J.C. Penney Postponing Store Closures

April 17, 2017 in Latest News

Thanks to higher sales at stores marked for closure, J.C. Penney has postponed plans to shutter 138 shops.

Company spokeswoman Daphne Avila told CNBC on Thursday that the locations J.C. Penney announced in March would be closed have since seen “better-than-expected sales and traffic.”

“This is not an uncommon response when you announce a store closure,” Avila added. “Local shoppers will come out for a variety of reasons — some out of nostalgia and some who are just looking for a great deal.”

As a result, J.C. Penney will start liquidating those stores on May 22 instead of April 17, as first planned. And stores will shutter by July 31, instead of mid-June.

“Meanwhile, it’s advantageous for the company to continue selling through spring and summer merchandise at current promotional levels by pushing liquidation back another month,” the company told the Dallas Business Journal.

J.C. Penney first announced in February plans to shut down 13 to 14 percent of its 1,014-store fleet, and two distribution centers in Lakeland, Florida, and Buena Park, California.

At the time, the Plano retailer said the stores it planned to shutter accounted for less than 5 percent of annual sales and no profit dollars.

Closing them is expected to generate annual savings of roughly $200 million, though J.C. Penney expects to incur $225 million in pre-tax charges during the first half of 2017.

J.C. Penney decided what stores to close after evaluating their financials and whether they met the “brand standard,” CEO Marvin Ellison said.

For the record, I think that 1,014 stores for J.C. Penney is too many, because we haven’t made the necessary investments in our store fleet the way we should,” Ellison said in January. “It’s a simple question: If we have a location that I wouldn’t want my children to work at, or wouldn’t want my wife to shop at, then we’re going to invest capital and ask if it fits the brand standard.”

 

Source:  SFBJ

Saks Owner Seeks Real Estate Spinoff ‘As Quick As Possible’

April 10, 2017 in Latest News

The Canadian owner of Saks Fifth Avenue said it may spin off its real estate assets in a separate public company.

“We have a tremendously valuable portfolio of real estate, which could be monetized in a variety of ways,” Hudson’s Bay Company Chairman Richard Baker said during an earnings call Wednesday. “What we should have done and what we should be doing as quick as possible is IPO-ing our U.S. real-estate portfolio and/or IPO-ing our Canadian real-estate portfolio.”

Toronto-based Hudson’s Bay bought Saks Inc. in 2013. Two years later it formed joint ventures with retail real estate investment trust Simon Property Group and RioCan Real Estate Investment Trust.

Last year Baker said that Hudson’s real estate portfolio is worth around $4.8 billion, and on Wednesday he claimed the figure is still up-to-date.

Hudson’s Bay has been planning a real estate IPO since at least 2015, but initially wanted to wait for further acquisitions. Now it appears to be in a rush, with interest rates set to rise and the real estate market cycle heading for a downturn.

Hudson’s Bay announced earlier this week that it planned to stack apartments and offices on top of its Fifth Avenue Lord & Taylor store. That renovation is expected to cost more than $250 million.

In February, the company was reportedly in talks to buy Macy’s, which has also explored selling off its considerable real estate assets.

 

Source:  The Real Deal

The 10 Best Markets For Retail Investment

April 3, 2017 in Latest News

consumer spendingOne fact that usually gets lost in the recent flow of news about store closures is that none of it is unusual. Retail concepts come and go all the time. Economic cycles and changes in consumer tastes all but guarantee that a retail concept that reigns supreme at one point in its lifecycle could very well file for bankruptcy or liquidate several decades later.

Still, the retail real estate sector accounted for $76 billion in investments at the end of 2016, according to Anjee Solanki, the U.S. national director of retail services at real estate services firm Colliers International. Major gateway cities like Atlanta, Los Angeles and New York often attract investor interest first, but experts point out that secondary markets offer just as many prospects for investors looking to put their money to work.

For investors, the economic outlook for 2017 looks mixed: varying estimates have the GDP growing between 2.1 percent and 2.5 percent in 2017, and wages are also expected to increase. The labor market is expected to tighten, as the economy is expected to create 2 million new positions in 2017, down slightly from the 2.2 million new jobs filled in 2016, according to the “2017 U.S. Retail Investment Forecast,” from Marcus & Millichap, a commercial real estate brokerage firm based in Calabasas, Calif.

Marcus & Millichap estimates that store openings among value- and service-oriented retailers could result in about 81 million sq. ft. of net absorption. Developers are expected to complete about 49 million sq. ft. of retail projects this year. That is a significant amount of development, but much lower than the estimated 225 million sq. ft. of new construction that the industry used to complete each year through 2007, says Bill Rose, a first vice president and national director of Marcus & Millichap’s retail group. Restrained new construction means the industry could see its vacancy rate drop to 5.1 percent.

Where does that leave retail real estate investors in 2017? Where should they look for acquisitions to get the best return on their investments?

10. Nashville, Tenn.

With thriving healthcare and technology sectors, the capital of Tennessee is attracting infrastructure projects, new construction and young people. Vacancies for 2017 are expected to average around 4.0 percent—among the lowest in the country, according to Marcus & Millichap. Rents are beginning to increase to rates that are comparable with those quoted in gateway cities.

9. Phoenix

This city of 1.5 million weathered the Great Recession and employment is now up 2.0 percent. The insurance and technology sectors represent the areas of greatest expansion, and they are attracting well-paid educated professionals. A clear seller’s market, retail fundamentals here strengthened in 2016, as the median asset price spiked 20 percent and cap rates slipped to 6.5 percent, according to Colliers.

8. Salt Lake City

This city offers prospective residents biking, fishing, hiking and skiing options. Marcus & Millichap’s Rose says investors are attracted to the market because it offers an appealing outdoor lifestyle experience.

7. San Diego

With perpetually sunny skies, strong land use controls and plenty of tourist attractions, it is no wonder that San Diego is considered part of the string of cities known as the “smile” of the United States. Investors can expect to pay a low going-in cap rate when buying in any one these markets, but with population and job growth in place, they also get good prospects for future rent growth.

6. Atlanta

This city lost one of the most invigorating comeback Super Bowls in recent memory, but it is still winning in the key areas of rising employment (up 2.5 percent) and asking retail rents (up 2.5 percent). New construction is expected to reach around 3.2 million sq. ft. this year.

5. Houston

Houston is among the cities with the highest number of expected completions, at about 3.6 million sq. ft. Gains in payrolls and employment endowed households with the kind of disposable income that supported retail sales growth.

4. Dallas

This gateway city is part of what the market calls the Triangle of Texas, along with Austin and Houston, and is a reliable locus of growth and strong investment. Employment prospects in the area are promising, with net migration is set to reach about 88,000 people. As for retail, asking rents are expected to rise to $15.47 per sq. ft. this year.

3. Denver

Colorado’s premiere city might seem isolated, but it offers an appealing outdoor lifestyle for young adults looking for a place to settle. Employment growth is a buoyant 2.8 percent. The retail vacancy rate is trending down and rents are also up 3.1 percent, according to Marcus & Millichap.

2. Los Angeles

Retail deliveries in 2017 are on course to double 2016 levels, but that is not a red flag for this market, according to Marcus & Millichap. Employment is expected to increase by 1.1 percent, and retail rents are expected to rise by about 2.0 percent. Retail properties are maintaining their appeal across various price points and locations around the city, keeping first-year returns within a range of mid- to high-4.0 percent, Marcus & Millichap reports.

1. New York City

Don’t let the recent headlines about landlords making rent concessions fool you. New York City is still a dominant gateway city, with strong hiring trends in healthcare, education and hospitality sectors, according to Marcus & Millichap. At the time of the report, about 60,000 new jobs were expected to hit the Big Apple market, and retail rents were expected to increase by 5.4 percent.

 

Source:  NREI

Smaller Retailers Destined For Former ‘Big Box’ Stores

March 27, 2017 in Latest News

These are dark days for the traditional “big box” retailer.

Sears cast doubt this week that it could stay open, and that followed recent announcements by other struggling retail stalwarts Macy’s, J.C. Penney Co. and Kmart that they would be closing stores across the country in response to the fallout from a consumer shift to online shopping.

Electronics and appliances retailer hhgregg said this month it would be closing all 11 stores in South Florida; the announcement came less than a year after Sports Authority went out of business.

The retailers are vacating spaces of 25,000 to more than 100,000 square feet, forcing shopping center owners to find new tenants or new uses for the buildings.

More yawning spaces could be opening up around South Florida if Sears and Kmart sink amid heavy financial losses. According to their websites, Sears operates 15 locations (14 department stores and an outlet store) in Palm Beach, Broward and Miami-Dade counties. Kmart has seven stores in all three counties.

“This certainly is at the top of [landlords’] minds right now,” said Robert Granda, director of retail investment sales for the Franklin Street brokerage across South Florida. “The challenge in this changing environment is that there are not that many retailers looking to take so much space. There are a lot more tenants looking for 10,000 square feet or less than there are looking for 30,000 square feet or more.”

Alan Esquenazi, a partner at commercial real estate company CREC, agreed that a “resizing” of retail is happening across the nation.

“Bricks-and-mortar retail is unequivocally not dead,” he said. “But you have to be really sharp, really competitive. You have to offer the customer an experience, like Apple does. The retailers that are closing offered nothing different, and they were destined to fail.”

Granda, Esquenazi and other retail observers say one of the best options for landlords is to subdivide the big box buildings into smaller spaces for two or three new tenants.

That’s the plan at former Sports Authority stores in Pompano Beach and Boynton Beach, though the new tenants have not yet been announced, said Katy Welsh, senior vice president of retail services at Colliers International.

The Related Cos. of New York, which owns CityPlace in West Palm Beach, has not announced plans for the two-story, 108,000-square-foot Macy’s that’s due to close this spring. But analysts say filling that space with multiple tenants is a strong possibility.

“My guess is that CityPlace will subdivide that space downstairs, and there likely will be a food and entertainment use upstairs,” said Alan Bush, CEO of Northlake Partners, a retail strategy company based in West Palm Beach. “That combination provides the best return on investment for the landlord.”

Welsh said retailers most likely interested in taking at least part of the space in former big box stores include discount clothing chains Ross, TJ Maxx and Marshall’s as well as Home Goods and Orchard Supply Hardware.

Another possibility is the grocery store chain group, including Trader Joe’s and Lucky’s Market, Welsh said. Lidl, a German grocer, is headed to Florida after expanding into the Carolinas, Virginia and Texas, she said.

Movie theaters are another possibility, but they wouldn’t be an ideal fit in smaller, older centers, analysts say.

Landlords are eager to find new tenants at a higher cost per square foot to replace the retailer-friendly leases signed by Kmart and other chains many years ago, according to Welsh.

As a consumer, she said it’s hard for her to accept that Sears and other former retailing powerhouses are struggling to survive. But as a retail observer, she’s intrigued by what’s ahead.

“From a landlord’s perspective,” she said, “we’ve been waiting for the other shoe to drop for a long time.”

 

Source:  SunSentinel

How Zombie Retailers Are Dragging Down The Industry

March 20, 2017 in Latest News

Zombie retailers—companies that are living on the edge of bankruptcy—such as Sears Holding Corp. (SHLD), Payless Shoesource Inc. and J.Crew Group, Inc. are undermining the margins of healthier companies such as Macy’s Inc. (M) by keeping significant amounts of uncompetitive, brick-and-mortar capacity alive while more traditional retailers struggle with their online competitors, according to The Wall Street Journal.

The fraction of retailers whose debt Moody’s Investors Service has rated as either speculative or worse—currently standing at 13.5% of the retailers it rates—has surged since the end of 2011, when it stood at 5.6%, and is currently nearing the figure of 16% reached during the financial crisis, the Journal reported.

A Republican proposal to tax imports could make the situation worse, according to CNBC. Stephen Sadove, who is on the board of the National Retail Federation, described this potential policy as “the biggest threat” that retailers have seen in years during a CNBC interview. The retail industry could also suffer should the United States pull out of the North American Free Trade Agreement (NAFTA).

Retailers on Life Support

Amid these treacherous conditions, some companies have been harnessing creative financing techniques, for example taking part in distressed-debt exchanges, the Journal reported. Investors, who take a haircut by agreeing to these exchanges, have simply refused to throw in the towel in some cases. Many of them are holding onto hope that the retail industry is suffering not as a result of secular decline, but because of more temporary factors.

By enabling troubled retailers, investors are contributing to the oversupply of brick-and-mortar locations that have been hurting the margins of stronger retailers such as Sears, according to the Journal.

Is This Only the Beginning?

While a large number of more traditional retail stores have been impacted by electronic commerce (e-commerce), the widespread impact that e-commerce has had thus far may only be the beginning, Tenpao Lee, interim dean and professor of economics at Niagara University, told Investopedia in an interview. He noted that while Amazon.com, Inc.‘s (AMZN) sales represent a small fraction of Wal-Mart Stores Inc.‘s (WMT) sales, Amazon could easily enjoy robust sales growth going forward.

Past that, Lee offered some broader trends. While 20% of retail sales are currently online and 80% take place through brick-and-mortar stores, this ratio could soon change to 40-60.

As for which large retailers suffer the most as online retail transactions proliferate, he specifically singled out Ralph Lauren Corp. (RL) and Michael Kors Holdings Ltd. (KORS). Lee emphasized that these luxury retailers can only reduce their price so much in the face of competition if they want to stay true to their brand. He said that in the current global economy, businesses are having a harder time distinguishing themselves.

 

Source:  Investopedia

Retail Giants Offer Insights On 2017 Industry

February 27, 2017 in Latest News

A new report on retail real estate offers some telling signs for 2017 and beyond. Authored by Crossman & Company, the Spring 2017 Southeast US Market Report on Retail Real Estate explores key topics in the retail industry.

“This report is the result of a considerable amount of effort from our research department and the many outstanding relationships that we enjoy throughout the country,” says Crossman president John Crossman. “Our partnerships with universities, trade organizations and many industry leaders lend a unique and dynamic perspective to this in-depth report.”

Crossman identified the 37 top markets in the Southeast. Of those 37, they took an in-depth look at the five investment grade markets. The result is called the “Top 5 Deep Dive.” The remaining 32 markets are grouped by state, and the states are listed alphabetically. (Here’s what teen retailers need to know.)

“One of the interesting insights found that as conventional retailers embrace an online presence, e-retailers are recognizing the advantages brick and mortar provides in the customer experience,” says Chandan Economics Analyst Jonathan O’Kane. “The convergence has led to increased demand for space in well-positioned malls and lifestyle /entertainment centers, especially within the urban core.”

In addition to reporting fundamental market metrics, Crossman highlights major developments, touches on tenant activity, and updates on the infrastructure of the biggest metropolitan areas in the Southeast: Atlanta, Charlotte, Miami-Dade County, Orlando, and Tampa. (Check out retail banking’s evolution in this Crossman report.)

“We are feeling cautiously optimistic about 2017,” says Ross Cooper, executive vice president and Chief Investment Officer for Kimco Realty. “We are watching the market dynamics of rising interest rates and potential inflation very closely. In the meantime, Kimco is in the “sweet spot” of retail: our traditional tenant base of value and discount-oriented, everyday goods and services is enjoying positive trends and sales growth.”

Crossman organized data from a variety of sources and reported them in an easy-to-navigate infographic, with quotes from industry leaders in those markets. The report offers numerous insights into retail real estate trends.

The report includes interviews followed by editorial articles on capital markets, retail in Florida, and trends shaping 2017. The report comes on the heels of Crossman announcing it has expanded to Mississippi.

 

Source:  GlobeSt.

Payless In Negotiation With Lenders to Close 1,000 Stores

February 20, 2017 in Latest News

Payless Inc. is in talks with its lenders over a restructuring plan that includes closing about 1,000 stores as it wrestles with an unsustainable debt load, according to people with knowledge of the matter.

The discount shoe retailer may consider filing for bankruptcy if it’s unable to reach a deal with the creditors, said the people, who asked not to be identified because the information isn’t public. A decision on whether to restructure in or out of court may be reached as soon as this month, they said.

The chain has hired Guggenheim Partners to help in the effort, the people said.

Representatives for Payless and Guggenheim declined to comment.

Payless is the latest retailer to find its back against the wall because of declining mall traffic as more and more customers shift spending to experience from shoes and apparel. The retailer hired law firm Kirkland & Ellis LLP to look at options for its $600 million debt load, people with knowledge of the matter said earlier.

Traditional chains are struggling because of the quickening shift to online shopping offered by competitors led by Amazon.com Inc. Retailers such as J. Crew Group Inc., Claire’s Stores Inc., Gymboree Corp., Rue21 Inc., and True Religion Apparel Inc. are identified as the most troubled companies on S&P Global’s list of retailers on negative outlook.

Payless was bought by private equity firms Golden Gate Capital and Blum Capital Partners in 2012 as part of a split of publicly traded Collective Brands Inc. The company, founded in 1956 in Topeka, Kansas, has more than 4,400 stores in 30 countries and employs more than 25,000 people, according to its website.

The company’s biggest debt piece is a $520 million term loan due in 2021, according to data compiled by Bloomberg. The loan, which was last quoted above par July 2014, now trades around 53 cents on the dollar.

Moody’s Investors Service and S&P both cut the ratings of Payless’s loans in February, pointing to revenue declines and mounting leverage. Moody’s in its report highlighted the company’s high leverage and limited access to liquidity.

 

Source:  NREI

Whole Foods Pulls Back On Expansion, Announces Store Closures

February 13, 2017 in Latest News

Last week, Whole Foods Market announced plans to close nine stores and table an expansion it announced last year. The retailer posted its sixth-straight quarter of same-store sales declines.

The natural food grocer had planned to expand to 1,200 locations in the U.S., more than doubling its nearly 470 locations throughout the U.S., UK and Canada. But now Whole Foods will wait to see how the roll-out of around 100 locations goes before revisiting expansion talks.

Lately, competition has been fierce for the high-end grocer, Fortune reports. On a call with investors, Whole Foods CEO John Mackey said, “the more conventional, mainstream supermarkets have upped their game … the world is very different today than it was five years ago.”

Whole Foods will close two stores each in Colorado and California along with locations in Chicago, New Mexico, Utah, Arizona and Georgia. Mackey said the stores set to close are older, smaller locations that Whole Foods had acquired. Many were near a larger, more modern Whole Foods or occupied spaces with leases that were due to expire. Two leases were terminated. Whole Foods said it would take a $30M charge in the second quarter related to the store closings.

In an effort to stabilize profits, the chain is turning to consumer data and promotions. A new partnership with UK-based Dunnhumby, a consumer data subsidiary of Tesco, aims to help Whole Foods improve merchandising and offers to loyal customers. Cost-cutting efforts are also underway and the grocer is working to slash operating costs by $300M through layoffs and centralizing operations.

Last year the chain pushed to draw customers back by aggressively lowering prices and experimenting with value-driven Whole Foods 365 concepts, specifically targeting areas with large hipster populations. So far the company has opened 13 stores this year with roughly 80 new stores in the pipeline.

 

Source:  Bisnow

$3B American Dream Miami Megaproject Receives First Approvals

February 6, 2017 in Latest News

american-dream-miamiThe Miami-Dade County Commission voted 10-1 for preliminary approval of American Dream Miami, a proposed $3 billion “retail theme park” in northwest Miami to be developed at the Florida Turnpike and Interstate 75.

The proposal by Triple Five Group, a Canadian development firm owned by the Ghermezian family, would create the largest mall and amusement park in North America, with a nearby mixed-use commercial center developed by Graham Cos. The project now goes back to state authorities for approval land use changes before returning to the county for public hearings this spring.

The project on nearly 200 acres would include 2,000 hotel rooms, 1.5 million square feet of retail and 1.5 million square feet of “entertainment” for a total of 6.2 million square feet of commercial space.

The Graham project would include 2,000 apartment units, another 1 million square feet of retail and a 3 million-square-foot business park on more than 300 acres adjacent to American Dream.

 

Source:  CoStar

Wet Seal To Close All 171 Stores

January 30, 2017 in Latest News

After filing for bankruptcy two years ago, teen retailer Wet Seal is preparing to close all of its 171 stores due to slumping sales and a lack of buyout bids.

While the company has not officially announced its liquidation, the Wall Street Journal received a letter dated Jan. 20 that said Wet Seal was unable to find a buyer or raise more cash, leaving it with no option but to close its doors, Yahoo Finance reports. Supporting that story, a California WARN (Workers Adjustment and Retraining Notification) report filed last week said Wet Seal was closing permanently and laying off all 148 workers at its corporate headquarters.

Wet Seal will be the latest retailer to close all of its stores, following American Apparel and The Limited as e-commerce and intensified competition continue to take a toll.

 

Source:  Bisnow