Shawn Massey, CCIM, SCLS

Weekly CRE and Retail Article Round Up – February 18, 2012

I apologize that I have not posted the past few weeks. I will admit work as been a good hectic in the Mid-South. Clients are trying to find lease space which is in low supply.

I hope you enjoy this weeks articles.
Net Lease Auto Parts Store Research Report Released
Nike Buys Frayser Land From Belz for Expansion
Retail real estate investment sales jumped 20 percent in 2012
Eight Retailers That Will Close the Most Stores
Urban Site Selection With High Definition
Is This The Best We Can Do?

From the desk of Garrick Brown:
Terranomics Top Five
Job Growth Steady. But Unemployment Rises to 7.9%
New York Times 02.01
Fasten Your Seatbelts: The Future Of Shopping Looks A Lot Like Airline Travel
Fast Company 01.31
NRF forecasts tepid sales on slow economic growth
Retailing Today 01.28

The Big Picture
NRF: Retailers unlikely to surcharge for credit card use
Chain Store Age 01.30
Consumer confidence in January falls to 14-month low
Chain Store Age 01.29
Mom-and-pop shops stage a digital comeback
Entrepreneur online 01.28

Retailer Roundup
Dillard’s: A Short Idea in Retail
Chasing Alpha 02.03
Murphy Oil USA Will Spin Off in Later Part of This Year
Convenience Store News 01.31
Louis Vuitton scales back growth to regain luxury lustre
Reuters 01.31
McAlister’s Frank Paci planning for growth in 2013 01.28

The Restaurant Review
Saladworks Announces Continued Major Growth
Restaurant News Resource 01.30

Ruby Tuesday CEO plots big changes
Nation’s Restaurant News 01.29
Little Caesars Focused on Suburban, Rural Markets for Growth
Pizza Marketplace 01.29
Starbucks targeting drive-thru format for growth in U.S.
Chain Store Age 01.28
Veggie Grill Raises $20M to Double Locations 01.28
Smashburger Debuts Restaurant Makeover 01.28
Woody’s Bar-B-Q Sets Its Sights on Hometown USA
QSR 01.28

M&A Mania
Shopko completes conversion of acquired Pamida Stores
Chain Store Age 01.31
How Memphis sporting goods retailers compete against the chains
Bullish on Memphis: Real estate analyst says city has all ingredients for growth Lean Mean and Growing
Memphis commercial market improves in Q4

From the desk of Al Taf:

Consumer confidence hits new low
January 30, 2013 Consumer confidence in January fell to its lowest point since November 2011, according to the Conference Board.
The Conference Board’s index decreased to 58.6, down from a revised 66.7 in December. The figure was lower than forecast; Bloomberg predicted a median of 64. The drop in confidence coincides with the 2% payroll tax increase used to fund Social Security.
Amazon quarterly sales growth driven by Kindle
January 30, 2013 SEATTLE — reported that net sales increased 22% to $21.27 billion in the fourth quarter, compared with $17.43 billion in fourth quarter 2011.
Net income decreased 45% to $97 million in the fourth quarter, or 21 cents per diluted share, compared with $177 million, or 38 cents per diluted share, in fourth quarter 2011.
Report: Shopping center development making a comeback in Chicago
January 24, 2013, Shopping center development in the Chicago area is on the rise after four years of decline, according to new report released Thursday.

Construction of new shopping centers rose from 1.02 million square-feet in 2011 to 1.14 million square feet in 2012 with roughly 900,000 additional square feet expected this year, according to the report.
Discount Stores
Shopko completes conversion of Pamida stores
January 31, 2013 GREEN BAY, Wis. — Shopko has completed the conversion of 163 Pamida stores. The move makes Shopko one of the largest U.S. retailers to serve smaller and rural communities. The merger was first announced one year ago this month.

Shopko invested a total of $70 million into efforts to convert the Pamida stores to the Shopko Hometown format. Today Shopko currently operates 176 Shopko Hometown stores, a significant jump from just 10 at this time last year. The Shopko Hometown retail format offers a differentiated and financially successful merchandising strategy. Shopko Hometown combines pharmacy services with a broad and dynamic offering of strong national brands and high-value private label brands of apparel, toys, consumer electronics, seasonal items, and lawn and garden products – all in attractive, well laid out, easy-to-shop store formats that range from 15,000 to 35,000 square feet.
Drug Stores
Rite Aid comps up on strong flu season
January 31, 2013 CAMP HILL, Pa. — Rite Aid reported a slight increase in same-store sales for the month of January, thanks in part to strong sales of flu products.
The company posted a 0.3% increase in comps for the month of January, tat included a 4.2% increase in front-end comps, 2.4% of which came from sales of OTC flu products. Pharmacy comps decreased by 1.4%, while same-store prescription count increased 5%, 3.4% of which came from flu-related prescriptions and flu shots. Total store sales for the four-week period, which ended Saturday, decreased 0.5% to $1.914 billion.
Grocery Stores
Harris Teeter Posts Q1 Sales Gains
Jan. 31, 2013 MATTEWS, N.C. — Harris Teeter Supermarkets here said pricing and promotional efforts drove gains in sales and market share in the fiscal first quarter, although it said profits were under pressure from competition, low inflation and a weak retail environment during the holidays.
Net income for the quarter totaled $22.8 million, vs. $13.7 million in the first quarter of a year ago; year-ago net income from continuing operations totaled $25.8 million. Operating profit for the first quarter of fiscal 2013 was $40.5 million, or 3.48% of sales, vs. $46.3 million, or 4.13% of sales, for the first quarter of fiscal 2012. The company attributed the decrease to the operations and start-up costs of 10 stores acquired from Lowes Foods and six stores sold to Lowes Foods last year.

Comps Up 12.9% at Natural Grocers
Jan. 31, 2013 LAKEWOOD, Colo. — Natural Grocers by Vitamin Cottage here said Thursday that its comparable-store sales for the first fiscal quarter were up 12.9%.
The fast-growing, small-format operator also increased its sales and EBITDA outlook for the year, projecting comps of 8% to 9% for fiscal 2013 — up 0.5% over previous projections — and EBITDA as a percent of sales of 7.2% to 7.4%, v. previous projections of 7% to 7.2%.
Restaurant operators downbeat as sales, traffic soften
Jan. 31, 2013 Foodservice operators remained downbeat about the state of the economy as same-store sales and customer traffic declined in December, according to the National Restaurant Association’s monthly Restaurant Performance Index.
The RPI, a monthly composite that tracks the health of and outlook for the restaurant industry, slipped to 99.7 in December, a dip of 0.2 percent from November’s figure. December also marked the third consecutive month in which the RPI remained under 100, reflecting contraction in the index of key industry indicators.
Little Caesars focused on suburban, rural markets for growth
January 29, 2013, Little Caesars outlined a new franchise growth plan that entails small suburban markets, as well as rural communities. According to Wicked Local, those targeted markets include Danvers, Mass., and Essex County, Mass.
The company said in a release that smaller towns are poised for growth, representing opportunities for franchisees who want to be associated with a national brand and a simple business model.
Le Duff America buys Mimi’s Café chain for $50M
Jan 29, 2013 Bob Evans Farms Inc. agreed to sell its casual-dining Mimi’s Café unit to Dallas-based Le Duff America for $50 million.
Ohio-based Bob Evans said selling the 145-restaurant Mimi’s Café chain would allow it to focus on its 565 Bob Evans properties. There area five Mimi’s Café locations in the DFW area.
Starbucks targeting drive-thru format for growth in U.S.
JANUARY 28, 2013 New York — Starbucks Corp. is expanding its drive-thru format, the chain said in its first-quarter earnings call. According to company officials, more than half of the approximate 1,500 new locations it plans to open in the United States during the next five years will be drive-thrus.
Starbucks plans to remodel about 1,400 U.S. locations in 2013. Roughly 500 of those locations will receive a major overhaul.
Veggie Grill raises $20M to double locations
January 28, 2013, Santa Monica-based Veggie Grill has completed its fourth successful round of equity funding, supporting its continuing rapid expansion. Armed with 16 percent same-store-sales growth, a more than doubling of restaurant locations in the most recent year, and strong investor confidence, the company quickly secured the $20 million common stock funding from both current shareholders and new investors, Chief Energizing Officer Greg Dollarhyde, said in a company press release.
He also confirmed that the company is on track to double store count again within the next 18 months. The chain that serves only 100-percent plant-based food now has 16 units throughout California, Oregon and Washington.
Auntie Anne’s projects 100 new U.S. stores in 2013
January 25, 2013, Auntie Anne’s turns 25 on Feb. 2. To celebrate, the company is reporting milestones reached in 2012, including 202 new stores, of which 117 were in the U.S. Additionally last year, Auntie Anne’s entered six new countries and opened its 300th international location.
Auntie Anne’s 25th birthday also comes on the heels of the chain’s 1,000th domestic opening, which occurred in Elizabethtown, Ky. on Dec. 24, 2012. That unit is owned and operated by first-time Auntie Anne’s franchise partner and military veteran, Dwayne Mollison.
Dollar Stores, Warehouse Club & Other Retailers
Consumables boost Tractor Supply sales in Q4
JANUARY 30, 2013 BRENTWOOD, Tenn. — Tractor Supply Company reported that net sales for the fourth quarter increased to $1.29 billion, or 3.7% over the prior year’s 14-week period.
Same-store sales increased 4.7% compared with a strong 7.6% increase in the prior-year period.The same-store sales increase was driven primarily by continued strong results in key consumable, usable and edible (C.U.E.) products, principally animal- and pet-related merchandise. Net income for the quarter was $79.5 million, or $1.11 per diluted share, compared to net income of $70.5 million, or 96 cents per diluted share, in the fourth quarter of the prior year.
A third of Barnes & Noble stores may close in next decade, report says
January 28, 2013 Barnes & Noble will shut up to a third of its brick-and-mortar bookstores over the next decade as reading habits change and digital publications evolve, according to a new report.
The chain will end up with 450 to 500 stores in 10 years, down from the 689 physical stores it has now, according to Mitchell Klipper, chief executive of Barnes & Noble’s retail group.
Dollar General pushing toward 11,000 stores
January 24, 2013 Dollar General plans to add 635 stores and move 550 existing locations this year as part of its continuing expansion. Central Ohio is going to be part of that expansion.
The discount retailer is building two stores, whose locations weren’t available yesterday, and is studying three other sites, spokeswoman Crystal Ghassemi said yesterday.Each store will employ between six and 10 workers, she said.

From the ICSC

U.S. retail sales to grow 3.4 percent this year: Report
U.S. retail sales are set to grow by about 3.4 percent this year, versus 4.2 percent last year, and Washington must take substantial blame for the slowdown, according to the National Retail Federation. Political wrangling over the fiscal deficit during the holiday season depressed shopper morale. “What we witnessed during the holiday season is an indication of what we are likely to see in 2013 — consumers read troubling economic headlines every day and look at their bottom lines at the end of the month, and they don’t like what they see,” said NRF President and CEO Matthew Shay in a press release. “Pushing fiscal policy decisions down the road will lead to even greater uncertainty, and will continue to impact consumers’ desire and ability to spend on discretionary items. The administration and Congress need to pursue and enact policies that lead to growth and economic expansion, or it could be another challenging year for retailers and consumers alike.”
Global investors focus on top markets, conference told
Europe is capturing the lion’s share of global real estate capital, with London in particular receiving more investment than Moscow, New York City and Tokyo combined, said Joseph Kelly, director of market analysis at Real Capital Analytics, during the ICSC–Thomson Reuters Global Retail Real Estate Forum yesterday, in London. But even in Europe, most of the attention is concentrated on two markets: the U.K. and Germany, said Robert Bonwell, Jones Lang LaSalle’s chief of EMEA retail. Of all the money invested in European real estate last year, 50 percent went to properties in those two countries, and about 70 percent of that half went to Germany. “There is a very focused and concentrated spend in European markets,” Bonwell said.
The cost of money around the world is relatively low, and real estate continues to be good for yield and long-term growth, said Kelly. But risk-averse banks are interested only in top-shelf properties, he added. In October Norges Bank Investment Management, which manages the Norwegian government’s pension fund, bought a 50 percent stake in Meadowhall, a fortress mall in Sheffield, England, that draws 24 million shoppers a year. The deal valued Meadowhall at about £1.5 billion (nearly $2.4 billion). That is the kind of deal investors are seeking: low-risk properties and low loan-to-value ratios, said Kelly. Mezzanine finance is available, but syndicate lending remains a rarity, and borrowers seeking funding over £50 million are likely to struggle, he said.
In the U.S. investors are more willing to venture into secondary markets and to acquire distressed assets. Houston, New York City, San Francisco and Washington are the most popular U.S. markets for real estate investors, according to Cushman & Wakefield CEO Glenn Rufrano.
Warehouse clubs take market share from other retailers
Warehouse sector sales are likely to beat out mass merchandise, grocery and e-commerce sales over the next three years, according to a Deloitte survey of 132 CPG (consumer package goods) executives. Nearly 90 percent of those surveyed said they expect their sales through the warehouse-club channel to rise over that time frame. Nearly 50 percent said they expect grocery sales to increase during the period, and 18 percent said those would decline.
Nearly 80 percent of those surveyed said warehouse clubs will boost their food, household-goods and personal-care stock-keeping units. Three out of four said the clubs would expand their geographic presence, and as many again see them allocating more space to health-and-wellness products. “Consumer products companies are responding to the increased sales and branding opportunities in the warehouse club channel, particularly in expanding segments traditionally dominated by grocery and mass merchandise channels,” said Pat Conroy, a Deloitte vice chairman and consumer products leader, in a press release. “Club retailers have been remodeling existing stores, including allocating more space for food — particularly organic, healthy and fresh offerings — and personal care products. These retailers also continue to provide a variety of services and benefits to members, whether it is for personal consumption or for the member’s business.”
Respondents said they believe that club stores are appealing to a wider array of consumers. About 77 percent said warehouse club members are making more trips there, while 78 percent said the club members are spending more at club stores — and 63 percent said members find the stores more appealing than they did three years ago.
A previous Deloitte study found that warehouse club frequenters tend to be high-income consumers. Nearly half of the total respondents to this earlier study said they shopped at club stores. But among the affluent respondents — those reporting at least $100,000 in annual household income — 71 percent said they patronized these stores. Those higher-income consumers spend 24 to 32 percent more on food, beverage and household goods than the lower-income club consumers, the study showed.
“Unlike past recessions where consumers eventually returned to their previous shopping habits, this recession left a scar, not a bruise, and consumers remain hesitant to break from their cost-conscious routines,” Conroy said. “Economic uncertainty and consumers’ focus on value has made club stores a more important channel for many consumers, including those who are at the higher end of the income scale and represent a more lucrative target customer for retail and consumer products brands.”
Sustainable upgrades cut tenant costs at historic building
Tenants of the historic Flood Building, in downtown San Francisco, stand to get a nice treat with their next utility bill. Cumulatively, the 350 commercial and retail tenants occupying that 294,000-square-foot edifice may expect to share some $80,000 to $100,000 in savings annually over the next 12 to 15 years, for a total of about $1.5 million. In the first year, these tenants will enjoy a 15 percent reduction in utility costs, or about $4 per square foot each. These improvements are also expected to eliminate some 870 tons of carbon-dioxide emissions per year. Even better, the savings come without any hefty price tag tied to a retrofit or to the purchase of new equipment. In fact, most of the tenants had no idea the energy-efficiency project was even under way.
The Flood Building hired San Francisco–based Carbon Lighthouse last year to identify energy efficiencies, and many of the changes involved installation of sensors to improve existing systems, rather than replacement of all the systems outright. The firm also replaced and updated the lighting. “We are able to cut utility use by 15 percent just by changing the way the building is controlled — without changing any of the heating units or the fans or other equipment,” said Brenden Millstein, Carbon Lighthouse’s CEO. “If we have done our job correctly, utility bills reduce without anyone noticing that any changes were made at all.”
“The nice thing about this project was that it was so invisible to tenants,” said building owner Jim Flood. “Even though they’ll save a lot of money, they didn’t necessarily know it was even happening since it was so quiet and non-disruptive.” The building, constructed in 1904, is home to the likes of Anthropologie, Gap and Urban Outfitters. “This wasn’t just a pie-in-the-sky environmental solution, but a project with results we could measure in dollars and cents.”Carbon Lighthouse charged a flat fee for its services.
Regency Centers posted $58.9 million in fourth-quarter funds from operations, up from $56.5 million a year ago. The firm also reported a $37.1 million loss, versus earnings of $8.1 million a year ago. Regency attributed the loss in part to a $50 million write-down on the value of a shopping center it owns in Las Vegas. Same-center net operating income, meanwhile, grew 4 percent. The rent growth rate on Regency’s spaces vacant for less than 12 months was 5.5 percent.
• Columbus, Ohio–based Bob Evans Farms will sell its 145-unit Mimi’s Café chain to LeDuff America for $50 million. LeDuff America, a subsidiary of French bakery conglomerate Groupe LeDuff, owns several café brands, Brioche Doree, Bruegger’s Bagels, La Madeleine Country French Cafe, Michel’s Baguette and Timothy’s Coffee.
• Coach hired a designer to work on a women’s apparel collection for sale in its stores. The accessories brand wants to compete with full-service lifestyle brands such as Tory Burch.
• Saks Fifth Avenue says it will pull out of Dallas, home turf of rival Neiman Marcus, in June. Parent Saks Inc. said it would shut this anchor store at Galleria Dallas to focus on more-profitable locations. The company has operated a Saks Fifth Avenue store in Dallas since 1982. Saks will continue operating three Saks Fifth Avenue OFF 5TH stores in metro Dallas–Fort Worth.
• Los Angeles–based women’s luxury-apparel brand Halston says it will open a 4,400-square-foot Halston Heritage store on New York City’s Madison Avenue in March, as well as one 3,000-square-foot store each at Beverly Center, in Los Angeles; and at The Somerset Collection, in Troy, Mich. The company will also open a store at The Avenues mall, in Kuwait, this summer. The Halston Heritage brand, which is slightly less expensive than the Halston brand, will eventually have between 50 and 100 stores around the world, company executives said. The firm says it is scouting out slightly more-upscale, iconic street-front locations for a fleet of Halston stores it plans to open in coming years.
• The U.S. Patent and Trademark office issued Apple a trademark on its store design, affording the company some protection from rivals. The trademark covers the store’s “clear-glass storefront” design, complete with “large, rectangular horizontal panels over the top of the glass front.” It also protects the interior furniture and fixtures, including floors, lighting and shelves, and the “genius bar,” where customers go for tech support.
• Department store chain Belk says it wants to raise annual sales over the next five years from about $3.8 billon currently to about $6 billion. The company plans to invest some $140 million to create new flagship stores from enlarged and remodeled existing ones. Belk now operates about 300 units, of which it considers 15 to be flagships. The chain says it aims to open two flagships — one in Huntsville, Ala., and the other in Dallas — by 2014.
• Roughly 25 percent to 50 percent of the merchandise purchased online gets returned, according to a BBC report. Jessica Hodgkinson, a spokeswoman for Daniel Footwear, told the news outlet that one of every three pairs of shoes its customers order online get returned, a higher proportion than those
• U.S. retail chains are unlikely to charge customers more for credit card transactions, despite a proposed settlement with credit-card issuers that will legalize their doing so. The proposed antitrust settlement will allow retailers to add a 4 percent surcharge to purchases made using a Visa or MasterCard credit card. This “swipe fee” is intended to cover the fees those credit-card-issuing banks charge retailers (typically between 1.5 and 3 percent) to process payments and is part of a $7.2 billion antitrust settlement over price-fixing allegations. But consumers need not worry about paying the surcharges for a variety of reasons, including the fact that 10 states, California, Florida and New York among them, have laws prohibiting surcharges, effectively placing 40 percent of the U.S. population out of reach. Also, existing rules stipulate that no retailer with a store in any one of the restricted states may charge these fees in any of the others. Home Depot, Macy’s, Sears, Target and Walmart are among the chains that have said they will not assess card fees. And not a single member of the National Retail Federation has expressed interest in tacking on such charges, the federation says. Smaller, independent stores may be more willing to levy the fees, observers say, because such stores pay higher amounts to the banks for credit-card transactions while lacking the power to negotiate lower ones.
• Kimco Realty launched a corporate-responsibility website where tenants, investors and consumers may learn about the company’s stewardship activities and the related benefits to the community. Kimco intends to spotlight initiatives that help customers and tenants, ease the environmental footprint, boost operational efficiencies, and cut costs. The site will also furnish video and links to the company’s blog and Twitter feed.
Renewed wine-in-groceries push begins today
Restaurant Performance Index Declined in December as Sales and Traffic Levels Softened

Due in large part to softer same-store sales and customer traffic levels, the National Restaurant Association’s Restaurant Performance Index (RPI) declined in December. The RPI stood at 99.7 in December, down 0.2 percent from November. In addition, December marked the third consecutive month in which the RPI stood below 100, which signifies contraction in the index of key industry indicators.
“Although restaurant operators reported softer same-store sales and customer traffic levels in December, they are cautiously optimistic about sales growth in the months ahead,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “However, operators remain decidedly pessimistic about the overall economy, with only 17 percent saying their expect business conditions to improve in the next six months.”
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 99.1 in December – down 0.7 percent from November and the lowest level in nearly two years. December represented the fourth consecutive month in which the Current Situation Index stood below 100, which signifies contraction in the current situation indicators.
Although restaurant operators reported net positive same-store sales for the 19th consecutive month, December’s results were much softer than the November performance. Forty-two percent of restaurant operators reported a same-store sales gain between December 2011 and December 2012, down from 55 percent who reported positive sales in November. In comparison, 38 percent of operators reported lower same-store sales in December, up from 30 percent in November.
While overall sales remained positive, restaurant operators reported a net decline in customer traffic levels in December. Thirty-one percent of restaurant operators reported higher customer traffic levels between December 2011 and December 2012, down from 43 percent who reported positive traffic in November. Meanwhile, 48 percent of operators reported lower customer traffic levels in December, up from 35 percent in November.
Although sales and traffic results softened, restaurant operators reported an uptick in capital spending, with 45 percent of operators saying they made a capital expenditure for equipment, expansion or remodeling during the last three months.
The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 100.3 in December – up 0.3 percent from November. December represented the first time in three months that the Expectations Index rose above the 100 level, which indicates that restaurant operators are becoming somewhat more optimistic about the business environment in the months ahead.
Although restaurant operators remain generally positive about sales growth in the months ahead, their optimism is well down from their bullish outlook during the first half of 2012. Thirty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), unchanged from last month. Meanwhile, 16 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, up slightly from 14 percent last month.
In contrast to their sales outlook, restaurant operators are more pessimistic about the direction of the overall economy. Only 17 percent of restaurant operators said they expect economic conditions to improve in six months, down from 21 percent last month. Meanwhile, 29 percent of operators said they expect economic conditions to worsen in the next six months, compared to 36 percent who reported similarly last month.
Despite the uncertain outlook, restaurant operators continue to plan for capital spending in the months ahead. Fifty percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 45 percent who reported similarly last month.
Saks to leave Dallas Galleria, Belk moving in
Urban Sustainability – Not Just A Dream
December Jobs Report Mirrors Growth Sectors for Franchising in 2013
Tenant Improvements vs. Landlord’s Work Letter
Retail: What to Watch in 2013

From the Desk of Garrick Brown
Terranomics Retail Newsline
Week Ending January 27, 2013
Space Demand Up, but will Weaker Retail Sales be the Spoiler?
This week, my friends at the Royal Bank of Canada (RBC) released their National Retailer Demand Monthly Report. One of the findings of this report was that planned new store openings are now at their highest level in five years. As of December 2012, the retailers that RBC tracks were planning on opening almost 82,000 stores over the next 24 months. This reflects a 1.1% increase over November’s totals and the highest level of planned openings they have tracked since beginning this endeavor in 2008.

Now, I happen to know Rich Moore and Wes Golladay and their crew and know the methodology they use and it is as good as any in the marketplace. That being said, I can share with you from my own efforts in tracking the marketplace that there is no perfect methodology out there. The reason isn’t because of the methodologies used. It is because different retailers have different levels of transparency when it comes to their planned openings. The biggest wildcard are franchise systems, which more often than not, release planned franchising goals for the year(s) ahead rather than concrete plans. As a result, Subway always tops this list and seemingly every year is planning on opening about 2,000 new units. They rarely meet this goal and these numbers certainly don’t take closures into account either. The fact is that chains usually are happy to talk about planned growth but rarely put out press releases when it comes to shutting down underperforming locations. But these metrics are not about net growth anyway, just gross.

But ultimately the long and short of what I am saying is that we will not see 82,000 new retail storefronts over the next two years. But, that is not because the work that RBC is doing is flawed—in fact, this is one of the best resources in the business. But the real value here is not in that final number—it is in the trendline. This is a fantastic benchmark indicator of retailer demand and where it is coming from.

And it shouldn’t come as much surprise that smaller space users are driving this trend, though this is more about well capitalized national credit tenants than it is about mom-and-pop entrepreneurs. The strongest segments (in terms of planned unit growth) remain food users and dollar stores. Of the top ten retailers listed in the report, eight fall into one of those two categories.

The report also tracks the top 30 retailers who plan to grow the most (planned units against their existing store count), but here is where we see the problems again of likely real growth versus franchise systems listing their goals—some of which are simply pie-in-the-sky thinking. Of the ten top retailers on that particular list, nearly every one is a franchise operation and even the strongest performers on the list are unlikely to meet the numbers that they have shared with the marketplace. Example; Five Guys Burgers and Fries is easily the strongest new QSR out there in terms of explosive growth, but the likelihood of this 750-unit chain expanding by 600 additional units over the next twelve months is virtually nil. I would not rule out that they could possibly sign deals for that many potential future units (though even that number seems highly unlikely to me), but you can bet dollars to donuts that even with its continued rapid growth, Five Guys will not close 2013 with more than 1,300 units.

So what else does this report tell us? Women’s apparel users are expanding, but nearly all of this growth is being driven by discount concepts. Men’s apparel stores are slowing growth, but once again the discount concepts remain the most active—same goes for children’s apparel. Active sportswear planned openings have dipped slightly, but here is where we still mid-to higher price point retailers doing well. And discount department stores have posted a slight increase in demand, led by players like Ross and Tuesday Morning. Planned bookstore openings have remained flat, but since this report only focuses on planned openings, it does not show the full story. Closures are way up and will continue to rise for this sector—bookstores will continue to net unit count losses over the next few years, primarily due to e-commerce.

Wireless store demand is up, though one has to wonder how long this can continue. Not that demand for smartphones is ever going away; the issue is market saturation for many of the biggest players like Verizon. But, growth right now is being driven by T-Mobile and a few franchise operations that are playing catch-up with the other brands. Pet Supply store demand is up and will continue to climb—this is one surprisingly strong sector of the market that withstood the recession remarkably well. Americans may have been strapped over the last few years, but for the most part, they still took care of their furry little friends.

Demand for consumer electronic stores has stayed roughly even, but here again we are dealing with the issue of closures not registering against these figures. But while furniture store demand remains flat for now, this is a sector of the market where I anticipate large gains by the end of the year. The return of the housing market will translate into greater demand (which should be visible by late 2013) and more openings (which should start to occur by 2014). Hardware store demand may follow similar trends; however, I don’t anticipate as big a bump and the smaller players will continue to struggle to compete with resurgent D-I-Y chains like Home Depot and Lowe’s in the markets where they are active.

I could break down the report section by section, but ultimately, what is up most are food users of all stripes (though jewelry stores, salons/spas, fitness centers, childcare, shoe stores and sporting goods retailers have all posted gains). You can access the full report here.

Of course, one of the other major stories of the week—it actually just broke—is that the National Retail Federation (NRF) has predicted that retail sales will slow this year. In 2012, they increased by 4.2%, the Washington, D.C.-based trade group released their forecast this morning that they anticipate that sales growth will slow to 3.4% in 2013.

This obviously seems to fly in the face of RBC’s findings of increased retailer demand ahead. However, there is a considerable lag time in site selection and many of the retailer plans for growth that are being set in motion now were initially put together months ago. But all of this is assuming that the NRF is correct.

The NRF forecast cited a number of factors that will slow growth including modest recovery in the employment market and continued economic uncertainty. Certainly, the weaker than expected 2012 holiday shopping season has helped to inform this forecast and there is no doubt that the Fiscal Cliff debate and the associated uncertainty had an impact on consumer sentiment and behavior. There is also no doubt that consumer confidence had not quite recovered in January, though the impact of the payroll tax deduction going away could be the culprit here.

I think the NRF forecast is reasonable, but I don’t agree completely. I am a little more optimistic, though I certainly would not expect 2013 growth numbers to exceed what we saw last year. Instead, I see roughly the same level of growth going forward as a mix of positive and negative factors weigh against each other and result in, more or less, the status quo.

For example, the quiet resolution (at least for now) of Debt Ceiling Debate II gives me a lot of hope that ongoing policy debates will not lead to the same level of discord and economic damage that we saw with either Debt Ceiling I or the Fiscal Cliff run-ups.

Certainly tax increases will play a role in negatively impacting retail sales, but it remains to be seen just how much. Likewise, I anticipate that sometime in the coming year (maybe as early as spring) that we will see what has become our annual gas gouging period. We have had a nice run lately, which unfortunately tells me we are due for a run-up. Whether it is due to another crisis in the Middle East, supply and demand or just “because we can,” I think that we have to assume that at some point in 2013 we will see another run-up in fuel prices that will take a bite out of retail sales.

But even with these challenges, I also see the resurgent housing market playing a much greater role in boosting the economy in 2013 and in helping to restore some much needed construction jobs by the end of the year. The return of residential real estate values is what bodes best of all—appreciation in home prices directly translates into consumer confidence, demand and spending.

Let’s hope that I am right and that as many of those 82,000 potential new retail storefronts in the works that the RBC is tracking actually go out and sign some deals.
– Garrick H. Brown

Terranomics Top Five

Retail Sales Seen Softening This Year
Chicago Tribune 01.28

C-store total poised to surpass 150,000 units
Chain Store Age 01.24

U.S. Restaurant Count Surpasses 616,000
Reuters 01.23

Weakened Barnes & Noble puts landlords on alert
Portland Business Journal 01.23

Store Opening Plans Reach Five-Year High, Report Claims
Retail Traffic 01.22

The Big Picture
Boomers Dining Out More as Millennials Cut Back
Convenience Store News 01.23

Wal-Mart issues ‘zero tolerance’ policy for global suppliers
Chain Store Age 01.22

Deloitte: Sales in warehouse club stores to outpace other channels
Chain Store Age 01.22

Restaurants Crave Smaller Venues
The Wall Street Journal 01.22

Report: Shoppers want more buy-America options and Walmart aims to give it to them
Drug Store News 01.22

Retailer Roundup
Nashville Business Journal 01.24

Dollar General to Open 635 Stores, Add 6,000 Jobs
BusinessWeek 01.23

Grocery Grab Bag
7-Eleven’s Out-of-Box Experience 01.24

TravelCenters of America Opens More Dunkin’ Donuts
Convenience Store News 01.21

The Restaurant Review
Starbucks targets drive thrus for U.S. growth
Nation’s Restaurant News 01.25

Starbucks profit up 12%; 1,300 stores on tap for 2013
Chain Store Age 01.24

Industry Takes Notice of Pizza Franchise on Unstoppable Growth Path
Restaurant News 01.24

Two Boots Pizza coming to Nashville
Nashville Business Journal 01.23

Project Pie expands, launches franchise program
Nation’s Restaurant News 01.22

Second Mellow Mushroom location sprouting in East Memphis
Memphis Business Journal 01.22

Fast casual pizza concept Project Pie set to expand in seven markets
Pizza Marketplace 01.21

M&A Mania
Frozen Peaks Completes Merger with Crave Yogurt
Restaurant News 01.24

REIT/Investment Outlook

REITs Eye Passive Investor Role in Retail Project
Globe Street 01.25
Retail Vacancy Continues To Drop in Central Arkansas
Can A Tenant File A Tax Appeal When Its Lease Doesn’t Give It The Right To Do So?+-
Retail chains face strong headwinds
How to Make Suburbs Work Like Cities
Dollar General May Receive a Rating Upgrade
Soul Fish Cafe to add third location
Cell Tower Lease Extensions-Why More And More Property Owners Are Being Asked To Extend Their Lease
Tenants and Scope Creep, Is Change Good?
Landlord, Stay Out Of My Fit-Up Plans!
hitting the high points of Memphis commercial real estate conference
The Fading Differentiation between City and Suburb

From the Desk of Al Taf
E-commerce now 10% of total retail sales
Feb 7, 2013 Online sales returned to pre-recession growth levels in 2012, advancing 15% to a record $186.2 billion, according to a year end recap by online measurement firm comScore.

The record setting year marked the first time that e-commerce sales as a percentage of total retail sales reached double digits (10%) and was capped by a fourth quarter in which e-commerce sales reached unprecedented levels. Online sale increased 14% to $56.8 billion in the fourth quarter, the first time quarterly sales have surpassed $50 billion, according to comScore. The growth was driven by a combination of traffic and transaction size with a 6% increase in the number on online buyers and an 8% increase in spending per buyer.

RILA seeks tax fairness in 2013
Feb 5, 2013 ARLINGTON, Va. — The passage of comprehensive tax reform and a more level playing field between online retailers and Main Street retailers for sales tax collection top the Retail Industry Leaders Association’s public policy priorities for 2013.

According to RILA, the retail industry pays among the highest domestic effective tax rates at 36.4% more than 10 percentage points higher than the average for all other industries.

Economy Adds 157,000 Jobs
Feb 1, 2013 A raft of positive economic news drove the Dow Jones Industrial Average above 14000 for the first time in more than five years, with Friday’s jobs numbers countering a surprising report earlier in the week that the economy contracted at the end of 2012.

The government’s main snapshot of the labor market showed employers added 157,000 jobs in January and hired more workers in 2012 than previously estimated.

American incomes rise by most in eight years
Jan 31 ,2013 American incomes rose in December by the most in eight years, a positive sign for consumer spending that could help the economy sustain momentum early this year.
Personal income for Americans rose 2.6 percent last month, the Commerce Department said on Thursday. That was the biggest increase since December 2004 and well above analysts’ expectations for a 0.8 percent gain.

U.S. economy shrank 0.1 percent in 4th quarter 2012, worst since ’09
Jan 31 ,2013 The U.S. economy unexpectedly reversed course in the final quarter of 2012 and contracted at a 0.1 percent rate, the Commerce Department said Wednesday, its worst performance since the aftermath of the financial crisis in 2009.

The drop in gross domestic product was driven by a plunge in military spending, as well as fewer exports and a steep slowdown in the buildup of inventories by businesses. Anxieties about the fiscal impasse in Washington also contributed to the slowdown, one reason that stockpiles grew more slowly.

Income surged in December, amid fiscal cliff fears
Jan 31, 2013 Personal income rose 2.6%, the biggest one-month gain since December 2004, the Commerce Department said Thursday.

Americans decided to sock away that extra income more than spend it. While consumer spending ticked up only 0.2%, the personal savings rate rose dramatically. On average, people saved about 6.5% of their disposable income in December, up from 4.1% in November. That’s the highest saving rate since May 2009.

Federal Reserve holds steady on interest rates and stimulus effort
Jan 30, 2013 WASHINGTON — With economic growth slowing in recent months, the Federal Reserve said Wednesday it would keep short-term interest rates near zero and continue its latest bond-buying stimulus program.

Following a two-day meeting, Fed policymakers said recent information “suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors.”

Apparel Stores

Limited sees comps boost
Feb 7, 2013 COLUMBUS, Ohio — Limited Brands reported that comparable-store sales for the fourth quarter were up 5% and that net sales for the same period were $3.86 billion compared with $3.5 billion for the same period last year.

For the month of February, the company posted sales of $986.4 million compared with $774.5 million for the same period last year. Same-store sales for the month rose 9%.

Bebe records Q2 loss on discounting and falling sales
Feb 1, 2013 Brisbane, Calif. — Bebe Stores Inc. swung to a loss in its fiscal second quarter from a profit a year ago amid heavy discounting during the holiday shopping season.

Bebe said it lost $4.8 million for the three months that ended Dec. 29, according to preliminary results, versus a profit of $6.5 million a year earlier. Net sales dropped 11% to $135.5 million. Same-store sales fell 10.5%.
Auto Parts Related

O’Reilly Auto Parts interested in site on James Redman Parkway
Feb 1, 2013 PLANT CITY — After opening its 4,000th store in Tampa two weeks ago, O’Reilly Auto Parts is making a bid for a Plant City location.
The national retailer says it’s eyeing a site on James L. Redman Parkway next to the new RaceTrac at Park Road.
Department Stores

Macy’s, Kohl’s have positive January results
Feb 7, 2013 New York — Department store retailers reported strong sales in January as shoppers responded positively to post-holiday clearance events.
Overall, the 20 retailers reporting January comps saw an average rise of 5.1%, according to the International Council of Shopping Centers, which beat the mall trade group’s 3% forecasted rise.

Discount Stores
Discount sector posts strong January showing
Feb 7, 2013 New York — There were few missteps among the discounters in January, as most posted strong results, many surpassing Wall Street expectations.
Target reported a same-store sales rise of 3.1%, topping Wall Street expectations. Total sales surged 29.6% to $5.97 billion in January.
Comps rise 3.1% as Target releases final monthly results
Feb 7, 2013 Target salvaged its fourth quarter with a 3.1% increase in January same store sales that followed disappointing results in December and November.
Target said sales for the five weeks ended February 2, increased 29.6% to nearly $6 billion due to the inclusion of an extra week in the recent reporting period.
Drug Stores

Walgreens January same-store sales up 6.3%
Feb 5, 2013 Deerfield, Ill. — Walgreens Tuesday morning reported January sales of $6.2 billion, an increase of 6.3% as compared to the same month in fiscal 2012.
Prescriptions filled at comparable stores increased by 13.6% in January and increased 11.6% on a day-fall adjusted basis. This year’s January had one additional Wednesday and Thursday and one fewer Sunday and Monday compared with January 2012, positively impacting prescriptions filled in comparable stores by 2 percentage points.

Vitamin Shoppe cleared for Super Supplements takeover
Feb 4, 2013 North Bergen, N.J. — The Vitamin Shoppe said Monday it was notified by the FTC that it has been cleared to acquire Super Supplements, with a targeted closing date of Feb. 15.
In December, the vitamin retailer had announced it would purchase the assets of Super Supplements, a specialty retailer of vitamin, mineral and supplements, for $50 million.
Grocery Stores

Harris Teeter Q1 income up 67%; nine new stores on tap
Feb 1, 2013 Matthews, N.C. — Harris Teeter Supermarkets Inc. reported that its fiscal first-quarter net income rose nearly 67%. The company earned $22.8 million for the quarter that ended Jan. 1, up from $13.7 million in the same quarter last year. The prior year’s results included an $18 million cost to settle some pension liabilities and employee benefits in connection with the sale of its industrial thread manufacturing company.
Harris Teeter’s total revenue increased to $1.16 billion from $1.12 billion. Same-store sales rose 2.5%.

Home Improvement & Office Products
The Home Depot increases seasonal hiring for spring
Feb 6, 2013 Atlanta — The Home Depot plans to hire more than 80,000 temporary workers to help customers this spring, some 10,000 more than it hired last year.
The move comes as the housing rebound spurs spending on remodeling and landscaping.

OfficeMax to open smaller format
Feb 4, 2013 New York — OfficeMax has become the latest retailer with a smaller-store, urban format either open or in the wings.
The retailer will unveil its smaller concept sometime in 2013, according to Crain’s Chicago Business. The new format will range between 5,000 sq. ft. and 15,000 sq. ft., the report said.


Chipotle 4Q profit rises despite higher food costs
Feb. 5, 2013 Chipotle Mexican Grill Inc. reported on Tuesday a 6.8-percent increase in profit for the fourth quarter despite higher commodity costs for beef, salsa ingredients and dairy.
For the quarter ended Dec. 31, Chipotle recorded net income of $61.4 million, or $1.95 per share, compared with $57.5 million, or $1.81 per share, in the year-earlier quarter. As reported earlier, revenue grew by 17 percent to $699.2 million on a same-store sales increase of 3.8 percent, mostly driven by traffic.
Zoës exec unveils expansion plans for ’13
Feb 4, 2013 Zoës Kitchen, one of the fastest growing franchises in the U.S., is planning to add a slew of new corporate-owned stores in 2013, according to a news report.

Zoës Chief Operations Officer and President Kevin Miles told Nation’s Restaurant News recently that the brand is looking to expand in 2013 between Dallas and Philadelphia, as well as in the Sun Belt. Among others, the company will open stores in Oklahoma and metro Philly later this year.

Dunkin’ Brands tripled income in 4Q
Feb. 1, 2013 Dunkin’ Brands Group Inc., the parent of the Dunkin’ Donuts and Baskin-Robbins chains, said Thursday net income for the fourth quarter tripled as traffic and sales increased during the period.
Dunkin’ Brands said earnings for the quarter ended Dec. 29 reached $34.3 million, or 32 cents per share, compared with $11.6 million, or 10 cents per share, in the year-earlier period.
Park as well.

Dollar Stores, Warehouse Club & Other Retailers

Sally Beauty Q1 earnings double, but misses Street
Feb 7, 2013 Denton, Texas — Sally Beauty Holdings Inc. reported Thursday that profit in the first quarter nearly doubled year-over-year – from $30.1 million to $59 million – but results still missed Wall Street expectations.
Revenue rose 4.7% to $905.4 million, shy of analysts’ expected $915.1 million in revenue. Same-store sales rose 2.8%

Costco maintains comp momentum
Feb 7, 2013 January same-store sales grew 4% at Costco’s U.S. locations excluding fuel sales.

The company said its sales for the five week January period ended February 3 increased nearly 7% to $9.35 billion as there were increases in member traffic and average transaction sizes. Total company same store sales increased 4%, excluding fuel prices which were slightly lower in January and the impact of foreign currency. The comp performance was negatively affected to the tune of 200 basis points because this year’s reporting period contained one less day than last year due to the timing of the New Year’s holiday.

Best Buy, Sears, Barnes & Noble among retailers that will close the most stores in 2013
Feb 3, 2013 It is the time of year when America’s largest retailers release those critical holiday season figures and disclose their annual sales.
A review of these numbers tells us a great deal about how most of the companies will do in the coming year. And while successful retailers in 2012 may add stores this year, those that have struggled may have to cut locations in 2013 to improve margins or reverse losses.

7-Eleven Leads C-store Brands on Franchise 500 List
Feb 01, 2013 IRVINE, Calif. — Aspiring franchise owners would do well to consider 7-Eleven, according to Entrepreneur magazine, which ranked the Dallas-based convenience store chain at No. 4 on its 2013 Franchise 500 list. Other notable c-stores on the list are ampm at No. 22 and Circle K at No. 36.
Franchise partners with c-stores that made the list include Subway at No. 2; Dunkin’ Donuts at No. 13; Chester’s at No. 95; and Blimpie’s Subs & Salads at No. 198.

Tractor Supply Beats – Analyst Blog
Jan 31, 2013 Tractor Supply Co. reported strong results for the fourth quarter and fiscal 2012. The company’s earnings surged nearly 15.6% to $1.11 per share in the fourth quarter of 2012, beating the Zacks Consensus Estimate of $1.03. The company’s results benefited mainly from strong top-line performance and improved operating margin.
For the full year, the company reported earnings per share of $3.80, an increase of 26.2% from the prior year and higher than the Zacks Consensus Estimate of $3.72.

From the ICSC February 8th, 2013

U.S. shopping center NOI up 3.6 percent in 2012
U.S. shopping centers strengthened their net operating income last year by cutting expenses and growing sales, according to data from ICSC and the National Council of Real Estate Investment Fiduciaries. Overall NOI at U.S. shopping centers grew by some 3.6 percent year on year, according to NCREIF’s database of 1,000 retail centers. Income rose 2.3 percent last year versus 2011, and expenses were down by 0.1 percent.
“Retail was the best-performing property type in the NCREIF index for the fourth quarter and the year,” said Jeffrey R. Havsy, NCREIF’s research director. “The strong returns were driven by improved fundamentals. Both NOI and occupancy improved from 2011 levels.”
Fourth-quarter operating income for U.S. shopping centers on a square-foot basis grew by 3.6 percent from the comparable quarter a year ago, while operating expenses increased by 2.4 percent. As a result, NOI per square foot posted a strong 4.3 percent gain from the year-ago quarter, atop a very strong 6.3 percent year-over-year gain in the third quarter.
Regionally, fourth-quarter NOI for the industry was strongest in the East, which saw a year-on-year gain of 8.6 percent, followed by the West, which saw NOI rise by 4.4 percent. NOI for shopping centers in the South rose by a modest 1.7 percent in the fourth quarter, while NOI in the Midwest slipped 1.8 percent relative to a year ago.
Powers centers led the pack, with fourth-quarter NOI growth of 7.7 percent year on year. Meanwhile, fourth-quarter super-regional mall NOI grew by 4.6 percent, and the neighborhood and convenience center sectors both posted NOI growth of 3.8 percent year on year for the quarter. Regional malls posted the smallest fourth-quarter gain, with NOI growing 0.4 percent.
“The U.S. shopping center industry as a whole performed well in 2012, but regional malls and community centers were sector laggards,” said Michael P. Niemira, ICSC’s chief economist and vice president of research. Niemira says he anticipates continued NOI improvement this year on improved sales.
$52.8 billion in U.S. retail centers traded in 2012: Report
U.S. retail property investment deals rose by 20 percent year on year for 2012, to $52.8 billion, according to Real Capital Analytics. Top-shelf properties in major markets attracted an influx of equity and debt capital as investors gravitated toward the relatively low cap rates available. In fact, investment volume surged 54 percent year on year in the six biggest U.S. markets. Some 4,400 transactions were priced at $10 million or higher. Exactly 117 regional mall properties valued at a combined $24.2 billion traded hands, up 172 percent from 2011. The average price paid for a U.S. mall last year was $237 per square foot, and the average cap rate was 7 percent. For strip centers, the price average was $145 per square foot, and the average cap rate was again 7 percent.
January sales jump despite fiscal ‘drag’
U.S. chain-store sales for January grew by 4.5 percent year on year, according to ICSC’s index. This is the strongest increase since September 2011. The growth is attributable in part to a hard flu season that drove shoppers into the drugstores. That segment posted a 2.9 percent January sales increase year on year, its largest since August 2011. Department-store sales rose by 11.4 percent, thanks partly to post-holiday clearance sales. Macy’s posted an 11.7 percent increase. “Simply put, January was an outstanding month,” CEO Terry Lundgren told investors. Other chains said they felt a fiscal drag resulting from higher payroll taxes that caused consumers to pull back. John Cato, CEO of women’s apparel chain Cato, told investors that his company’s 4 percent same-store sales drop was caused by “the timing of tax refunds and the effect of higher payroll taxes.” Target CEO Gregg W. Steinhafel said customers “face a slow economic recovery and new pressures, including recent payroll tax increases.” Target same-store sales grew by 3.1 percent year on year for January. Perhaps offsetting some of the tax increase was a minimum-wage increase in 10 states, which observers estimated would boost pay for 1 million workers directly or indirectly, according to Michael P. Niemira, ICSC’s chief economist and vice president of research. ICSC anticipates a February same-store sales increase of 5.5 percent year on year.
Rival bidders agree to split Canadian REIT’s properties
A two-month bidding war over the retail portfolio of Toronto-based Primaris REIT ended this week with the two top competitors agreeing to split up the properties between themselves in a $2.75 billion deal. H&R REIT and a consortium of investors led by KingSett Capital offered Primaris shareholders $28.12 per share in cash and stock, beating a friendly $27.44 per share offer from H&R in January and a hostile $26.11 per share offer from the KingSett group in December.
H&R will acquire Primaris’ operating platform and 25 of its shopping centers (including Primaris’ recently announced acquisition of $378 million worth of retail space in Alberta, Canada) valued at an aggregate $3.1 billion, including debt. H&R says the cap rate on the purchase is 5.6 percent. Meanwhile the KingSett Capital–led consortium, which consists of certain KingSett Capital managed funds, Ontario Pension Board and RioCan REIT, will acquire the remaining 18 properties in the Primaris portfolio, which are valued at approximately $1.9 billion, including debt. Primaris shareholders are expected to approve the deal, but if they do not, the firm must pay H&R and KingSett a fee of $100 million. Once the deal closes, RioCan will buy the 453,300-square-foot Oakville (Ontario) Place and a 50 percent interest in the 721,000-square-foot Burlington (Ontario) Mall for $362 million.
“We have created a stronger transaction for both H&R and Primaris unit holders,” said Tom Hofstedter, chief executive of H&R, in a press release. “With this transaction, H&R will become Canada’s largest and leading diversified real estate investment trust, emulating the preferred real estate investment model adopted by large pension plans worldwide.”
Dominican Republic a retail magnet, conference hears
The Dominican Republic still offers virgin markets for mall developers and retailers, including sizable pockets within the capital city, said panelists at the ICSC Caribbean Conference this week in San Juan, Puerto Rico. Last year’s openings of three major malls in Santo Domingo — Ágora Mall, Galería 360 and Sambil Santo Domingo — brought that city’s combined shopping center leasable area to nearly 265,700 square meters (about 2.9 million square feet). Certain areas, such as the Sector Bella Vista (population 180,000) and Santo Domingo Norte (population 330,000), are still without a mall.
“Santo Domingo has a great concentration of malls in just one area,” said Sarah Viñas, commercial manager of Intercentro Trade Center, a Santo Domingo–based real estate developer. “The untapped sectors of the capital city as well as other regions offer excellent prospects for retail development. We are talking of a market of about 4 million new consumers for malls.”
San Pedro de Macorís, population 418,000, one of the Dominican Republic’s 31 provinces, boasts strong local street retail, but no malls. This is also the case in La Altagracia province, population 335,677. There are preliminary plans for a mall in the prosperous province of La Romana, which has a population of about 330,600 and some tourism attractions but no shopping centers.
The Dominican Republic’s economy grew by nearly 5 percent last year. The country has a population of 10 million that is growing by about 1.6 percent annually.
CBL & Associates posted $99.7 million in fourth-quarter funds from operations, up from $88.7 million a year ago. Net income, meanwhile, was $52.4 million, down from $72.4 million, but same-center net operating income grew by 2.2 percent.
General Growth Properties reported $312 million in fourth-quarter funds from operations, up from $253 million a year ago. The firm posted $32 million in earnings, meanwhile, versus a net loss of $368 million a year ago. Net operating income rose to $585 million for the quarter, from $549 million a year before.
Kimco Realty funds from operations fell in the fourth quarter to $127.2 million from $135.4 million for the previous year’s comparable quarter. The firm’s earnings rose to $59.2 million, from $31.6 million, while same-property net operating income grew by 3.4 percent. This was the firm’s highest same-property NOI increase since the fourth quarter of 2007.
Macerich reported an increase in fourth-quarter funds from operations, to $132.6 million from $118.8 million a year ago. The firm’s earnings rose to $174.2 million from $163.1 million a year ago.

Simon Property Group funds from operations grew to $827.4 million in the fourth quarter, from $678.9 million a year before. The firm’s net income fell to $315.4 million from $362.9 million a year ago.
New York City–based private equity fund Blackstone Group will buy a majority stake in 40 U.S. shopping centers, totaling 5.7 million square feet, from UBS AB property funds for $1.1 billion. Kimco Realty Corp., UBS’s joint-venture partner on the properties, will increase its ownership to 33 percent from 18 percent. The venture has about $692 million in debt on the properties.
Toronto-based Primaris Retail REIT is expanding its holdings in Alberta with the purchase of nine properties for C$377 million (about on par with the U.S. dollar). This includes two enclosed regional centers — the 539,000-square-foot Medicine Hat (Alberta) Mall and the 461,000-square-foot Sherwood Park (Edmonton) Mall — plus five unenclosed strip plazas, one single-tenant retail building, one office building and about 4.5 acres. The sellers are Sherwood Park Mall Ltd., Markalta Developments Ltd. and Sleeping Bay Building Corp. The cap rate on the deal is 5.76 percent.
Mobile, Ala.–based Burton Property Group bought the 360,000-square-foot Jubilee Square Shopping Center, in Daphne, Ala., from L-A Daphne LLC for $37 million. Tenants there include Dick’s Sporting Goods, The Fresh Market and Office Depot. SRS Real Estate Partners will handle leasing.
AAG Management, of New York City, sold a 70,000-square-foot grocery-anchored center in Woodcliff Lake, N.J., to a private buyer for $29 million.
Chipotle Mexican Grill says it plans to open between 165 and 180 restaurants this year, including four internationally. The company opened 183 restaurants last year and now operates about 1,400 worldwide.
CVS Caremark made its first international push by buying Brazil’s eighth-largest drugstore chain, Drogaria Onofre, which operates 44 stores there. The price was undisclosed.
Louis Vuitton, the world’s biggest luxury brand in sales terms, is expanding too quickly and hurting its exclusive image, according to Bernard Arnault, CEO of parent LVMH. The chain will be expanding its existing boutiques now, instead of opening new ones, he said. Vuitton currently operates 460 stores across 50 countries, from its Paris home to as far as Mongolia.
Microsoft announced plans to open six stores next year, at Beachwood (Ohio) Place; City Creek Center, in Salt Lake City; Dadeland Mall, Miami; The Shops at La Cantera, San Antonio; St. Louis Galleria; and Westfield San Francisco Centre. Four of those stores are former pop-up shops now being made permanent. Microsoft operates about 30 permanent stores in the U.S. and Canada, the first of which opened in 2009.
Mid-America Real Estate Corp.’s Net Lease Investment Group has compiled a net-lease-data comparison of the top nine U.S. banking chains. “Clients are always wondering how one tenant compares to another and what makes one retailer’s cap rate more aggressive than the other,” said Tom Fritz, a Mid-America investment broker and co-author of the report. “This study illustrates much more than that, by rating each bank among different categories, such as total deposits, annual NOI, average deposits per branch, and of course, cap rate, to name a few. It literally shows investors where they can get the biggest bank for their buck.” Those top nine banks are, in order of credit ranking, US Bancorp, Wells Fargo, Bank of Montreal, JPMorgan Chase, PNC Financial Services Group, Bank of America, KeyCorp, Fifth Third Bancorp and TCF Financial Corp. Download a chart of these results here.
Total U.S. spending on Valentine’s Day gifts will hit $18.6 billion this year, according to a National Retail Federation survey of nearly 6,000 consumers. According to the trade group, the typical consumer will spend $130.97 on Valentine’s Day gifts, on average, up from $126.03 last year. The survey found that roughly a quarter of the respondents are planning to shop online, up from slightly less than 20 percent last year and the highest number in the survey’s 10-year history. Nearly 40 percent said they would buy gifts at discount stores. About 33 percent said they would shop department stores; nearly 23 percent, specialty stores; about 20 percent, flower shops; roughly 11 percent, jewelry stores; about 8 percent, specialty apparel stores; and almost 3 percent will shop by catalog.
REI chief executive Sally Jewell has been nominated for U.S. Secretary of the Interior, to replace Ken Salazar.
Sales boomed last year at shopping centers in Argentina, Brazil and Peru. Thirty-six malls in the Greater Buenos Aires area reported a 22.5 percent sales increase, according to government data. In Brazil mall trade group ABRASCE said its 457 malls reported some $60.1 billion last year, up nearly 11 percent from 2011. Sales at the 57 shopping centers in Peru shot up 20 percent last year, reaching $5.3 billion, according to that country’s shopping center trade association.
Shopping center landlords from Los Angeles to Hong Kong are investing a lot more money — and more imagination — in their food courts these days. Malls have come a long way from the days when food was seen as a means to prolong the shopping trip, and food court patrons are not just eating to shop anymore. SCT takes a culinary journey through some of the world’s best food courts. Check out our video report here.
Broker Collaboration – What’s the Point?
Indianapolis seen as major Memphis rival in economic development
Did Dollar Stores Over-Expand?
Google Now.
Union City tackles humankind, universe with Discovery Park of America
Apple Closing 20 Retail Stores In Order To Expand Them, Accomodate More Customers

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Shawn joined the Memphis Office of The Shopping Center Group in 2003 and became a partner in 2008 to focus on shopping center leasing and tenant representation. He has a Bachelor of Business Administration and an MBA in finance and real estate from The University of Memphis. Prior to joining The Shopping Center Group, Shawn was a Senior Project Manager for Cingular Wireless (AT&T) and was responsible for real estate development management, construction and implementation for wireless antenna and tower infrastructure for Tennessee and Mississippi. He is adjunct professor at The University of Memphis where he teaches the masters level class in real estate development and sustainability. In 2013 in will be working with Homburg Academy and University teaching on-line commercial real estate classes internationally. He holds both the CCIM and SCLS designations. Shawn engages in tenant representation, third party leasing/sales, investment sale and development consulting in the retail sector.

He is the co-founder and Chairman of the Board for the Memphis Business Academy charter schools (K-12th grade) in the Frayser area of Memphis. He is currently the 2013 vice-president of the Memphis CCIM chapter, 2013 Secretary/Treasurer of the MAAR Education foundation. He has serve on various charitable organizations boards in Memphis including Habitat For Humanity, the Binghamton Development CDC Retail Committee and Youth Visions. He is a member of Christ United Methodist Church. His wife is Price Phillips and he has two children Amanda and Matthew.

For all your retail real estate needs (tenant representation, landlord representation and property, investment & land sales) I hope that you will choose The Shopping Center Group and me to represent you and your business. We understand that representation is a privilege and that you have a choice!

The opinions expressed in this post are entirely my own. They should not be considered the opinion of The Shopping Center Group, LLC in which I am associated.

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