News
RETAIL RECON-NAISSANCE
May 24, 2011
| We saw neither fear nor loathing in Las Vegas yesterday, and we looked in every casino and line for Blue Man Group there was.ICSC’s RECon was in full swing, with over 30,000 attendees descending on the Las Vegas Convention Center to wheel, deal, and discover the hot trends. And Bisnow was among them. |
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| Here’s only part of the crowd during yesterday’s lunch; we tried counting but ran out of fingers and toes. ICSC prez Michael Kercheval says the attendees and exhibitors account for every continent except Antarctica (we hear penguins aren’t into dry heat or penny slots), including three dozen firms from Japan and 100 new retailers. After contractions and closures, stores are expanding again, he points out. We’re not at peak but back to ’03 levels. |
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| Economic indicators are headed in the right direction, says Taubman Centers COO Bill Taubman (left, with Michael, who thanked him for his ’10-’11 ICSC chairman tenure). The retail centers deserve a lot a credit, Bill says. Rather than throwing their hands in the air, they responded with new fashions, products, and pricing, as well as listening even more to customers. “We ultimately parted the clouds,” he says. However, unemployment is still high, banks are still not lending freely for retail, and consumers aren’t spending as much money. But hope springs eternal for Bill, who’s seen optimism not only in the US but in his travels to China, Puerto Rico, Mexico,Brazil, and Canada. |
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| Keynoting the lunch was former NATO Supreme Allied Commander US Gen. Wesley Clark, who says we can fix the economy but there’s no simple solution. However, a lot of the growth will be sparked and led by entrepreneurs. Much of what defines today— retail, cell phones, Internet, personal computing, GPS—descended from defense investment. “What happened?” he asks, noting that there hasn’t been much to invest in after the turn of the century. It’s in our nature to seek lower production costs, but the government needs a vision as to what America will next produce. “We’re more about single partisanship than teamwork, and policies are not consistent,” he says. “We have to enunciate goals, move forward. And we need men and women who take risks.” So kudos to whoever risked distracting the General with something off stage right. |
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| Sunday’s Billboard Music Awards had nothing on ICSC’s VIVA Best-of-the-Best Awards, which honor the most outstanding shopping centers. Above, Grosvenor chief Peter Vernon accepts the award for best center to come online in '10 from Thomas Consultants'Ian Thomas. Grosvenor's Liverpool One mixed-used revitalized a derelict 42 acres of the city center (30 buildings designed by 26 architects built around the existing streets) with 1.4M SF in 175 shops, restaurants, hotels, apartments, and offices, all done in one phase. Other winners: AEON LakeTown in Koshigaya, Japan, for sustainability; CrossIron Mills in Rocky View, Alberta, for marketing; and Developers Diversified Realty for community service. |
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| Marketing firm Miller Ryan’s Jonathan Miller (right, with The Next Hundred Million: America in 2050 author Joel Kotkin) says we’re entering the era of less. Over the next five to 10 years, American families will have less disposable income. High-paying jobs (not just manufacturing) are going overseas. The new ones are lower paid than the ones we lost. The average outstanding student loan is $25k. Some 85% of students have credit cards, and half of those have more than four. Things out of people’s control—energy costs and traffic congestion—will further eat into incomes. We’re seeing smaller stores, more focus on the best locations, and e-commerce cutting into bricks and mortar. |
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| Joel (with Jonathan and GentlemanMcCarty's Karen Gentleman) was more positive: Malls may be in trouble in many areas of the US, but they’re booming in parts of the developing world. Still, the biggest opportunity is within the US, where another 90M people are expected by 2015. (Though most of them are just arriving for the free chicken teriyaki samples in the food court.) But it's going to be a different, more diverse group. “Think of immigrant populations as developing countries within the US," says Joel. "La Gran Plaza on the outskirts of Fort Worth went from 15 to 300 tenants after it was redeveloped with a Hispanic flavor." And as immigrants become upwardly mobile and move into non-gateway cities, more underperforming malls will be redeveloped. |
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| Citigroup’s Paul Vanderslice says the CMBS market is a shadow of its former self, with $30B to $35B issued this year vs. $230B in the '07 peak. The good news: Investors are back. Mesa West Capital’s Jeff Friedman calls this a market of haves and have-nots. Whether you’re on the equity side or the debt side, “we’re all still fairly particular.” According to MetLife’s Bill Markey, the “new normal” looks a lot like what we’re seeing right now. Walton Street Capital’s Jay Weaver (next to moderator Leslie Lundin of LBG Realty Advisors) says his firm tries to invest significantly below replacement cost. The problem is that prices already are coming back toward replacement, presenting the risk that the cycle is recovering too quickly. |
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| Colliers International's James McMasters (left, with Petco’s Jim Lampassi) kept a tight ship on the Retail Runway: Retailers were each allotted a three-and-a-half minute spiel on expansion plans. Petco intends to open more than 45 more stores by 2012 (both its eponymous shops and its smaller Unleashed concept, which launched in San Diego in '09). T-Mobile’s Dan Henken says his company is actively pursuing a pipeline of some 200 stores under the T-Mobile name despite parent Deutsche Telekom’s deal to sell it to AT&T. |
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| Ignite Restaurant Group’s Ed McGraw says Joe’s Crab Shack plans to shed some of its shack-like design. It’s opening more than a dozen Joe’s and Brick House Tavern + Taps in the Mid-Atlantic, Northeast, and tourist markets this year. Energy Kitchen, a new restaurant with offerings all under 500 calories and using no oil or butter has 75 development deals in place, aiming for 1,000 locations in 10 years. Hooters' Mike Locey, who calls his restaurant the “anti-Energy Kitchen,” says it plans to open 20 to 30 stores this year and 40 to 60 in 2012. Other tenants with expansion plans: AutoZone, Burlington Coat Factory, Chipotle, Darden (Olive Garden, Red Lobster, LongHorn), Great Clips, Hobby Lobby, Jos. A. Bank Clothiers, Kool Smiles, L.A. Fitness, Staples, The Fresh Market, Walgreens, Yogurtland, and 24 Hour Fitness. Also expanding: our waistline. |
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| Last night, JLL retail head Greg Maloney (second from right) told us ICSC has been much more upbeat than in the past three years. With him at ARIA’s Haze nightclub, we snapped JLL markets CEO Bill Krouch, Gregory Greenfield & Associates’Greg Greenfield, and JLL’s Kristin Mueller. Much of the enthusiasm is from pent-up demand and a desire to hear good news, he points out. People rush to say everything’s great in retail, but it’s actually a slow incline to recovery. Still, JLL is bullish enough to be expanding retail operations in Atlanta, Florida, and SoCal (plus those markets where it's continually growing: DC, Chicago, Dallas, and San Fran). |
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| How’s this for timing? Right before RECon, CastleRock Mortgage CEO Alex Katz flew in from Israel to arrange and close on a $23.5M floating-rate loan through CapitalSource Bank. The funds will finance the purchase and repositioning of Ledgewood, NJ's 600k SF Ledgewood Mall (Walmart, Macy’s, Sports Authority, and Marshall’s). The three-year loan was the senior piece of a nearly $34M debt and equity package Armstrong Realty used to buy the retail asset. The financing repped 91% LTV of the $37M purchase, Alex tells us, rare for a redevelopment plan (typical: 65%). The deal shows that both buyers and lenders have strong interest in anchored retail properties. Alex reps Middle Eastern high-net-worth, pension, and life companies seeking properties in primary US markets. |
