Archive for the ‘Trends’ Category

BJ’s, Leonard Green in Talks (Thursday’s News & Notes)

by Elaine Misonzhnik March 24th, 2011

The streak of private equity firms going after retailers continues, with Leonard Green & Partners signing a confidentiality agreement with BJ’s Wholesale Club, according to Supermarket News.

Private equity took a breather from the retail sector in 2009 and 2010, but there has been a definite pick-up in deal activity in recent months, including the contested buyout of J.Crew by a Leonard Green/Texas Pacific partnership and several restaurant chain buyouts.

As a buyout target, BJ’s has several things that might make it attractive to private equity players, including a focus on value and an established brand name. Its main weakness, according to analysts, is that it’s competing against two stronger players: Costco and Sam’s Club. That would give an experienced private equity owner something to work with in creating additional value for the chain. If the Leonard Green deal goes through, it would be interesting to see what the firm will do with BJ’s to help it gain market share.

Ironically, while private equity firms are taking a closer look at more and more retailers, a chain that perhaps needs a private partner the most, Barnes & Noble, is about to give up on its search for a buyer, Bloomberg reports.

For more news on retail and retail real estate, follow the links below:

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Are We About to See Major Mergers/Acquisitions Among CRE Brokerage Firms?

by Elaine Misonzhnik March 22nd, 2011

Last night, Grubb & Ellis announced it hired a financial advisor in JPM Securities to explore strategic alternatives, including a possible sale of the company, Bloomberg reports. According to company chairman Michael Kojaian, Grubb & Ellis received some unsolicited offers and given its less than stellar stock performance in recent months, decided to look into the possibilities.

The move begs the question of whether we might see more merger/acquisition activity among CRE firms going forward. Over the course of 2009 and 2010, most brokerage companies struggled as investment sales and leasing transactions plunged. Recently, however, some finally started to show profits and hiring new talent. Or in any case, exchanging existing professionals on both the investment sales and leasing fronts.

Does this mean conditions might be ripe for healthier firms to go after weaker players? It will be interesting to see how the story plays out over the coming months, especially as investment sales activity and leasing are expected to pick up.

Back in 2007, Grubb & Ellis was only one of a number of brokerage firms to try to grow its market share through M&A deals.

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Wealthy Individual Investors Set Sights on CRE (Thursday’s News & Notes)

by Elaine Misonzhnik March 10th, 2011

As commercial real estate values recover, wealthy individual investors are following institutional capital in chasing real estate yields, according to a story from Bloomberg. Data from Real Capital Analytics shows high net-worth individuals spent $2.1 billion on commercial real estate investments in 2010, almost four times the $579 million they spent on the sector in 2009.

For more on retail and retail real estate, follow the links below:

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Regional Mall REITs in Great Shape in Fourth Quarter

by Elaine Misonzhnik March 7th, 2011

Regional mall REITs once again outperformed other sectors in the fourth quarter of 2010. Out of the sector’s seven REITs, five beat consensus analyst estimates, by up to $0.09 per share. Only two companies—Macerich Co. and Glimcher Realty Trust—missed, by a penny.

What’s more, everyone posted occupancy increases, inching well into the mid-90s.

“Malls have been the top performer so far this earnings season,” wrote Rich Moore, an analyst with RBC Capital Markets, in a Feb. 15 note.

“The strength in the retail sectors has been particularly apparent, and retail is poised, in our view, to be a strong performer in the next several quarters.”

As of Feb. 15, half of all REITs tracked by RBC beat analyst estimates, while 18.4 percent came in line with expectations. Approximately 31.6 percent of the companies missed. RBC covers 38 REITs in various sectors.
By comparison, in the regional mall sector, about 71 percent of the REITs beat estimates for the fourth quarter.

One area where the regional mall players still seem to be experiencing some trouble is NOI growth. Most companies, including Simon Property Group, Macerich, Glimcher, Taubman Centers and PREIT, reported same-center NOI increases in the fourth quarter, ranging from 1.8 percent to 4.8 percent. CBL & Associates, however, posted a modest decrease at 0.3 percent and General Growth Properties did not report on NOI growth at all.

regional_mall_reits_q42010

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February Same-Store Sales Come in Strong (With Caveats)

by David Bodamer March 3rd, 2011

In spite of winter storms that hit much of the country and rising fuel prices, same-store sales grew by more than 4 percent in February, according to several tallies of the monthly results. That solid number followed surprisingly strong results in January.

However, the pool of retailers reporting figures this month is the smallest yet thanks to Abercrombie & Fitch Co., Aeropostale Inc. and American Eagle Outfitters Inc. all deciding to stop reporting monthly same-store sales figures last month.

The biggest retailer in the country, Walmart, also no longer reports monthly. It recently reported that its fourth quarter same-store sales were down 1.1 percent, excluding fuel. That, in and of itself, casts a shadow on the veracity of the same-store sales figures. Walmart’s size means that when it was part of the pool of retailers reporting, it had the power to shift the overall result up or down by several percentage points. If its declines were still part of the monthly mix, the same-store figures would likely be worse than the headline numbers we’re getting now.

As a result, we have to continue to remember to take the same-store numbers with a large grain of salt.

My look inside the monthly reports is after the jump. Read the rest of this entry »

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Zell Talks About CRE Outlook; Rips Obamacare and Dodd-Frank

by David Bodamer March 3rd, 2011

The great Sam Zell, chairman of Equity Investments, was on CNBC this morning talking about a range of topics. A few minutes in he talks about why he has not done deals during the down cycle and his explanation for why the distressed market did not play out the way many people thought it would.

Here are some excerpts from the video. You can watch the whole clip embedded below.

We haven’t built anything in this country since July of ‘07. Except for some apartments, I don’t think we’re going to build anything in this country for the next two or three years.

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Literally, across the country, existing space is being filled…. It’s literally getting occupied.

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You can’t have a commercial real estate destruction without oversupply and we do not have oversupply. Will it take a year or more to fill? Probably. I think that there’s a direct correlation between filling of buildings and the end of ‘pretend and extend.’ In other words, up until now the banks have been able to defer dealing with these issues. But when the buildings get filled, they have no need of the zombie owner anymore. And they’re going to take it back and it will lead to what I call, ‘dilution is the solution deals’ where an institution comes in, puts new capital into a building, pays down the debt, redoes the debt and then the owner ends up with a hope certificate and a management contract.

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How much more commercial real estate do we need? Between 1945 and 1969 the city of Chicago grew immensely and we added one skyscraper in 15 years. And there was nobody sitting on the street at their desk. Demand tends to fit into the available of the supply. Do we need more space? Is it economically viable for a law firm to move to a new building and create the vacant old building, which doesn’t get filled up?


In another segment of the interview, Zell talked politics and blasted Obamacare and ripped the Dodd-Frank bill. Those two clips are below.



Aside from that, there are several other pieces to the interview Read the rest of this entry »

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

Target Steps Up Expansion, Continues to Grow Grocery Business

by Elaine Misonzhnik February 25th, 2011

In what seems to be an attempt to compete more effectively with the dollar stores, Target made two announcements about its plans for 2011. The first concerns its store opening plans. In 2010, the retailer slowed down its growth pace, preferring instead to concentrate on renovating existing units. This year, however, Target intends to double its number of store openings to 21, according to The Star Tribune.

Furthermore, it will continue to add grocery components to more and more locations, including 380 stores this year, according to Supermarket News. And it will begin testing a smaller store format intended to make it easier for the big box operator to grow into urban areas:

He said Target plans to open its first units of a new small urban format — called City Target — in 2012, woth pilot locations set for Seattle, Los Angeles, San Francisco and Chicago. “If successful, this format will provide us more flexibility to operate in densely populated areas on sites that won’t accommodate our larger-store formats,” Steinhafel said.

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Shady CMBS Deals in the Works? (Tuesday’s News & Notes)

by Elaine Misonzhnik February 8th, 2011

We reported in our January/February issue how the increasing competition for CMBS deals among Wall Street firms was leading to a loosening of underwriting standards.

That trend has apparently taken hold of the CMBS market so quickly that one S&P insider has referred to some of the stuff that’s been going into the new pools as outright “crap,” according to a Bloomberg report.

Based on our conversations with long-time industry veterans, however, this is not a particularly surprising development. Many of them have said that it would be only a matter of months before the conduit lenders would begin to revert to their bad old habits. What’s your take? Did you think it would take more time for Wall Street to recover its confidence after the financial crisis?

Meanwhile, you can read more news about retail and retail real estate here:

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Inside January’s Surprisingly Strong Same-Store Sales Results

by David Bodamer February 3rd, 2011

Same-store sales came in surprisingly strong in January, rising year-over-year by just under 5.0 percent. The results surprised experts, especially because of the blast of big snowstorms in the Northeast and Southeast during the month.

A look into the numbers reveals surprising strength in the apparel sector, led by Limited’s 24.0 percent year-over-year gain. As a whole, the apparel sector saw sales rise 7.3 percent, according to ICSC.
Wholesale clubs also did well—although that figure was helped some by gas sales. Costco’s same-store sales rose 9.0 percent and Costco does sell gas at many of its stores. Wholesale clubs same-store sales rose 8.3 percent during the month, according to ICSC, but when you strip out gas the gain falls to 5.3 percent. With gas prices at their highest level in some time, fuel provided an added boost to same-store sales figures that was not due to any strength in discretionary spending. In fact, Costco alone is responsible for contributing 1.7 percentage points to the industry’s overall gain for the month.

However, going forward, it looks like same-store sales figures will become an increasingly poor measure of what’s going on with retailers.

Abercrombie & Fitch Co., Aeropostale Inc. and American Eagle Outfitters Inc. all announced that today will be the final time they report monthly same-store sales figures. That will drop the pool of retailers reporting to less than 30. The ones still reporting tend to be the stronger retailers.

A few years back, more than 70 firms reported. In recent years, more and more retailers have opted to stop relaying the figure, most notably Walmart, which last reported monthly same-store sales figures in 2009. Walmart is part of a group of retailers that now report quarterly while other retailers don’t report same-store sales metrics at all. For its part, Walmart has posted quarterly declines in same-store sales for at least the last four straight quarters—including fuel sales. So if Walmart was still part of the equation—given how big a chunk of the retail world the firm represents—the same-store numbers would look a bit worse.

Going forward, as three more firms drop out of the mix, we’ll have to take the same-store numbers with a large grain of salt.

My look inside the monthly reports is after the jump. Read the rest of this entry »

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Is CRE Crisis Really Here? (Wednesday’s News & Notes)

by Elaine Misonzhnik February 2nd, 2011

While most retail real estate insiders feel the worst of the downturn may be over for the industry, one notable contrarian claims we might be in the midst of it. In an interview yesterday, retail consultant Howard Davidowitz pointed to the troubles now facing big box retailers like Walmart and Target as proof that the retail real estate sector is still ailing. The big boxers missed analysts’ earnings expectations in recent months and have been looking outside the U.S. for growth potential. For more on retail and retail real estate, follow the links below:

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