Mickey Hits Another Home Run
Ann, Alyson, Terry and myself attended the Orlando ICSC dealmaking convention, which proved to be another home run. Lots of busy and happy dealmakers gathering for three days to wheel and deal, a task they were all equipped to do and do well.
The cocktail party on Sunday, while active, seemed (but I'm not sure) to have a little less in attendance than in the past, and I have two theories why (the third is I'm wrong) 1) Airfare and hotel costs have gone up, so some elected to come for one day less to save some expenses; 2) There was confusion on which day the cocktail party was, many thinking it was on Monday, not Sunday night. Either way, the show itself ended up with nearly 5,000 attending over last year's 4,300 and the cocktail party was a success with all attendees being in an upbeat mood. We can't ask for more than that.
The reoccurring complaint I heard was on the increasing costs of construction and insurance in the Florida market since last year's hurricanes. The details have been reported everywhere, but I'm told some insurance costs have gotten close to the $3 psf mark and construction costs are up 25% to 30%. Some claimed that it marks the beginning of the end of Florida's great retail market, but I doubt that. It will make dealmaking more difficult, as more secondary sites are rejected and greater "discussions" on acceptable rents than in the past occur. The great curse of life. May you live in interesting times.
Ann and Alyson attended the Ladies in the Biz cocktail party on Sunday and they seemed happy with the networking opportunity and the excellent turnout. From what I could see, the booths at the actual dealmaking show were sold out with just a few no-shows, so by every definition, Orlando was a winner, as has become tradition with this event. Every exhibitor I spoke to expressed satisfaction with the show, so even with some problems on the economic horizon, the Florida market is still hot. Of course, trying to figure out the economy is impossible; One day inflation is down, the next up. One day consumer spending is up, the next down. One week, unemployment figures are up, the next down. It's totally confusing, and anyone claiming to understand what's happening is a fool or a liar.
I'm writing this during the last week of August and, to say the least, business is slow, at least from the brokerage end; publishing is busy preparing for all the upcoming ICSC dealmaking events. Phone calls have slowed to a trickle, most people I call are on vacation or getting ready to go on one and 99% of the deals scheduled to open for this coming Xmas season are finalized, so no one is under pressure to do a deal; they want to enjoy what's left of the summer. Hopefully, as has been true in the past, this changes after Labor Day and business becomes hectic once again.
The hunt to find centers for sale is as strong as ever, with most of the brokers and buyers confused and frustrated on why CAP rates aren't going up as interest rates have (In theory, they have; in realty, they haven't). I guess the only logical answer is "If they can get their asking price, whether it makes sense or not, why not." The single largest complaint I constantly heard was where/how to acquire property that makes economic sense, and there is no answer. Where I'm really confused is all the reports that I've read contend there's a slowdown in leasing and retail sales, but in the majority of markets, rents are still increasing and a retailer has to be a real fool to pay higher rents on declining sales. I must be the exception to the rule because every property we're leasing I'm finding it harder to get decent rents and tenants are fighting harder on renewals. Of course, some of it is sticker shock, when after 10 years a tenant's rent goes from $7.50 psf gross to $18.25 psf net, it can be difficult to accept. Of course, the retailer's gross has increased substantially over the years and that they have no problem accepting higher sales volumes and the incoming profits.
Another change in the sale of properties is that, while CAP rates have not risen, it is taking longer to make a deal and I've noticed more deals are coming back onto the market after a LOI was signed. Deals seem to be dying more often; it now often takes several acceptable offers from different buyers before an actual deal is finalized. If the due diligence doesn't come through perfectly the buyer wants to renegotiate.
Switching subjects, Josh, as I mentioned attended the ICSC's University in Lansing, MI and they appear to have done a decent job of teaching him the basics and providing lots of networking opportunities, many of which will probably last him a lifetime. The reason I think they did a decent job is that he came back with lots of buzz words and sat down with Ann and myself and explained all the things we've done wrong over the last 30 years. God, I never realized how ignorant I've been. I guess that's what children are for, to point out all your mistakes. Forgetting the sarcasm for a moment, the University was well worth the time and money involved. Josh said the "teachers" were great and over the five days he had 10 or 11 teachers covering all aspects of leasing and management. It reminds me a little of talking to him after his first day of kindergarten; I was more excited than him.
On a different note, we're marketing a center for sale that, to say the least, is problemed and we're having trouble generating any interest. I called a few brokers I know who specialize in sales and said we should co-broker and then sent out a complete package. A week or two later one of the brokers called, saying very apologetically that one of his clients made an offer but he was ashamed to make the offer. I used a line from Lee Cherney of Kin Properties; "As long as you don't insult my kids or wife, I won't take it personally. So give me the offer." He was right, it was low ($10 psf to buy) and I promptly turned it down, BUT I did call the seller and tell him of the offer. The good news is that, even though he didn't accept the offer, he didn't get uptight and came back with a counter offer, which the buyer turned down, but at least I got him an offer. The other brokers reluctant to present a low-ball offer reminded me of a trend I've noticed over the last few years. The amount of real "horse traders" in our industry is declining. I'm not talking the typical deal between a landlord and tenant where the rent starts out at an asking price of $25 psf and ends up at $19 psf, but on marginal properties for lease or sale. It used to be that companies and individuals would make an offer on marginal centers IF the deal could be bought "right" (and there are still companies that only want marginal properties where they can get in cheap), but I guess that secondary centers are either too much of a risk or too much work for most of the "next generation" to be bothered with. Nickel and dime negotiations aren't popular anymore to many (not all) companies and too many people seem ashamed to make a low ball offer; a big mistake in my opinion.
The cocktail party on Sunday, while active, seemed (but I'm not sure) to have a little less in attendance than in the past, and I have two theories why (the third is I'm wrong) 1) Airfare and hotel costs have gone up, so some elected to come for one day less to save some expenses; 2) There was confusion on which day the cocktail party was, many thinking it was on Monday, not Sunday night. Either way, the show itself ended up with nearly 5,000 attending over last year's 4,300 and the cocktail party was a success with all attendees being in an upbeat mood. We can't ask for more than that.
The reoccurring complaint I heard was on the increasing costs of construction and insurance in the Florida market since last year's hurricanes. The details have been reported everywhere, but I'm told some insurance costs have gotten close to the $3 psf mark and construction costs are up 25% to 30%. Some claimed that it marks the beginning of the end of Florida's great retail market, but I doubt that. It will make dealmaking more difficult, as more secondary sites are rejected and greater "discussions" on acceptable rents than in the past occur. The great curse of life. May you live in interesting times.
Ann and Alyson attended the Ladies in the Biz cocktail party on Sunday and they seemed happy with the networking opportunity and the excellent turnout. From what I could see, the booths at the actual dealmaking show were sold out with just a few no-shows, so by every definition, Orlando was a winner, as has become tradition with this event. Every exhibitor I spoke to expressed satisfaction with the show, so even with some problems on the economic horizon, the Florida market is still hot. Of course, trying to figure out the economy is impossible; One day inflation is down, the next up. One day consumer spending is up, the next down. One week, unemployment figures are up, the next down. It's totally confusing, and anyone claiming to understand what's happening is a fool or a liar.
I'm writing this during the last week of August and, to say the least, business is slow, at least from the brokerage end; publishing is busy preparing for all the upcoming ICSC dealmaking events. Phone calls have slowed to a trickle, most people I call are on vacation or getting ready to go on one and 99% of the deals scheduled to open for this coming Xmas season are finalized, so no one is under pressure to do a deal; they want to enjoy what's left of the summer. Hopefully, as has been true in the past, this changes after Labor Day and business becomes hectic once again.
The hunt to find centers for sale is as strong as ever, with most of the brokers and buyers confused and frustrated on why CAP rates aren't going up as interest rates have (In theory, they have; in realty, they haven't). I guess the only logical answer is "If they can get their asking price, whether it makes sense or not, why not." The single largest complaint I constantly heard was where/how to acquire property that makes economic sense, and there is no answer. Where I'm really confused is all the reports that I've read contend there's a slowdown in leasing and retail sales, but in the majority of markets, rents are still increasing and a retailer has to be a real fool to pay higher rents on declining sales. I must be the exception to the rule because every property we're leasing I'm finding it harder to get decent rents and tenants are fighting harder on renewals. Of course, some of it is sticker shock, when after 10 years a tenant's rent goes from $7.50 psf gross to $18.25 psf net, it can be difficult to accept. Of course, the retailer's gross has increased substantially over the years and that they have no problem accepting higher sales volumes and the incoming profits.
Another change in the sale of properties is that, while CAP rates have not risen, it is taking longer to make a deal and I've noticed more deals are coming back onto the market after a LOI was signed. Deals seem to be dying more often; it now often takes several acceptable offers from different buyers before an actual deal is finalized. If the due diligence doesn't come through perfectly the buyer wants to renegotiate.
Switching subjects, Josh, as I mentioned attended the ICSC's University in Lansing, MI and they appear to have done a decent job of teaching him the basics and providing lots of networking opportunities, many of which will probably last him a lifetime. The reason I think they did a decent job is that he came back with lots of buzz words and sat down with Ann and myself and explained all the things we've done wrong over the last 30 years. God, I never realized how ignorant I've been. I guess that's what children are for, to point out all your mistakes. Forgetting the sarcasm for a moment, the University was well worth the time and money involved. Josh said the "teachers" were great and over the five days he had 10 or 11 teachers covering all aspects of leasing and management. It reminds me a little of talking to him after his first day of kindergarten; I was more excited than him.
On a different note, we're marketing a center for sale that, to say the least, is problemed and we're having trouble generating any interest. I called a few brokers I know who specialize in sales and said we should co-broker and then sent out a complete package. A week or two later one of the brokers called, saying very apologetically that one of his clients made an offer but he was ashamed to make the offer. I used a line from Lee Cherney of Kin Properties; "As long as you don't insult my kids or wife, I won't take it personally. So give me the offer." He was right, it was low ($10 psf to buy) and I promptly turned it down, BUT I did call the seller and tell him of the offer. The good news is that, even though he didn't accept the offer, he didn't get uptight and came back with a counter offer, which the buyer turned down, but at least I got him an offer. The other brokers reluctant to present a low-ball offer reminded me of a trend I've noticed over the last few years. The amount of real "horse traders" in our industry is declining. I'm not talking the typical deal between a landlord and tenant where the rent starts out at an asking price of $25 psf and ends up at $19 psf, but on marginal properties for lease or sale. It used to be that companies and individuals would make an offer on marginal centers IF the deal could be bought "right" (and there are still companies that only want marginal properties where they can get in cheap), but I guess that secondary centers are either too much of a risk or too much work for most of the "next generation" to be bothered with. Nickel and dime negotiations aren't popular anymore to many (not all) companies and too many people seem ashamed to make a low ball offer; a big mistake in my opinion.
posted by tedkraus at 8:19 AM
0 Comments:
Post a Comment
<< Home