ICSC =Atlanta Real Estate
I attended the Atlanta dealmaking show and Rich (our editor) and I went to Chicago for its event (Ann was busy working on the New York show) and, in both cases, attendance was up but not quite as much as most shows have experienced in the last few years. In fairness, the slowdown in growth may be due to some people not being able to get to either show because of the hurricane in Florida and that the two shows were back to back, making some of us old farts say it was too much and only attended one of the two. I think, but I'm not positive, that Atlanta was slightly larger than Chicago, but both were worth attending. The reason, I'm told, for the shows overlapping were because of the Jewish holidays and the desire/need not to have an event on any of the holidays. Next year, Chicago will be in September and Atlanta in October, making 'em a non-competitive event and, IMHO, that's good. Ann and I are leaving today for the Texas show, then New York in December before it all ends for the year. Happy New Year!
The only two widespread complaints were minor. The cocktail party in Atlanta, which was well attended, had long lines at the bar and food tables (not enough set ups) and in Chicago, if you tried to get your badge between 8:45 and 10:30 am, you had up to a 45-minute wait. According to Phyllis Peterson, who runs all the major shows, this was caused by an extremely high amount of people showing up at the same time, a problem promised to be corrected next year. The ICSC is learning; they know New York will be a nightmare on 42nd Street and is mailing out badges to advance registrants to avoid delays (smart decision).
Both shows were busy the day before the actual dealmaking, with suites set up throughout the hotels, "dealmakers" at every vacant table and busy restaurants the night before. I wasn't able to attend the Harold Eisenberg dinner the night before the Chicago show started because I arrived there at 10 p.m. from Atlanta but was told it was a sellout with over 550 in attendance. But I still have to thank Jim Shutter for the invitation (Oh, don't forget to come to the Barry Davis Memorial Dinner on Sunday, Dec 6th. in NYC. Not only are you supporting a great cause but it's a really outstanding networking event. It's the East Coast's Harold Eisenberg Dinner, you don't want to miss it. Call the ICSC at 646-728-3800).
Chicago seemed to appeal to companies from a wider region than Atlanta, in that I got into conversations with people from California, New York and all places in between. Atlanta drew more from a 200-mile radius. The New York show will be a national event. And, with some luck, another record will be set (actually no luck is needed. Short of a blizzard, another record is coming).
Both Atlanta and Chicago also seem to attract "small" developers who cater to middle markets, a difference from the Philly, Palm Springs and the Florida events. At both shows and in other trade publications, all you hear about is mixed-use, lifestyle centers. Based on all the press they receive, you'd think that the only type of center being built in America today is a 400,000 sq.ft., $75 million project which few of the "little guys" can afford (my definition of little guy means they have a personal net worth of $5 to $25 million but their average project usually costs under $10 million and there are LOTS of centers still being built that fit this definition). There were numerous conversations about mixed-use and lifestyle centers with several retailers talking about "failed" lifestyle centers they were in (so much going wrong so soon after they've become so "hot"). One retailer compared the hype over mixed-use and lifestyle centers as being similar to all the talk about outlet and off-price centers being the cure for all problem properties, which they weren't. Several retailers contended that the only common ground that many lifestyle centers have was that they had a bookstore either announced or proposed after that they could contain a Pizza Hut and Kmart, but the developer contended it was a lifestyle. The one common comment I heard was that the lifestyle/mixed-use center did best when located across from a regional mall (makes sense). Some said they were being offered centers located in blue collar areas that are "close" to the upscale markets (which doesn't work).
While 80% to 85% of the attendees at both shows were upbeat, 15% to 20% were apprehensive of the industry's immediate future. Several developers were complaining about the number of bankruptcies and store closings they were encountering and were not optimistic about Christmas. They also saw more resistance from retailers on doing deals. Several retailers I spoke to said they were slowing down openings and holding off on determining the number of openings for 2006 until after Christmas. If we have a poor Christmas, business will suck next year. What was interesting was I spoke to several retailers who are operating in Chapter 11 and they were all upbeat about their future. Of course what choice do they have?
What was "scary" was I had conversations with some "bottom fishers" (I say this in the most complimentary way) and they contend both shows were excellent for them, a bad sign for the industry. On the other hand, I spoke to numerous "opportunist buyers" who "claimed they got great deals," such as buying a center for $5 psf. The good news is there are still deals like that available, the bad news is you usually get what you pay for. I was offered the opportunity to manage/lease two of these projects and, in both cases, I felt they were beyond our ability to "cure." IMHO, they are beyond recovery and are on a death watch. Neither buyer was that sophisticated or experienced and made their decision purely based on price, which is trouble looking for a place to happen.
Oh, good news on retailers for a change. Bon-Ton just announced they are acquiring SAKS northern division of 142 stores, combined with their past acquisition of Elder-Beerman makes them a major Midwest player. Why do I mention this since it's just an acquisition? Well, it isn't like Federated is acquiring some great local names and making 'em into a Macy's and taking away a local identity. Here, Bon-Ton, a former candidate for bankruptcy, is now alive and well and becoming a major player themselves. The demise of SAKS was a given, so this acquisition makes a local player more competitive and aids our industry in competition. I think Federated's acquisitions will, and does, hurt the mall industry.
Macy's is an excellent department store, BUT variety is the spice of life. Malls are becoming boring when it comes to tenant mix. Yes, mall developers (the few that there are) are spending billions upgrading the centers, adding entertainment, condo, five-star restaurants and more, BUT the major reason you go to a mall is the retailers and retailing today is become so "me-too" that you often can't tell the store you're in until you're at checkout and they tell you who to make the check payable to.
Oh well, on with my parting thoughts: Most retailers that either file for chapter 11 or close huge amounts of stores are either stupid or have top executives that are stupid and "forced" the real estate department to open more stores than they properly could and still keep costs down. I recently received an email from DJM Asset Management promoting the excess space of OshKosh B'Gosh, which is closing 15 locations. Their locations run the gamut of CA, CO, GA, MO, OH, OR, TN, TX, VA, VT and WI. Their square footage runs from 3,000 sq.ft. to 9,900 sq.ft. The locations, square footage and rents provide a decent overview of their operations and philosophy and insight into what they are. After reviewing their "excess locations," I understand why they're having problems; they pay too much rent, which runs from $23 to $38.50 per foot. A lot of their real estate is excellent, sharing space with the likes of Ann Taylor, Bath & Body Works and Gap, but I think in most cases they were more concerned about image than mundane things such as profitability. They could do the same volume for less rent if they "worked" on finding locations. In the mail I also received a flyer from DJM marketing 58 locations of the Good Guys. An analysis of these locations proved the same insight. Too high of a rent payer.
The advantage of the Internet age and the proliferation of companies marketing the excess space of retailers is we can get a glimpse into the type of deals retailers did and I'm sure every retailer and tenant rep gets a dozen or more submissions a month of the surplus locations of one retailer or another. Hopefully, they can learn from the retailer's mistakes and not do their own. Yes, buying a lease of a tenant in bankruptcy makes sense if its an older lease at low rent, but newer deals rarely make sense. Oh, I think too many people are watching the TV program "Flip This House" and are trying to do it with shopping centers. In the last few weeks I've had four people call wanting to know if any of our clients would be interested in purchasing their contract for centers, which they signed a week ago. The ink isn't dry and they want to flip.
The only two widespread complaints were minor. The cocktail party in Atlanta, which was well attended, had long lines at the bar and food tables (not enough set ups) and in Chicago, if you tried to get your badge between 8:45 and 10:30 am, you had up to a 45-minute wait. According to Phyllis Peterson, who runs all the major shows, this was caused by an extremely high amount of people showing up at the same time, a problem promised to be corrected next year. The ICSC is learning; they know New York will be a nightmare on 42nd Street and is mailing out badges to advance registrants to avoid delays (smart decision).
Both shows were busy the day before the actual dealmaking, with suites set up throughout the hotels, "dealmakers" at every vacant table and busy restaurants the night before. I wasn't able to attend the Harold Eisenberg dinner the night before the Chicago show started because I arrived there at 10 p.m. from Atlanta but was told it was a sellout with over 550 in attendance. But I still have to thank Jim Shutter for the invitation (Oh, don't forget to come to the Barry Davis Memorial Dinner on Sunday, Dec 6th. in NYC. Not only are you supporting a great cause but it's a really outstanding networking event. It's the East Coast's Harold Eisenberg Dinner, you don't want to miss it. Call the ICSC at 646-728-3800).
Chicago seemed to appeal to companies from a wider region than Atlanta, in that I got into conversations with people from California, New York and all places in between. Atlanta drew more from a 200-mile radius. The New York show will be a national event. And, with some luck, another record will be set (actually no luck is needed. Short of a blizzard, another record is coming).
Both Atlanta and Chicago also seem to attract "small" developers who cater to middle markets, a difference from the Philly, Palm Springs and the Florida events. At both shows and in other trade publications, all you hear about is mixed-use, lifestyle centers. Based on all the press they receive, you'd think that the only type of center being built in America today is a 400,000 sq.ft., $75 million project which few of the "little guys" can afford (my definition of little guy means they have a personal net worth of $5 to $25 million but their average project usually costs under $10 million and there are LOTS of centers still being built that fit this definition). There were numerous conversations about mixed-use and lifestyle centers with several retailers talking about "failed" lifestyle centers they were in (so much going wrong so soon after they've become so "hot"). One retailer compared the hype over mixed-use and lifestyle centers as being similar to all the talk about outlet and off-price centers being the cure for all problem properties, which they weren't. Several retailers contended that the only common ground that many lifestyle centers have was that they had a bookstore either announced or proposed after that they could contain a Pizza Hut and Kmart, but the developer contended it was a lifestyle. The one common comment I heard was that the lifestyle/mixed-use center did best when located across from a regional mall (makes sense). Some said they were being offered centers located in blue collar areas that are "close" to the upscale markets (which doesn't work).
While 80% to 85% of the attendees at both shows were upbeat, 15% to 20% were apprehensive of the industry's immediate future. Several developers were complaining about the number of bankruptcies and store closings they were encountering and were not optimistic about Christmas. They also saw more resistance from retailers on doing deals. Several retailers I spoke to said they were slowing down openings and holding off on determining the number of openings for 2006 until after Christmas. If we have a poor Christmas, business will suck next year. What was interesting was I spoke to several retailers who are operating in Chapter 11 and they were all upbeat about their future. Of course what choice do they have?
What was "scary" was I had conversations with some "bottom fishers" (I say this in the most complimentary way) and they contend both shows were excellent for them, a bad sign for the industry. On the other hand, I spoke to numerous "opportunist buyers" who "claimed they got great deals," such as buying a center for $5 psf. The good news is there are still deals like that available, the bad news is you usually get what you pay for. I was offered the opportunity to manage/lease two of these projects and, in both cases, I felt they were beyond our ability to "cure." IMHO, they are beyond recovery and are on a death watch. Neither buyer was that sophisticated or experienced and made their decision purely based on price, which is trouble looking for a place to happen.
Oh, good news on retailers for a change. Bon-Ton just announced they are acquiring SAKS northern division of 142 stores, combined with their past acquisition of Elder-Beerman makes them a major Midwest player. Why do I mention this since it's just an acquisition? Well, it isn't like Federated is acquiring some great local names and making 'em into a Macy's and taking away a local identity. Here, Bon-Ton, a former candidate for bankruptcy, is now alive and well and becoming a major player themselves. The demise of SAKS was a given, so this acquisition makes a local player more competitive and aids our industry in competition. I think Federated's acquisitions will, and does, hurt the mall industry.
Macy's is an excellent department store, BUT variety is the spice of life. Malls are becoming boring when it comes to tenant mix. Yes, mall developers (the few that there are) are spending billions upgrading the centers, adding entertainment, condo, five-star restaurants and more, BUT the major reason you go to a mall is the retailers and retailing today is become so "me-too" that you often can't tell the store you're in until you're at checkout and they tell you who to make the check payable to.
Oh well, on with my parting thoughts: Most retailers that either file for chapter 11 or close huge amounts of stores are either stupid or have top executives that are stupid and "forced" the real estate department to open more stores than they properly could and still keep costs down. I recently received an email from DJM Asset Management promoting the excess space of OshKosh B'Gosh, which is closing 15 locations. Their locations run the gamut of CA, CO, GA, MO, OH, OR, TN, TX, VA, VT and WI. Their square footage runs from 3,000 sq.ft. to 9,900 sq.ft. The locations, square footage and rents provide a decent overview of their operations and philosophy and insight into what they are. After reviewing their "excess locations," I understand why they're having problems; they pay too much rent, which runs from $23 to $38.50 per foot. A lot of their real estate is excellent, sharing space with the likes of Ann Taylor, Bath & Body Works and Gap, but I think in most cases they were more concerned about image than mundane things such as profitability. They could do the same volume for less rent if they "worked" on finding locations. In the mail I also received a flyer from DJM marketing 58 locations of the Good Guys. An analysis of these locations proved the same insight. Too high of a rent payer.
The advantage of the Internet age and the proliferation of companies marketing the excess space of retailers is we can get a glimpse into the type of deals retailers did and I'm sure every retailer and tenant rep gets a dozen or more submissions a month of the surplus locations of one retailer or another. Hopefully, they can learn from the retailer's mistakes and not do their own. Yes, buying a lease of a tenant in bankruptcy makes sense if its an older lease at low rent, but newer deals rarely make sense. Oh, I think too many people are watching the TV program "Flip This House" and are trying to do it with shopping centers. In the last few weeks I've had four people call wanting to know if any of our clients would be interested in purchasing their contract for centers, which they signed a week ago. The ink isn't dry and they want to flip.
posted by tedkraus at 7:40 AM
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