Madon –Senior Managing Partner at Brookfield Asset Management responsible for restructuring and lending activities
# Adam Metz – Chief Executive Officer of General Growth Properties, Inc.
# David Neithercut – President and Chief Executive Officer and a member of the Board of Trustees of Equity Residential, one of the nation’s largest REITs as measured by equity market capitalization
# Sheli Rosenberg – Currently lead director of General Growth Properties; Retired Chief Executive Officer, President and Vice Chairwoman of Equity Group Investments, Inc., a Chicago-based, privately held investment company
# John G. Schreiber – President of Centaur Capital Partners, Inc. and a Partner and Co-Founder of Blackstone Real Estate Advisors; Former Chairman and CEO of JMB Urban Development Co.

CRE Loans Performing Better (Monday’s News & Notes)

Remember all the talk about commercial real estate being the next shoe to drop? Based on recent statistics, that fear might have been overblown. The CoStar Group reports that delinquencies on commercial real estate loans started to subside in the second quarter of 2010 and are expected to fall further by the end of the year. For this and other stories about retail and retail real estate, follow the links below:

CBL to Launch Mobile App

In the wake of all the fanfare surrounding Simon Property Group’s partnership with the Shopkick mobile app, CBL & Associates announced it will soon launch its own mobile app for iPhone, iPad and iPod Touch users. The mall owner feels mobile marketing is the way of the future and has been talking to app developers for the past few months. It finally settled on Slicker Interactive LLC as its partner. CBL’s mobile app, mallMerlin, will be launched at the majority of CBL’s malls by the beginning of next year.

The app will mimic the natural way people shop, according to CBL’s spokesperson. The content will be customized to the individual shopper and his/her location within the center and will include special promotions, high-definition video and in-mall navigation tools. CBL’s retail tenants will be able to participate in the program free of charge, but will have to pay a fee if they opt to upgrade their content by, for example, offering digital coupons.

Madison Marquette was the first mall owner in U.S. to launch a property-specific mobile app earlier this year, for its Asbury Park center.

CMBS Market Continues Revival (Friday’s News & Notes)

On back-to-back days we’ve now gotten word of big CMBS offerings by JP Morgan

On Thursday, Bloomberg reported that JPMorgan Chase & Co. plans to sell $1 billion of commercial mortgage-backed bonds in what would be the biggest offer of 2010.

JPMorgan’s sale, the largest this year of the debt, would grant hedge fund H/2 Capital Partners LLC, the buyer of the bottom $50 million slice, primary authority over troubled loans, according to people familiar with the transaction who declined to be identified because negotiations are private. Goldman Sachs Group Inc. and Citigroup Inc. gave those rights to investors of the highest-rated portions in a $788.5 million offering on Aug. 4.

Today, news of another offering emerged.

JPMorgan Chase & Co. is marketing $484.6 million of bonds backed by a loan to Centro Properties Group, the Australian shopping center owner seeking to refinance $2.7 billion of debt from its U.S. business.

The loan is secured by 72 retail properties owned by the Glen Waverley, Australia-based company, according to people familiar with offering who declined to be identified because terms are private. Shopping centers in Texas account for 39 percent of the pool, while properties in New York and New Jersey represent 21 percent.

Things are slowly improving.

Here are a few other headlines from the past couple days worth checking out.

Free Speech and Malls

freespeech
Last week brought the latest ruling in the ongoing saga about free speech in malls. A California court ruled that conversation rules at Westfield’s Roseville Galleria violate the Constitution.

At the property, Westfield bars any conversations between strangers that do not have to do with the mall itself. The case stemmed from a 2007 incident during which a youth pastor was kicked out of the property after he talked with three women about faith. The pastor sued the mall and won the ruling last week. Westfield is appealing that decision.

This is far from the first time that the issue of free speech and malls has been taken to the courts. At the heart of the debate has always been the tension between the concepts that malls are the modern equivalent of town squares, yet at the same time are clearly private property. Town squares, of course, have a rich history as places for public discourse, which can include controversial subjects and political and religious debates. But malls are places of commerce and under no obligation to provide forums for open debates and discussions.

An editorial in the Sacramento Bee echos the idea that malls should not try and limit speech and assembly:

Although they are private businesses, malls have become the current-day version of the public square, where Americans come to shop, to people-watch, mingle and, yes, even talk to strangers about something other than the latest hot gadget or which store has the best deals.

Indeed, malls are designed that way, with fountains, play areas and other public spaces.

Mall operators can’t have it both ways. They can’t go all out to lure as many people as possible, then unreasonably regulate how they can behave.

On the other hand, private property owners do have the right to dictate the rules of what happens within their properties. And mall owners have for years tried to regulate speech. Ultimately, they are places of commerce. And they do not want activities occurring that are going to intimidate people or distract them from shopping.

The debate goes at least as far back as the late 1960s. And it has been revisited for all sorts of reasons.

California’s ruling comes down squarely on the side of seeing malls as public places. But mall owners have won the argument in many other courts. So there is no clear precedent one way or the other on how courts rule in these issues. For example, a court in California in 2007 ruled that shopping malls can’t ban protesters from calling for boycotts of mall businesses. But the State Supreme Court in Connecticut in 2004 ruled a mall there had legally prohibited union members from distributing literature.

Other incidents that have become the subject of court cases include one where a mall patron in Albany in 2003 was kicked out of a mall for wearing a T-shirt with the words “Peace on Earth” and “Give Peace a Chance”. Antiwar protesters were also at the heart of the 1994 case called New Jersey Coalition Against War In The Middle East v. J.M.B. Realty and the Green Party won a ruling in 2000 after it was banned from a New Jersey property.

So what’s the right answer? My hunch is that mall owners aren’t about to change their attitude on this issue. They do not want their properties to become forums for open political or religious debates or rallies. They want their properties to be neutral spaces. The question is whether that stance is realistic any longer.

A Glimpse At Florida’s Retail Climate

A glance at the retail fundamentals in Florida reveals a dramatically different retail scene from market to market.

What the different markets in the state have in common is that a low amount of new construction will ease pressure on rents everywhere. The lack of new supply will help keep vacancies under control and help keep rents from falling further. In fact, in Miami, rents have actually increased slightly in 2010.

The other commonality in Florida’s markets is the question of unemployment. Throughout the state, unemployment rates are hovering at or above 10 percent. That is casting a pall over the retail picture in many markets.

Read the rest of this entry »