The below are tips and tidbits about local Los Angeles area retail real estate as well as related local and national news and trends. For your information, from one of our shopping center real estate development partners and experts, Sam "Bachie" Bachner.
By Jonnelle Marte, Smart Money, June 2012
Frustrated by rising gas prices, consumers are patronizing discount retailers in growing number, a factor financial analysts point to as key component of discount retailer Dollar General’s surging stock price.
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By Nathaniel Popper, Los Angeles Times, March 18, 2012
Despite holding fewer deposits than it’s nearest competitors, Wells Fargo’s $178 Billion stock valuation is $70 billion more than JP Morgan Chase and $9 Billion more than Citi Group.
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By ICSC SCTWeek February 17, 2012
Commercial property loans to surge in 2012: Report
U.S. commercial mortgage originations are projected to hit $230 billion this year, up 17 percent from last year, and will probably reach $290 billion by 2015, according to The Mortgage Bankers Association. Commercial mortgage debt outstanding is expected to grow this year too, to upwards of $2.4 trillion, 2 percent more than last year. By the end of 2015, mortgage debt outstanding will probably exceed $2.5 trillion, the trade group says.
Life insurance companies and government-sponsored entities will be the most active lenders, the group predicts, saying also that the CMBS market will recover steadily through this year. “Our forecast anticipates continued strength in lending by life companies and the GSEs, increased lending by banks and others, and a slow but steady return in CMBS activity,” said Jamie Woodwell, the association’s vice president of commercial real estate research, in the report. “Low loan maturity volumes over the next few years, coupled with moderate sales transaction activity, will mean that a relatively robust supply of mortgage capital will be a catalyst for deal activity.”
Unfortunately for retail borrowers, the trend seems to be driven by lending to multifamily and industrial properties. The association reports that in the fourth quarter of last year, when commercial mortgage originations grew 13 percent from the year-ago quarter, loans on the industrial side grew by 43 percent, and those in the multifamily sector increased by 31 percent. By comparison, on the retail side loan originations in the fourth quarter fell 8 percent year on year, while originations for health care properties dropped 24 percent, office properties decreased 29 percent and hotels sank 44 percent.
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By ICSC SCWeek, February 10, 2012
Visa change a boon for shopping centers
Brazilians and Chinese wanting to visit the U.S. will have a much easier time under a presidential order issued in January. “The more folks who visit America, the more Americans we get back to work,” the president said. “It’s that simple.” This is good news for U.S. outlet centers.
Shoppers from Brazil spend some $6 billion annually here (in Florida they outspend British travelers), and the Chinese tourists spend just over $5 billion annually, much of that at discount and outlet stores. But visitors here from those two countries face considerable hurdles trying to obtain visas. The process requires personal interviews at U.S. consular offices, with waits averaging about two months, not to mention hours of waiting in line once the appointment day arrives. Visas for Canada and France are easier to obtain than visas for the U.S. “We’re competing with the rest of the world,” said Rosemary McCormick, president of Shop America Alliance. “The biggest barrier to Chinese visitation right now has nothing to do with currency or desire. It has to do with our visa process.”
Chinese shoppers spend about 50 percent more than the average international traveler, says Ann Ackerman, vice president and marketing director of AWE Talisman. “We market heavily to them,” Ackerman said. “The Chinese have money, and they want to spend. They are very brand-savvy and love upscale brands. This is why they gravitate to outlets.”
Indeed, Chinese consumers are highly motivated to patronize outlet stores, others say. “At U.S. outlet centers Chinese shoppers are seeing items that are almost 80 percent off what they are accustomed to paying for the same brands there,” said Karen Fluharty, a principal of consultant firm Strategy & Style who once lived in Hong Kong.
The U.S. has plans to deploy 100 more consuls to Brazil and China to help ease processing. Other initiatives include expanding an existing program to allow low-risk foreign visitors quicker admission through airport checkpoints and the addition of Taiwan to a list of countries requiring no visa. Four U.S. airports — in Charlotte, N.C.; Denver; Phoenix; and Minneapolis — would be added to the 20 that already have special kiosks for processing such visitors.
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Western Real Estate Business, December 22, 2011
Hemet, Calif. — A 50,000-square-foot retail property in Hemet that is currently occupied by LA Fitness has sold to a private trust from Beverly Hills, Calif., for $9.6 million. The single-tenant location sold at a 7.6 percent cap rate. This is the lowest cap rate that a single-tenant, health club-occupied property has obtained in the U.S. since July 2008, according to CoStar. The property is situated on 5.61 acres at 220 North Sanderson Ave.
Shaun Riley of Faris Lee Investments represented the trust, which was also in a 1033 exchange. He noted the buyer was initially seeking a drug store property to capitalize on long-term, passive returns. Riley instead urged the buyer to consider health club properties, which could be attained at a significantly higher yield. The buyer was ultimately able to place long-term financing on the property at 240 basis points lower than the cap rate, Riley noted. This positioned the trust favorably, affording it a 10 percent cash return going in and the potential for future rent increases. The seller, Eden Group, LLC, was represented by Marcus & Millichap.
“The buyer was yield-driven and was looking for a strong-credit, single-tenant investment in Southern California. After conducting a thorough search of the marketplace, we advised our client on the possibility of acquiring the Hemet LA Fitness as a strong option since the tenant had the financial strength the buyer required and had more than 12 years remaining on the lease term. The pricing, cap rate and the opportunity to finance the property with new debt that could be obtained at a historically low interest rate, also appealed to the buyer,” Riley said in a statement.
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by Patrick Fitzgerald The Wall Street Journal, February, 2011
“The Wall Street Journal reports Blockbuster Inc. agreed to sell itself for $290 million to a consortium of its investors in a pact that gives the buyers the option to convert the video-rental chain’s Chapter 11 bankruptcy into a Chapter 7 liquidation.”
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