Download - Icsc Presentation Slides 10 7 09
A PUBLIC STRATEGY FOR TODAY’S RETAIL REALITYICSC Northern California Alliance Program 2009
PanelPanel
PresentationsJanet Smith-Heimer, Managing Principal, BAE
Retail Trendse a e ds
Retail Store Closures
Garrick Brown, Senior Retail Research Director USA, Colliers InternationalCommercial Real Estate – The Next Crisis?
Panel Discussion – Public StrategiesPanel Discussion Public StrategiesDoug Wiele, President, Foothill Partners
Bill Lambert, Assistant Director of Economic Development, Alameda County Redevelopment Agency
Leslie Parks, Director of Downtown Management, San Jose Redevelopment Agency
The Good News – Expanding Retailers
RETAIL TRENDS & STORE CLOSURESJanet Smith-Heimer, BAEbae
Why Do We All Care About Retail?Why Do We All Care About Retail?
D l /R il L l GDevelopers/RetailersLocation
Local GovernmentsLocation
Accessibility Attracting shoppers
AccessibilityPlacemaking / R i li iRevitalization
OOccupancySales per square foot
OccupancySales per square foot
Return on Investment Tax Revenue to General FundGeneral Fund
bae
Impact of RecessionImpact of Recession
l / lDevelopers/RetailersSlowed development projectsRi i i / l l Rising vacancies/ lower lease ratesClosing storesB k t b iBankrupt businesses
L l GLocal GovernmentsDeclining tax revenuesSl d it li ti j tSlowed revitalization projectsEmpty stores/blighted landscapeJob lossesJob losses
bae
National Sales TrendsNational Sales Trends
US retail sales grew steadily h h hi through this decade…
Until 2008Until 2008
Source: Monthly Retail Trade Survey, U.S. Census, June 11, 2009 Release.bae
Recent National Sales TrendsRecent National Sales Trends
Sales started to plunge in A 2008 Aug 2008, to unusual low in Dec 2008
Sales starting to tick up in Aug 2009Aug 2009
Source: Monthly Retail Trade Survey, U.S. Census, June 11, 2009 Release.bae
Bay Area Per Capita SalesBay Area Per Capita Sales
Accounts for changes in
l ipopulation
Shows 2007 declining on declining on adjusted per capita basis
bae
Major Impact of Recession: Retailers Closed or Closing
Mervyn’sCircuit City
Steve & Barry’sValve Cityy
GottschalksShoe Pavilion
yKB ToysWicks Furniture
YardbirdsBally FitnessLinens N Things
LevitzGoody Family ClothingCacheLinens N Things
Sharper ImageBombay and Co.
CacheMovie GalleryWilson Leathery
Bailey, Banks & Biddle
bae Sources: Metrovation & Collliers International
More Impacts of Recession: Retailers Closing Stores or Filing Chapter 11
BBQ Galore Filed Ch 11Ann Taylor Closing 117 stores
Disney Stores Closing 100 + storesGoodys Closing 103 storesy g
Cost Plus Closing 26 storesTalbots Closing stores Macy’s Closing 11 storesJ Jill Closing stores
Goodys Closing 103 storesBenigans Steaks Closing 150 storesBoscovs Filed Ch 11Against All Odds Closing W. Coast stores
J Jill Closing stores Shane Co Filed Ch 11Foot Locker Closing 140 storesGap Closing 85 stores
Black Angus Closing stores Ritz Camera Closing 100 + StoresLane Bryant Closing 150 storesEddie Bauer Closing 27 storesp g
Sprint/Nextel Closing 133 storesEthan Allen Closing 12 storesPep Boys Closing 33 storesZales Jewelers Closing 105 stores
Eddie Bauer Closing 27 storesHome Depot Closing 15 storesPacific Sunwear Closing storesJC Penney Closing stores
Zales Jewelers Closing 105 stores Dillards Closing stores
bae Sources: Metrovation & Collliers International
Impacts of RecessionImpacts of Recession
Falling salesClosing storesgEmpty storefrontsCl i t d lClosing auto dealersStalled projects
Where is this all going?Where is this all going?
Compact Car Parking at Targetbae
COMMERCIAL REAL ESTATE - THE NEXT CRISIS?Garrick Brown, Colliers International
The Next Shoe to Drop
The New Foreclosure CrisisThe New Foreclosure Crisis
$3.5 Trillion in total outstanding CRE Debt (according to Federal Reserve)( g )
$2.6 Trillion held by banks
$900 Billion CMBS
Approximately $1.155 Trillion in CRE debtApproximately $1.155 Trillion in CRE debt coming due through 2012
$1 Trillion held by banks$ y
$155 Billion CMBS
Amount of CRE Debt Going Bad Through 2012?
We are already dealing with a number ofWe are already dealing with a number of banks on their distressed assets, as well as a number of CMBS special servicers.
Their individual estimates vary, but the consensus number we are hearing from lenders of all types is that they expect roughly 30% of their CRE loans to go bad over the next 36 months…
Some lenders are bracing for as much as a 40% failure rate.
Ab t h lf f th ti ill bAbout half of these properties will be retail…
30% Failure Rate Equals…
The New Foreclosure CrisisThe New Foreclosure Crisis
If 30% Failure Rate Holds…
Estimated $300 Billion in Bank Losses and $50 Billion CMBS
Expected Losses of $350 Billion Thru 2012Adjusted for inflation, the approximately $160B lost in the S&L crisis, would come out to roughly $250B in today’s dollars.
This is bigger than the Savings and Loan Crisis
And it should have hit us… already…
Pretend & Extend
“Pretend & Extend?”
Lenders are opting not to foreclose, but most are also not doing loan modifications or workouts either…
For many smaller regional and local banks, a tt f i lmatter of survival…
Attempt to hold back flood gates to lessen losses and to slowly release troubled assets tolosses and to slowly release troubled assets to the market to minimize pricing pressures…
Many are holding out hope for improving marketMany are holding out hope for improving market fundamentals to lessen problem…
Some hold out hope of government interventionSome hold out hope of government intervention or aid…
Inconsistencies in Pretend & Extend
Th h “P t d & E t d” i th idiThough “Pretend & Extend” is the overriding trend, we continue to see inconsistencies in how banks are dealing with troubled loans
Individual bank balance sheets play a role in these decisions…
Bank staffs are being overwhelmed by sheer numbers of problem properties…
Decisions often being made by loan officers whose expertise is in writing loans, not dealing with distressed properties…with distressed properties…
Decisions often are being made from afar by individuals with little local market knowledge…g
The Problem With “Pretend & Extend”…
Likely Kicking the Can…Likely Kicking the Can…
There are no more bailouts coming…
Retail fundamentals will continue to be weak for at least another three years…
There are already buyers on the sidelines… waiting…
There are now two types of REITS—bankrupt or raising capital through IPOs.
$20 Billi h b i d th h IPO$20 Billion has been raised through IPOs in last five months… to both pay down debt/save balance sheets and … to build
h t f th fi l twarchests for the firesale to come…
The Problem With “Pretend & Extend”…
Clouding the BottomClouding the Bottom
Without “Pretend & Extend” we would be looking at shorter, but VERY sharp g , pmarket correction…
Pricing declines from peak of anywhere from 50% to 80% for some property types, with pricing schism between quality, stabilized product with solid occupancy vs. weaker properties…
The Problem With “Pretend & Extend”…
Prolonging the Inevitable…Prolonging the Inevitable…
The asset bubble has burst already.
Deals are not happening yet, because time is on the side of opportunistic buyers… and they know it.
There are buyers waiting on the sidelines NOW… but they want 10% to 12% caps… not the 8% and 9% caps we see being offered…
S l ti it lik l till t l t i thSales activity likely still at least six months off until flood of distressed assets results in pricing declines of at least another 10 to 15%15%...
Looking Ahead: Worst Case Scenario
When it comes to crisis, Fed is hoping to if t ll d d litimanage as if controlled demolition.
Assuming they can’t…
Economic recovery remains weakEconomic recovery remains weakCRE fundamentals worsenPretend & Extend only prolongs problem until lenders are overwhelmed by sheeruntil lenders are overwhelmed by sheer volume of distressed assetsToo many small and regional banks fail at once (1,500 institutions or more in thisonce (1,500 institutions or more in this scenario)…Credit markets seize up againDouble dip recession…p
NOT LIKELY…
Looking Ahead: Likely Case Scenario
CMBS Losses Mildly Diminished by Policy:Recent Extension of TALFRecent Extension of TALF Recent Tax Changes Continued Extension of TALFFurther Policy TweaksFurther Policy Tweaks
Small and Regional Banks Devastated1,000 banks fail,Pretend & Extend helps some banks to survive, but ultimately prolongs crisis…
CRE values drop another 20% in marketplace with murky bottom. Process takes five to seven years to work through system, with CRE values depressed
Recovery significantly weighed down, but not d il d b i iderailed by crisis.
It’s Happening Already
8,204 US Banks Remaining
Roughly 100 Have Collapsed in 2009
Over 415 on FDIC “Watch List”Over 415 on FDIC Watch List
FDIC looking into borrow billions from “Healthy Banks” to deal with pending crisisy p g
The victims will not be the “Big 3” but banks small enough to let fail…
Excellent Website to Research Individual Bank Health:http://banktracker.investigativereportingworkshop.org/banks/
WHAT DO WE DO NOW?Panel Discussion: Leslie Parks, Doug Wiele, & Bill Lambert
THE GOOD NEWSExpanding Retailers and Restaurants
Retailers - ExpandingRetailers Expanding
Anna’s Linens 7-10,000 sfApple Computer 3-5 000 & 15-20 000 sf
DSW 15-25,000 sfFamous Footwear 5-8 000 sfApple Computer 3 5,000 & 15 20,000 sf
Avis Car Rental NABatteries Plus NABed Bath & Beyond 20-30 000 sf
Famous Footwear 5 8,000 sf (malls)
Fantastic Sams 1,200-1,500 sfFoods Co 65-80,000 sfBed, Bath & Beyond 20-30,000 sf
Brooks Bros 8-10,000 sfCPK 5,000 sfCarter’s/OshKosh 2 4 000 sf
,Forever 21 2,500-90,000 sfGamer Doc 800-1,500 sfGame Stop 1,200-2,000 sfCarter s/OshKosh 2-4,000 sf
Children’s Place 4,000 sfStaples Copy 4,000 sfCiti Trends 5 000 sf
Game Stop 1,200 2,000 sfGolfsmith 20,000 sfH&M 10 – 40,000 sfHenry Markets 20-30 000 sfCiti Trends 5,000 sf
Cost Cutters 900-1,200 sfCostco 100,000 sf+Dollar Tree 10 12 000 sf
Henry Markets 20 30,000 sfHome Goods 25-37,000 sfJoAnn Fabrics 35,000 sfJos A Banks 4 500 sfDollar Tree 10-12,000 sf Jos A Banks 4,500 sfKohl’s 86-92,000 sf
Sources: Metrovation & Collliers International
Retailers – Expanding (cont….)Retailers Expanding (cont….)
Massage Envy 2,500-4,500 sf Sprouts Organic Grocery 20-30,000 sfSt l 15 000 fOld Navy 15-19,000 sf
Payless Shoes 2700-3300 sfPet Food Express 6,500 sf
Staples 15,000 sfStyles for Less 2,500-3,000 sfSupercuts 900-1,200 sfS C fPetco 12-15,000 sf
Party City 12,000 sfRack Room Shoes 6,000 sf malls
Sylvan Learning Centers 1,600-2,500 sfTarget 125-175,000 sfThe Avenue 4,500 sf
Rainbow 5,000 sfSleep Train 5,000 sfSmart and Final Extra 25-30,000 sf
TJ Maxx/Shoe Store 10,000 sfVilla Sport 70-80,000 sfWalgreens 14,500 sf
Sports Chalet 40,000 sf Zara (malls) up to 14,000 sf
Sources: Metrovation & Collliers International
Restaurants - ExpandingRestaurants Expanding
Bad Ass Coffee up to 1,800 sfBeach Pit BBQ 2 – 2,500 sf
Golden Corral 11,000 sfHabit Burger 1,500 – 2,200
Big Swirl Yogurt up to 1,500 sfBoston Market up to 3,500 sfCheba Hut 2,000 sf
Java City up to 3,000 sfJimmy John’s up to 1,500 sfJohnny Rockets up to 3,500 sf
Churro Station (malls) 800 sfCici’s Pizza up to 4,200 sfEinstein’s/Noah’s up to 2,500 sf
Julie’s Thin Crust up to 2,500 sfL&L Hawaiian BBQ up to 2,500 sfMaos Vegetarian 1,000 sf
El Pollo Loco up to 3,500 sfExtreme Pita 1 – 2,000 sfExtreme Pizza up to 2,500 sf
Marco’s Pizza up to 1,400 sfMary’s Pizza Shack up to 4,000 sfMcDonald’s 4,000 sf Pad
Five Guys Burgers & Fries 1 – 2,000 sfFraiche Yogurt 800-1,500 sfFuddruckers up to 5,500 sf
Mr. Pickles 1 – 2,000 sfOld Chicago Pizza & Pasta up to 4,500 sfPacific Yogurt Partners up to 1,200 sf
Fuzio Universal Bistro 3 – 3,500 sf
Sources: Metrovation & Collliers International
Restaurants – Expanding (cont…)Restaurants Expanding (cont…)
Panera Bread up to 4,500 sfPho Hoa 2 – 4,000 sf
SF Sourdough Eatery N/AShakey’s Pizza up to 4,000 sf
Phoa Noodle 1200-1800 sfPinkberry up to 2,000 sfPizza Patron up to 1,200 sf
Smashburger 1,800 sfSpicy Pickle up to 1,800 sfSonoma Chicken Coop 5-8,000 sf Pad
Pizzeria Venti 2,500 sfPopeye’s Chicken 2,500 sf PadRed Mango up to 1,200 sf
Spoon Me up to 1,300 sfSubmarina up to 2,500 sfSubway 1 – 2,000 sf
Round Table Pizza 2 – 3,000 sfRubio’s Mexican Grill 2 – 2,600 sfSandella’s Flatbread up to 1,500 sf
ToGo’s up to 2,400 sfU-Food Grill (airports) 800 to 2,000 sfWahoo’s Fish Tacosup to 2,500 sf
Seller’s Markets up to 3,300 sf Wing Stop 1,500 sf
Sources: Metrovation & Collliers International