Shawn Massey, CCIM, SCLS

Weekly CRE and Retail Article Round Up – Match 4th, 2013

I hope you enjoy!
Can I Have Your Space Back? – Revisited: Pay me
Best Buy and Target at High Risk for Showrooming, But Other Retailers Face an Even Greater Threat
Best Advice: Leave Money on the Table for Your Partners
South Main’s New Life
South Main’s era of rebirth highlighted by $100 million cash infusion
It’ll be a Cold Calling Day in Hell!
Roof Rights
The Surprising Retail Winner In Mobile Apps
Retail Rap: 2013 Outlook

From the Desk of Al Taf

Consumer confidence rebounds in February
Feb 27, 2013 NEW YORK — Consumer confidence rebounded in February, reversing three straight months of declines, according to The Conference Board, a private research group. The Conference Board’s closely-watched Consumer Confidence Index stands at 69.6, up from 58.4 in January. Economists had expected 60.5, according to research firm FactSet. It was the highest reading since November’s 71.5 metric.
E-commerce satisfaction continues to grow
Feb 26, 2013 ANN ARBOR, Mich. — According to the American Customer Satisfaction Index’s (ACSI) annual E-Commerce Report, produced in partnership with customer experience analytics firm ForeSee, customer satisfaction with e-commerce websites continues to rise, gaining 1.2% to 81.1 on the ACSI’s 100-point scale.
Consumers Becoming Pessimistic as Gas Prices Keep Rising
Feb 25, 2013 ALEXANDRIA, Va. — Concerns about the economy and gas prices are beginning to take their toll on consumers, making them increasingly pessimistic, according to the monthly NACS Consumer Fuels Survey.
According to NACS, the Association for Convenience & Fuel Retailing, nearly one quarter (23 percent) of consumers surveyed in a national poll of gasoline purchasers are “very pessimistic” about the economy, a significant increase from the 18 percent who said that they were very pessimistic in NACS’ January consumer poll. Consumers age 50 or older were the most pessimistic (27 percent), while those age 18 to 34 were the least pessimistic (16 percent).
US consumer prices flat in January for 2nd month
Feb 21, 2013 WASHINGTON – U.S. consumer prices were flat in January from December for the second month in a row, the latest sign inflation is in check. That could give the Federal Reserve leeway to continue its efforts to stimulate growth.
The consumer price index has risen 1.6 percent in the 12 months ending in January, the Labor Department said Thursday. That’s down from a 2.9 percent pace a year ago.
Apparel Stores
Gap Inc. ends year with strong earnings growth
Feb 28, 2013 SAN FRANCISCO — Gap Inc. reported that net sales for the fourth quarter were $4.73 billion, compared with $4.28 billion for the same period last year. Same-store sales were up 5% for the quarter, compared with a 4% decrease during the same period last year.

Net income for the quarter was $351 million, or 73 cents per share on a diluted basis. This compares with net income of $218 million, or 44 cents per share on a diluted basis, for the same period last year.
Chico’s Q4 up 26%; to open Boston Proper stores
Feb 28, 2013 Fort Meyers, Fla. — Chico’s FAS’ fiscal fourth quarter net income rose 26%, helped by new store openings and the same of more items at full price. The quarter also had an extra week of sales.
Chico’s earned $31.5 million for the 14 weeks ended Feb. 2, compared with $25.1 million in the 13-week period a year earlier. Revenue rose 15% to $651.9 million, from $569.2 million. Wall Street analysts had expected higher revenue of $666.1 million.
TJX profit surges in Q4; full-year forecast below expectations
Feb 27, 2013 Framingham, Mass. — The TJX Cos. reported Wednesday a profit of $604.8 million for the quarter ended Feb. 2, compared with $475.3 million in the year-ago period. Despite the strong showing, TJX forecast a slowed growth pace for the new fiscal year and issued a profit forecast below analysts’ expectations. And joining many other retailers, the company announced that beginning with the fiscal 2014 second quarter, it will no longer report monthly sales.
For the 14-week fourth quarter ended February 2, 2013, TJX reported net sales of $7.7 billion, a 15% increase over the prior year. Consolidated same-store sales for the quarter increased 4% over the prior year’s 7% increase.
Limited Brands Q4 comps up 5%
Feb 27, 2013 COLUMBUS, Ohio — Limited Brands reported that adjusted earnings per share for the 14-week fourth quarter ended Feb. 2 were $1.76 compared with $1.50 for the 13-week fourth quarter ended Jan. 28, 2012.
Comparable-store sales for the quarter increased 5%. Net sales were $3.86 billion for the quarter compared with $3.5 billion for the same period last year.
Saks comps up slightly in Q4, focused on omnichannel efforts
Feb 27, 2013 NEW YORK — Saks reported that sales for the fourth quarter were up 5.6% over the same period last year. Same-store sales were up 0.7% for the period.
For the fourth quarter Saks recorded net income of $20.4 million, or 13 cents per diluted share, compared with net income of $37 million, or 21 cents per diluted share for the same period last year.
Abercrombie to close up to 50 U.S. stores
Feb 25, 2013, Abercrombie & Fitch said it would close 40 to 50 stores in the US this year as the youth fashion retailer’s shares tumbled following weak sales in the crucial Christmas quarter.

Like-for-like sales fell 1 per cent at Abercrombie & Fitch’s US stores in the three months to February 2, extending previous declines in an intensely competitive sector where its rivals include American Eagle, Aéropostale and Forever 21.
Abercrombie Q4 profit tops view; same-store sales decline
Feb 22, 2013 New Albany, Ohio — Abercrombie & Fitch Co.’s net income rose to $157.2 million for the fourth quarter, compared with $45.8 million a year earlier for a 13-week period. The chain said its net income was calculated using a new system for valuing inventory
Sales rose 11% to $1.47 billion for the 14 weeks ended Feb. 2, led by a 34% rise in international sales. (The period, however, includes an extra week compared to year earlier.) Same-store sales were flat for the namesake chain, down 2% at Hollister and down 3% abroad.
Casual Male Retail Group is changing its name to Destination XL Group
Feb 22, 2013, Casual Male Retail Group Inc., a Canton-based retailer that sells clothing to big and tall men, said that it plans to change its corporate name to Destination XL Group Inc., effective Feb. 25.
The company has been selling apparel under such store name-plates as Casual Male XL, Rochester Clothing, and B&T Factory Direct. A while back, the company started experimenting with a new store format called Destination XL — the first DXL store opened in mid 2010 in Schaumberg, Ill. Company officials were so pleased with results that they now believe a corporate name change is in order.
Auto Parts Related
Tax delay dents AutoZone sales
Feb 26, 2013 A 1.8% decline in second quarter same store sales at AutoZone was attributed to a two week tax return processing delay by the Internal Revenue Service.
The delay kept tax refunds out of the hand of AutoZone customers inclined to perform maintenance on their vehicles during the retailer’s second quarter ended February 9. Last week, Walmart also cited the tax processing delay as a source of sale weakness when it reported a 1% comp increase that was at the low end of its forecast range for a 1% to 3% increase.
Department Stores
Q4 comps a disaster at JCP
Feb 27, 2013 Fouth quarter same store sales fell by a jaw-dropping 31.7% at J.C. Penney, but CEO Ron Johnson insisted the company continues to make great strides with its one year old transformation strategy.

The company report an adjusted net loss for the quarter of $427 million, or $1.95 a share and a full year adjusted net loss of $766 million or $3.49 a share.
Macy’s bests guidance in Q4
Feb 26, 2013 CINCINNATI — Macy’s reported fourth-quarter sales and earnings growth that exceeded company expectations, prompting it to issue new guidance for 2013.
Comp sales rose by 3.7% for the year, on top of increases of 5.3% in 2011 and 4.6% in 2010. Earnings per share grew by double-digits for the fourth consecutive year. Operating cash flow continued to be strong, and we used excess cash to repurchase shares and double the dividend.
Dillard’s Q4 profit up; same-store sales up for 10th straight quarter
Feb 25, 2013 Little Rock, Ark. — Dillard’s Inc. posted fourth-quarter net income of $161.4 million, up 14% over the year-ago period. It also reported its 10th consecutive quarter of same-store sales growth.
The department store company posted quarterly net sales of $2.106 billion, up 7% from $1.970 billion during the same quarter last year. (Net sales include the operations of the company’s construction business, CDI Contractors LLC of Little Rock. Excluding CDI, total merchandise sales were $2.087 billion, up 7% from $1.946 billion during the same quarter last year.)
Nordstrom Q4 profit up 20%; upbeat for 2013
Feb 22, 2013 SEATTLE — Nordstrom Inc. on Thursday reported that its fourth-quarter profit rose 20% to $284 million, compared to $236 million a year earlier. The company also forecast further increases in same-store sales for its new fiscal year.
Revenue for the three months ended Feb. 2 rose 13.5% to $3.6 billion, from $3.17 billion. Same-store sales, which consist of the full-line and direct businesses, rose 6.3%.
Drug Stores
Vitamin Shoppe Q4 profit up 3%, hurt by Superstorm Hurricane
Feb 26, 2013 North Bergen, N.J. — Vitamin Shoppe Inc. said Tuesday its fourth-quarter net income rose 3% to $9.7 million, up from $9.4 million in the year-ago period.
Revenue rose 2% in the quarter ended Dec. 29, to $218.9 million from $214.9 million. Same-store sales rose 5.2%. Online sales grew 13%. The company said that its sales growth was partially offset by the impact of Superstorm Sandy, which negatively impacted comparable sales by 1.6%. Also, when compared with the same period in the prior year, the chain’s fourth quarter had one less selling week.
Electronics Stores
Ax falls at Best Buy; cutting 400 headquarters jobs
Feb 27, 2013 MINNEAPOLIS — Best Buy Co. announced it is cutting 400 jobs at its headquarters as part of its “Renew Blue” transformation efforts.
The job reductions are part of a move to save $150 million in selling, general and administrative costs. The cuts are the first phase of the larger cost-cutting plan that new CEO Hubert Joly announced at an investor and analyst meeting last November. At that time, he said that Best Buy would remove $725 million in costs. This $150 million reduction is the first phase of the initiative, with additional reductions to come during the year.
RadioShack swings to loss in Q4
Feb 26, 2013 Fort Worth, Texas — RadioShack Corp. reported a greater-than-expected net loss of $63.3 million in the fourth quarter ended Dec. 31, compared with a profit of $11.9 million a year earlier.
Total sales edged down to $1.3 billion compared to $1.39 billion last year. Comparable-store sales fell 7%, hurt by a decline in the performance of its postpaid wireless business.
Grocery Stores
Study: Grocers Publix, Trader Joe’s top experience rankings; Office Depot among most improved
Feb 27, 2013 Waban, Mass. — Survey results released Wednesday by Temkin Group revealed that Publix and Trader Joe’s ranked the highest among 246 companies in terms of customer experience.
The 2013 Temkin Experience Ratings, which polled 10,000 U.S. consumers, were dominated by grocery chains and food purveyors. After Public and Trader Joe’s was Aldi, and rounding out the top 12 were Chick-fil-A,, Sam’s Club, H.E.B., Dunkin’ Donuts, Save-a-Lot, Sonic Drive-In, Little Caeser’s and Ace Hardware.
Home Improvement & Office Products
Home Depot Q4 profit surges 32%, beating estimates
Feb 26, 2013 Atlanta — The Home Depot Inc. said Tuesday its fiscal fourth-quarter net income jumped 32%, beating expectations, helped by strong U.S. sales and repairs and cleanup resulting from Superstorm Sandy. The chain also said it will buy back $17 billion of its common stock and boosted its quarterly dividend by 34%.
For the period ended Feb. 3, Home Depot Inc. earned $1.02 billion, compared with $774 million a year ago. Revenue climbed 14 percent to $18.25 billion from $16.01 billion, also beating Wall Street’s expectations. An extra week in the quarter compared to the previous year figured into both results.
Lowe’s Q4 profit tops estimates
Feb 25, 2013 Mooresville, N.C. — Lowe’s Co. reported fourth quarter profits that topped Wall Street estimates, helped rebuilding efforts in the wake of Hurricane Sandy and general remodeling activity. The retailer also said it authorized a new $5 billion share buyback program that it expects to use in the next two year
Lowe’s earned $288 million in the fourth quarter ended on Feb. 1, compared with $322 million. (Lowe’s fiscal year ends on the Friday nearest the end of January; therefore, fourth quarter and fiscal year 2011 included an extra week compared to 2012.)
Office Supplies Merger Likley to Present Challenge To Landlords
Feb 21, 2013 The freshly announced merger between Office Depot and OfficeMax might help save the struggling office supplies retailers from extinction, but it will also lead to some headaches for landlords, market observers speculate.
In a published release about the deal, Office Depot’s management estimates that the merger will result in anywhere from $400 million to $600 million in annual cost synergies by the third year following the transaction’s close. A significant portion of those synergies will likely come from store closings in areas where the two chains compete with each other, as well as less productive stores that are nearing the ends of their lease terms. Estimates that the combined entity will close at least 100 or 200 stores over the next few years, and possibly more.
Wendy’s credits remodels with 2012 sales growth
Feb. 28, 2013 Officials for The Wendy’s Co. reiterated an optimistic outlook for 2013, including robust growth in its set of remodeled “Image Activation” units, based on same-store sales and revenue growth in fiscal 2012.
Fourth-quarter revenue rose 2.4 percent to $629.9 million, reflecting a 0.2-percent same-store sales decline at company-owned restaurants in North America. Same-store sales in the fourth quarter of 2012 lapped the late-2011 introduction of Dave’s Hot ‘N Juicy line of cheeseburgers. Full-year net income fell 28.3 percent to $7.1 million, or 2 cents per share, compared with $9.9 million, or 2 cents per share, a year earlier.
Cracker Barrel: Marketing, menu moves drove 2Q sales
Feb. 26, 2013 Cracker Barrel Old Country Store Inc. reported a same-store sales increase of 3.3 percent at its restaurants during the second quarter, a jump the company attributes in part to marketing and menu initiatives.
Net income for the quarter was 35.2 million, or $1.47 per share, compared with 25.6 million, $1.10 per share, the year prior. Revenue for the quarter was $702.7 million, a 4.4-percent increase from the second quarter of 2012.

Chuy’s 4Q profit, sales rise
Feb. 25, 2013 Chuy’s Holdings Inc. reported on Monday that profit increased in its fourth quarter as it expanded its number of restaurants to 40 during the full year.
Austin, Texas-based Chuy’s, which went public last July, said net income rose in the fourth quarter to $2.6 million, or five cents per share, from $300,000 in the same period a year ago. Revenue during the quarter, which ended Dec. 30, increased 40.3 percent to $46.7 million, from $33.3 million in the prior-year period. Tex-Mex-themed Chuy’s added eight new casual-dining restaurants in 2012.
Darden warns on 3Q sales decline at top brands
Feb. 22, 2013 Darden Restaurants Inc. warned Tuesday that U.S. same-store sales are estimated to have declined 4.5 percent across its top three brands — Red Lobster, Olive Garden and LongHorn Steakhouse — during the third quarter of 2013.
The company estimates U.S. same-store sales fell 1.5 percent at LongHorn Steakhouse, 4 percent at Olive Garden and 7 percent at Red Lobster locations for the third quarter.
Dollar Stores, Warehouse Club & Other Retailers
Barnes & Noble swings to Q4 loss on sharp decline in Nook e-book sales
Feb 28, 2013 New York — Barnes & Noble reported on Thursday a loss in the fiscal third quarter, hurt by a 26% decline in revenue for its Nook e-book readers.
The company posted a loss of $6.1 million quarter through Jan. 26, compared to a profit of $52 million in the year-ago period. The retailer blamed the loss partially on charges stemming from weaker-than-expected sales of Nook e-readers during the holiday shopping season. Revenue fell 9% to $2.22 billion. Analysts had predicted sales of $2.4 billion.
Dollar Tree posts larger-than-expected Q4 profit
Feb 27, 2013 Chesapeake, Va. — Dollar Tree Inc. reported Wednesday a bigger-than-expected profit of $228.6 million for the quarter ended on Feb. 2, up from $187.9 million in the year-ago period.
Sales climbed 15.4% to $2.25 billion, boosted by an extra week in the quarter. Wall Street expected $2.23 billion in sales. Same-store sales increased 2.4%.
7-Eleven targets 50,000 stores by end of Q1
Feb 27, 2013 Dallas — 7-Eleven announced Tuesday that the company achieved record store growth in 2012 and expects the number of 7-Eleven stores worldwide to pass the 50,000-store mark by the end of the first quarter.

The c-store chain added nearly 5,000 stores globally in 2012; 1,000 were in the U.S. and Canada. At year’s end, 7-Eleven operated 49,500 stores in 16 countries.
Kangaroo Express Opens First New Store in Four Years
Feb 27, 2013 CARY, N.C. –The Pantry Inc.’s Kangaroo Express is getting ready for the grand opening of its new store located in Charlotte, N.C. The ceremony will take place this Saturday, March 2 and will feature a ribbon-cutting at the new store at 7747 North Tryon St. — the first new Kangaroo Express in four years.
7-Eleven Seizes Opportunity in Soft Real Estate Market
Feb 22, 2013, DALLAS — Last year, 7-Eleven Inc. was not shy about its plans to grow. The company publicly declared that it was working to have a record growth year, adding at least 630 new U.S. and Canada stores. It ended 2012 with far more than that, adding a net 969 locations, of which 961 were U.S. additions.
Papa Murphy’s Sees a Big Year in 2012

From the ICSC
U.S. retail vacancy drop bodes well for landlords
U.S. retail real estate sectors continue to improve, albeit slowly, with an improving economic and jobs picture driving the absorption of space, according to the National Association of Realtors. The group predicts that vacancy rates at U.S. retail properties will ease from 10.7 percent in the first quarter of this year to 10.4 percent in next year’s comparable quarter. The markets with the lowest retail vacancy rates are San Francisco (with 3.5 percent), Fairfield County, Conn. (4.2 percent), and Orange County, Calif. (5.2 percent). The association is forecasting that retail rents will rise by about 1.5 percent this year, on average, and by 2.1 percent next year. (Last year’s gain was 0.8 percent.) Net absorption of retail space, meanwhile, will probably reach 11.9 million square feet this year and 16.4 million square feet next year, the organization says. “Overall commercial real estate leasing activity continued to grow in most markets during the closing months of 2012, which is modestly lowering vacancy rates in all of the commercial sectors early this year,” said Lawrence Yun, the association’s chief economist, in a press release. “Business spending is expected to rise faster in 2013 because of record high corporate profits. Low interest rates also are permitting companies to improve their balance sheets.”
Macy’s links in-store, mobile and online sales
Macy’s Inc. reports that its 2012 sales grew faster than expected, thanks in part to an increase in online sales. Executives say they anticipate the trend will continue through this year as the company focuses on interlinking its mobile, online and store channels. The firm posted $27.6 billion in overall sales last year, up 4.9 percent from 2011, while same-store sales grew 3.7 percent, better than the expected 3.5 percent. Sales at the and sites, meanwhile, grew by 41 percent from 2011 and contributed 2.2 percentage points to the company’s overall same-store sales growth for the year. “The line between stores and the Internet is blurring, so much so that beginning in 2013 we will no longer break out our Internet growth when we report our results,” said CFO Karen Hoguet on an earnings call.
Macy’s Inc. is projecting same-store sales growth of 3.5 percent for this year, based on its network linkage efforts. Management says it will spend $925 million this year to improve the company’s omnichannel sales capabilities. Macy’s Inc. began filling online orders from inventories at 23 of its stores last year; the program has grown to 290 stores already, and that will probably expand to about 500 stores by this fall, which would represent 85 percent of Macy’s business, says Hoguet. “We are really just scratching the surface here,” she said. “In the future we expect these fulfillment locations will be key to offering faster and even same-day delivery and enable customers to buy online and pick up in stores.”
Macy’s Inc. will open two full-line Macy’s stores, in Victorville, Calif., and Gurnee, Ill., as well as a Macy’s Men’s Store, in Las Vegas. The company will also be opening a Macy’s store in Bay Shore, N.Y., and Bloomingdale’s will open one in Glendale, Calif., plus a Bloomingdale’s Outlet store in Rosemont, Ill.
Fashion’s Night Out cancelled
Shopping center marketing directors will not have to worry about Fashion’s Night Out this year. The annual event, which launched in September 2009 to encourage recession-battered consumers to return to shopping, is not going forward in the U.S. in 2013, organizers said. The sponsors — Vogue magazine, the Council of Fashion Designers of America, and New York City’s tourism bureau NYC & Co., decided to go on hiatus this year, since the recovering economy has many retailers wanting to refocus their marketing expenses.
Fashion’s Night Out, the brainchild of Anna Wintour, Vogue’s editor, was started to generate excitement about fashion and to spur sales by encouraging retailers to sponsor partylike events on a designated evening. The event typically takes place on the Thursday following Labor Day and coincides with New York City’s Fashion Week. As retailer and consumer interest in the program has grown, so too has participation among fashion-oriented malls and shopping centers. Last year Fashion’s Night Out events were held around the world, including Milan, Paris and London.
In the U.S. the events took place in about 500 cities last year, up from half that many the year before, according to a program spokesman. Retailers and shopping centers must apply through the program’s Web site for permission to use the trademarked term “Fashion’s Night Out” for their events.
Of course, Fashion’s Night Out draws crowds and generates publicity, particularly when celebrity appearances are included. Some 30,000 gathered for the festivities at Taubman Centers’ Beverly Center, in Los Angeles, last fall, where they watched celebrities and fashion designers make their red-carpet arrivals and took in two runway shows. The evening has practically come to rival Black Friday for drawing power, according to Susan Vance, Beverly Center’s marketing and sponsorship director. The mall has participated in the program since 2010. “It is about brand-elevation,” said Vance. “Being a partner with Vogue helps elevate our brand in the fashion world.”
The program is often a big-budget undertaking for malls and retailers, requiring months of planning and marketing, so participants should consider the cost involved, marketing experts say. “While Fashion’s Night Out can be a powerful branding tool, to do it well is generally expensive and extremely time-consuming,” said Rebecca L. Maccardini, SCMD, president of Ann Arbor, Mich.–based consulting firm RMResources and an ICSC past chairman. “Any marketing department has to balance the time, energy and money needed to produce it well against what they would do with that same time, energy and money to produce visible sales results,” she said.
Despite the event’s cancellation in the U.S. this year, Vogue has already introduced a spinoff: a program for teens it calls Back-to-School Saturday. Last year General Growth Properties was the first mall landlord to participate, holding teen-oriented fashion shows, musical performances and other programming at 10 of its malls in August.
The international version is moving forward. Nearly 20 countries will participate this year, according to Condé Nast International, publisher of Vogue. Thailand and Ukraine are participating for the first time this year.
MasterCard launches mobile-payment service
MasterCard unveiled a mobile-payment service it calls MasterPass this week. This smartphone application stores a consumer’s credit-card and bank-account numbers and makes them easier to access for shopping purposes. PayPal and Google Inc.’s Google Wallet already offer a similar service. MasterPass enables shoppers to scan and pay for merchandise in a store without having to wait in line or even interact with any store employees. For online purchases, MasterPass eliminates the need to enter shipping and card information with every purchase.
“Every device is becoming a shopping device,” said Ed McLaughlin, MasterCard’s chief emerging-payments officer, in a press release. “MasterPass brings together all of the ways we pay for things, from traditional plastic cards to digital wallets, and gives consumers the ability to make a payment from wherever they are and with one simple experience.”
Consumers in Australia and Canada will be able to sign up for MasterPass at banks by the end of March, U.S. shoppers can do so later this spring, and U.K. customers this summer. MasterPass will expand to Belgium, Brazil, China, France, Italy, Netherlands, Singapore, Spain and Sweden this year. Banks will pay to use the technology, which will accommodate branded credit cards besides MasterCard. Roughly 6,000 merchants have signed on for this platform, which can track loyalty programs, coupons and similar offers.
Visa is working on its own digital wallet service, called, and PayPal launched a European version of its mobile-payments service last week that can run on Apple iPhones and Android smartphones. Square, founded by Twitter co-creator Jack Dorsey, offers a free card reader that attaches to a smartphone and handles payments for a fee.
Big demand for small centers
With the 2013 Open-Air Conference in full swing in New Orleans this week, two decidedly ordinary subformats of the category — the unanchored strip center and the grocery-anchored center — are currently in high favor among investors. Few power centers, lifestyle developments or enclosed malls are opening in the U.S. now, but plenty of smaller, less fancy centers are. “Obviously, you require a lot more equity today, so those larger deals aren’t getting done, and the strip centers are,” said Arturo Sneider, SCLS, a founding partner and CEO of Los Angeles–based Primestor Development, which builds and operates open-air centers in urban markets in California, Arizona, Illinois and Nevada. These centers sell the basic merchandise people need regardless of the state of the economy, and they are not vulnerable to online competition, Arturo told SCT.
There are additional reasons that investors favor these simple centers. “Strip center developments are cheaper to build, easier to entitle and they take a lot less land,” John Schupp, a Jones Lang LaSalle senior vice president of retail and project management, told SCT. “Plus, neighborhoods are less likely to resist them.”
Real estate and financial executives at the conference discussed the open-air investment landscape on Thursday. They included Stephen H. Bittel, chairman and founder, Terranova Corp., Miami; Terry S. Brown, CEO, Edens, Columbia, S.C., and an ICSC past trustee; Daniel B. Hurwitz, CEO, DDR Corp., Beachwood, Ohio, and ICSC Central Division vice president and a trustee; and Sheridan Schechner, managing director, Barclays Capital, New York City.
Respondents to a survey conducted by PwC were more positive about the investment and development prospects of U.S. neighborhood and community centers than about any other retail format, with 52.7 percent of them recommending a buy.
Retailer downsizing was a topic of discussion at the meeting too, in a session whose landlord participants included Thomas A. Caputo, president, Equity One Inc., New York City; Michael V. Pappagallo, executive vice president and COO, Kimco Realty Corp., New Hyde Park, N.Y.; and Brian Smith, president and COO, Regency Centers, Jacksonville, Fla.
Other issues at the conference, which conscludes today, include leasing, capital, grocery stores and technical advances.
Fourth-quarter funds from operations at PREIT fell to $29.7 million, from $36 million a year ago. Same-center net operating income, meanwhile, grew to $76.5 million from $75.1 million. The firm posted a loss of $10.4 million for the quarter, versus a loss of $600,000 a year ago. The company attributed the losses to costs associated with job cuts, payment of dividends and other factors.
Chicago-based LaSalle Investment Management bought the 184,000-square-foot Airedale Centre, in the town of Keighley, West Yorkshire, England, from The Royal Bank of Scotland for $33.4 million.
Fashion Square LP, of Salt Lake City, sold a triple-net-lease property in Port Orange, Fla., to Phoenix-based Cole Ko Port Orange FL, LLC for $12 million. Kohl’s has a ground lease on the building.
Yale Macon LLC, an affiliate of Yale Realty Services Corp., of White Plains, N.Y., bought the 4,670-square-foot Walnut Creek Plaza, in Macon, Ga., from Rivercrest Realty Investors for $3.25 million.
• Traffic and sales are growing fast on Target’s mobile-shopping platforms. “Mobile purchases now constitute more than 7 percent of our digital sales, and mobile traffic is now more than 25 percent of our overall digital traffic,” said Kathryn Tesija, executive vice president of merchandising, on an earnings call. “Guests are responding to the significant enhancements we made to our mobile offering in 2012, including improved design and navigation, becoming one of the first retailers to participate in Apple’s Passbook and growing out a way-finding pilot in select stores.” Target also launched free wireless in all its stores during the fourth quarter. “ was, by far, the site most commonly accessed by guests while they were shopping in our stores,” said Gregg Steinhafel, the company’s chairman, president and CEO. Target will divide its $2.3 billion U.S. capital budget equally between omnichannel technology and store openings and remodels, according to Tesija.
• J.C. Penney reported $3.88 billion in total revenue for the fourth quarter, off 28.4 percent from the year-ago quarter. The company also posted a $552 million loss for the quarter. The company’s Internet sales fell 34.4 percent year on year for the quarter, while same-store sales fell 31.7 percent — 560 basis points worse than Wall Street analysts had anticipated.
Customers have not responded well to the company’s effort to rebrand and remerchandise its stores, including a strategy (since reversed) to eliminate sales in favor of everyday low prices. “I told you this would be a multiyear effort, and it will be,” CEO Ron Johnson said on an earnings call. The strategy of creating a series of branded “shops” within each JCPenney store is paying off, because the stores already converted are outperforming the rest, Johnson said. Part of the problem is that fewer people are visiting the stores, and insufficient numbers of those who do are actually making purchases.
Traffic for the quarter was down 17 percent year on year, CFO Ken Hannah said. Conversion of visitors to buyers was down 9 percent, he added. “The key to our volume is getting the customer back in the store,” Johnson said. The company had $930 million in cash on hand as of year-end 2012, and some of that will go toward improving the customer experience, according to Johnson. “Within one month,” he said, “every employee on the floor of a JCPenney store will carry an iPod and be able to check out customers anytime and anywhere in the store.”
• SCT interviews ICSC Past Chairman Gary D. Rappaport, SCSM, SCMD, SCLS, SCDP, chief executive of the McLean, Va.–based Rappaport Cos., about his career in retail real estate development, in a video made at the University of Maryland. In the first part of the interview, Rappaport talks about his decision to move into retail real estate after launching his career developing residential properties. See the interview here.
• Michael D. Fascitelli is stepping down as president and CEO of Vornado Realty Trust after 17 years. Company founder and Chairman Steven Roth and CFO Joseph Macnow assume Fascitelli’s responsibilities until a successor is named. Fascitelli remains on the board and says he has no plans to join any rival firm even after his yearlong noncompete agreement expires.
• A proposed law in Colorado would require property owners and developers to pay invoices within 30 days and would also require contractors to pay their subcontractors within five days of receiving payment themselves. Additionally, the bill allows subcontractors to walk off the job under certain circumstances and would not require them to return until as long as 30 days after receiving payment.
In its current form, the bill applies to public and private projects, but its sponsor reportedly plans to offer an amendment that would exclude public projects. The House Business, Labor, Economic & Workforce Development Committee is set to hear debate on the measure sometime next week. ICSC opposes the bill, as do the city and county of Denver and the Colorado Municipal League, NAIOP, certain business groups and many in the state’s construction industry.
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Terranomics Retail Newsline
Week Ending February 24, 2013
Because We Can
According to, the current average price of gasoline in the United States is $3.74 per gallon. This number has risen sharply since hitting a low of $3.22 per gallon on December 20, 2012. In the run-up that has since followed (January/February 2012), prices have increased by about 16% overall. What is somewhat interesting about the current increase is that pricing increased by a modest amount during the final weeks of December and then stalled for a couple of weeks at the very end of last year and first week or so of 2013. Of course, headlines at that time were dominated by the fiscal cliff issue and fears of an impending “taxmageddon.” As we all know, the late deal to avoid the fiscal cliff resulted in a surging stock market and significantly increased business confidence. As soon as the dust settled, gas prices began to climb.

Now, the good news is that the current increased have yet to match the levels posted in the last three run-up periods. Though it is possible that they may still match past run-up levels, the pace of rate increases has slowed this week. The price of crude oil has fallen from $97.81 per barrel on February 13th to today’s rate of about $94.19 per barrel. However, as in past run-up periods, there has been a significant lag-time between falling crude oil prices and a decline in the retail price per gallon of gasoline. The fact is that gas retailers make the most of their profit at the tail end of these run-up periods. They are generally quick to respond to rising prices and slow to respond to falling ones.

The past four run-up periods have looked like this:

January to February 2013 16% increase Low of $3.22 High of $3.74
June to September 2012 15% increase Low of $3.37 High of $3.88
December 2011 to April 2012 21% increase Low of $3.22 High of $3.89
March to May 2011 21% increase Low of $3.29 High of $3.97

I cross-checked these numbers against consumer confidence levels and found a few interesting correlations. The March to May 2011 spike followed strong gains in consumer confidence that began in December 2010 (53.3) and extended to April 2011 (66.0). Numbers finally fell in May 2011 after a couple of months of extremely rapid fuel price increases.

The December 2011 to April 2012 gas spike followed a period of strong consumer confidence gains that began in October 2011 (40.9) and lasted until December 2011 (64.8). Confidence faltered slightly in January 2012 (61.5), but regained its footing in February 2012 (71.6). Ultimately, as the cost of fuel continued to increase, consumer confidence stalled in March (69.5) and April (68.7) and then finally fell by May (64.9).

The correlation between consumer confidence and fuel pricing increases becomes a little hazier after that. Consumer confidence hadn’t rebounded yet from the early 2012 gas spike period when pricing once again started to creep up in June 2012. Likewise, though consumer confidence posted strong gains from September to November 2012, it faltered in December 2012 and continued that pattern in January 2013. But, as I detailed earlier, there was a sharp rise in business confidence last month following the fiscal cliff resolution. It didn’t translate into higher consumer confidence numbers and many economist believe that the end of the payroll tax holiday (which wage earners felt immediately) was the culprit. Of course, the gas price hike during the last uptick was not as severe (15%) and so far this surge (16%) has also proven to be less extreme than some of the other recent upswings.

And so what is my point? Two of the last four surges in gas pricing followed periods of strong gains in consumer confidence and it could be safely argued that three of the past four immediately followed events that triggered greater confidence in the U.S. economy. The June 2012 gas spike remains the one anomaly here.

The official oil industry line on this has been that this is all classic supply and demand. There is currently an oil shortage because a large number of refineries are not currently in operation as they “undergo maintenance.” This has meant that about 800,000 to 900,000 barrels per day of refinery capacity is not being utilized and this is causing the shortage that, in turn, is boosting the price of crude oil and gasoline. And certainly, if you look at the relationship between crude oil and gas prices (as you can here at, you will see a clear-cut relationship. Unfortunately, that relationship does not actually demonstrate anything about supply and demand. It just shows that when oil is high, gas is high. Duh.

I am not saying that supply and demand doesn’t play into gas pricing at all. But when large monopolies essentially control the supply, it sure makes it a lot easier to create false shortages. And how else could you categorize the current uptick, which the oil industry itself blames on “refineries closed for maintenance?”

In early January, I noted the possible near-term risk of gas price hikes to the economy in one of my commentaries. I was mortified to see the trend emerging within just a couple of weeks. Now, my prediction was not based on advanced econometric forecasting. It was not based on a careful reading of OPEC production or the futures markets or the regulatory environment. It wasn’t based on a careful inventory of U.S. refinery output and a careful review of which facilities may be “shutting down for maintenance.” And that is the scary part. My prediction was based on the simple idea that business confidence was on the upswing again, which would eventually also be reflected by consumer confidence increasing. And that the oil industry has become so predictable over the past few years at throttling the golden goose at every opportunity that any sign of optimism in the economy was sure to be followed by a spike at the pump. Now I am not necessarily saying that watching consumer confidence is always going to be the best method in predicting oil and gas pricing, but it sure seems a pretty good one for now. And ultimately this demonstrates just one thing; gas prices are NOT about supply and demand—gas prices are about BECAUSE WE CAN.

Look for the rate of gas price growth to slow over the next two weeks and likely begin to fall. This will correspond with the almost inevitable economic headwinds that it appears will be caused by Congress and the President being unable to come up with an alternative plan to sequestration. But don’t be surprised if we see another round of gas price increases emerging as we head into summer.
– Garrick H. Brown
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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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