By Los Angeles Times, Monday, March 23, 2015

Fresh & Easy closing 30 stores in Southern California

Fresh & Easy said it will sell 30 stores in Southern California and will redesign the rest, a spokesman for the grocery chain said.

The El Segundo-based company said it was selling locations “that do not meet the criteria of Fresh & Easy’s model of modern convenience,” spokesman Brendan Wonnacott said in a statement.

A total of about 50 stores in California, Nevada and Arizona will be closed. That number is about 30% of the grocery chain’s 167 stores currently operating, Wonnacott said.
Fresh & Easy closing 30 stores in Southern California
Fresh & Easy said it will sell 30 stores in Southern California and redesign the rest, a spokesman for the grocery chain said.

The move will allow the company to finance new development and growth, including a new 3,000- to 5,000-square-foot store, Wonnacott said. Fresh & Easy is working with Apple store designer ADMI on the new fresh food convenience store concept, he said.

Marcela Medina, 29, said she’ll miss her neighborhood Fresh & Easy on East Adams Boulevard in Los Angeles because it will be harder to find organic items in the area. On Monday she was snapping up organic products that were marked down 50% because of the store’s closing.

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It’s an all too common scenario in the retail shopping center business. You’ve got a space in your shopping center that just doesn’t work. Either It’s too big. Or it’s too small. Or it’s oddly configured (to serve some once booming use that’s and now outdated use).

Plenty of shopping center landlords face this challenge. So if you’re one, take heart, you’re not alone.

But what’s the solution? How can you deal with these seemingly non-functional retail spaces?

Here are four options that can help you solve this nagging issue – and put a paying tenant into a long lingering vacancy.

Adapt and Evolve

Tiny or oddly shaped spaces are often a perfect match for specialty or restaurant tenants.

E-Cig stores, and even traditional smokes shop, are great fit for smaller size units. And they’re generally happy with the lower monthly rent that accompanies a smaller sized space.

Strictly take-out food users, like Pizza tenants, are also perfect for smaller units.

When it comes to odd shape spaces, restaurants are an ideal alternative to traditional retail tenants. Restaurants don’t depend on the same interior fixtures as typical retail users – aisle shelving, display cases, etc…. Plus the unusual configuration may lend itself to unique interior design elements, which can add to a restaurant’s atmosphere and ambiance.

Divided and Conquer

Got a former convenience store, video rental or similar oversized space (of which there are now precious few tenants in the marketing for)?

Cut it up.

There are a couple schools of thought in this situation. You can leave a large space vanilla shell and market it with “Potential For Division.” There’s certainly some logic to this approach. It gives

prospective tenants the option to configure the space to their exact specifications. On the other hand, it’s often hard for many tenants to imagine the final product. Not the mention the prospect of major construction. Even if the build-out is landlord subsidized, it’s a situation that makes some tenants very nervous.

Employ HIGHLY Motivated Leasing Agent

When it comes to finding a tenant for a hard-to-fill space, there’s no substitute for a tenacious and well-incentivized leasing agent.

Driven, highly motivated agents who are in the business of making deals aren’t afraid to pick up the phone and make endless calls, do the legwork and generally go the “extra mile” necessary to fill challenging units.

And it’s usually in the landlord’s best interest to reward those agents with generous commissions. As is usually the case in business, it’s a two-way street.

Get Creative (With Lease Incentives)

There’s one caveat of real estate that will remain true for time in memorial.

“Everything sells (or leases) at the right price.”

But what if you’re at what you already consider a rock bottom price? Or at a price point you’re just not willing to dip below?

Enter Lease Incentives.

In lieu of lowering the lease rate any further, you’ve got some option…

You can offer a prospective tenant a Tenant Allowance (TI) to cover their build-out expenses.

Or you can offer a certain number of months “free rent” during the first year of the lease.

This can make taking a somewhat less than ideal space more palatable to a prospective tenant, while securing that tenant with longer term lease that pays at the full rate after the first year.


By SCTlive, Friday, February 20, 2015

Cell towers bring landlords higher profits

As well-located retail real estate grows scarcer, landlords are seeking growth solutions above — specifically, on their own rooftops. From dining decks to public gathering spaces, and from cell towers to solar panels, property owners are turning to their once-barren roofs to add new dimensions and open new revenue streams. “Shopping center roofs are no longer just places where you plunk down 300 HVAC units,” said Michael Hirschfeld, co-leader of JLL’s national retail tenant services group. “Roofs have unlimited and untapped potential.”

By far the most prevalent use for shopping center roofs is industrial: to wit, the telecom cell tower. “That market continues to expand with the rapid growth in cellphone use, and there’s a drastic need for new and existing sites,” said Hugh Odom, president of Nashville, Tenn.–based Vertical Consultants. “That’s where owners have a huge opening to create more value.”

When Verizon, AT&T or some other carrier contacts a shopping center for possible tower placement, the worst thing any owner can do is to consider such an offer as “found money,” Odom says. “Cell-tower leases shouldn’t be treated like basic real estate transactions based on sales per square foot,” he said. “Every site has a different value, and if you don’t understand that and structure these like utility leases, you’re going to get underpriced.” An owner may actually lose money in the long run if a tower lease hampers its ability to expand or tear down a structure, according to Odom. Landlords typically use real estate attorneys, who are inexperienced with such deals, says Odom, a former telecom lawyer himself. “When I was on the other side of this, we loved it when big [mall-retained] law firms started to negotiate deals.” Negotiations must account for both the value to the carrier and the downside if the carrier is unable to build, he says. Conversely, owners who fear they may be stuck in a bad lease may not realize that there is room for renegotiation, Odom says. He obtained a 343 percent increase from a reworked lease for one shopping center owner.

Unlike other roof leases and uses, mall-top cell-tower construction is driven solely by the pressing needs of the telecom industry. In fact, wireless networks are increasing capacity from 60 percent to 70 percent annually, says Ken Schmidt, president of Fort Myers, Fla.–based Steel in the Air, a cell-tower lease specialist. Because traditional towers provide between one and five miles of service in metro areas and roughly 25 miles in open areas, more opportunities abound, he says. To boost coverage, cell-service providers are densifying signals, with smaller installations; up to 40,000 of those are expected across the U.S. this year alone, according to Schmidt.

Not all cell towers get green-lighted in the U.S. “Zoning regulations are as tough as we’ve seen,” Schmidt said. Some areas have camouflage or “stealth” requirements — such as California and parts of the Pacific Northwest — that force carriers to disguise their towers as trees or flagpoles, he notes. “Cities are trying to keep them out of residential areas,” Schmidt said. “And that means more opportunities for shopping centers.”

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By CNBC, Friday, 20 February 2015

These consumers can make or break sales growth

Beauty brands, take notice.

In the face of stagnant sales for the overall category, there’s one shopper whose lust for fragrance and mascara is driving much of the industry’s growth.

According to a new study by Nielsen, sales growth from Hispanic consumers last year significantly outpaced that of non-Hispanic shoppers across every beauty segment.

In cosmetics, for example, dollar sales fell 1.2 percent year-over-year among non-Hispanics shoppers, but rose 7.4 percent among Hispanics; for hair care accessories, sales dropped 3.6 percent among non-Hispanic shoppers, but gained 3 percent among Hispanic consumers.

“In any category that we choose, that’s the relationship that we see,” said James Russo, senior vice president of global consumer insights at Nielsen.

Read MoreMillennials are reshaping luxury—and the stakes are high

The growing Hispanic population in the United States is one key driver behind the trend, Russo said. According to the U.S. Census Bureau, approximately 54 million Hispanics lived in the U.S. as of July 2013, accounting for 17 percent of the population. That’s up from 13 percent in 2000, according to Pew Research.

With these numbers comes a more voracious spending power. A separate Nielsen report found that Hispanics’ spending power in 2013 was $1.2 trillion; by 2018, that figure is expected to rise to $1.6 trillion.

But it isn’t just a robust presence in the U.S. that’s behind the revenues. The culture’s fondness for beauty products, and the fact that its U.S. residents tend to be younger than the general population, are also contributing factors.

Read MoreJC Penney’s next big act a bit of a headscratcher

“There’s a lot of different dynamics that support that growth,” Russo said. He added that U.S.-born Hispanics, who tend to be well-educated and more assimilated into the country’s culture, tend to outspend foreign-born Hispanics. The average U.S.-born Hispanic household spends an average $275 on beauty each year, compared with $267 for foreign-born Hispanics. That number drops to $213 annually for non-Hispanics.

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By SCTLive, Thursday, March 05, 2015

For tough-to-fill spaces, the solutions are many, panel says

Reconfiguring a vacant store is often the key to leasing it, panelists said at an SCTLive event in Miami this week titled “Solutions for Hard-to-Fill Spaces.” Retailer prototypes are shrinking, making large spaces unsuitable for many of the types of chains that are now expanding, the participants were saying.

The old supermarket model that required 50,000 square feet does not work anymore, as most grocers are learning to operate in much smaller spaces. “Does the physical plan work? If not, change it,” said Paul Rutledge, CRX, CSM, CLS, first vice president for the Tampa Bay market at CBRE. “Bulldozers are not bad.” Rutledge recommended scrapping excess vacant in-line space and creating new outparcels. Food tenants and other expanding chains, such as Dollar Tree, are increasingly requesting outparcels, he said.

Splitting a large space into front and back units can help, with the front space leased to a retailer and the rear leased to an office or some other nonretail use, suggested Linda Dougherty, CRX, CSM, CMD, CLS, executive vice president of real estate development at the Orlando, Fla.–based Dougherty Group. “We gave the rear of a large space to a maid service with an entrance onto the back parking lot,” she said. And this, she added, left a smaller, shallower space with more frontage that was easier to lease to a retailer.

When money is tight, matching a space’s quirks to a specific tenant’s business can help fill the space. Triangle-shaped stores, for example, are less conducive to traditional store fixtures, so they are more suitable for restaurants and destination uses such as beauty schools, said John Breder, CSM, CLS, CRX, owner and president of the Miami-based Breder Cos.

Leasing agents should also seek out international and ethnic retailers to occupy tough-to-fill spaces, Rutledge suggested. “Internationals don’t see the world as we see it,” he said. “In Miami we’ve put retailers in places you’d need to have a map to get to.” Such tenants are not only willing to take chances on unconventional spaces, they are also strong operators that help differentiate a center, he said. Tenants that serve booming ethnic groups are good target tenants too, Dougherty said, pointing out that Orlando retailers are scrambling to serve a growing community of Brazilians with second homes in the city. Robert Breslau, chief development officer at Stiles, suggested maintaining ties with local residential brokers to stay on top of changing demographics in surrounding neighborhoods.

The panel pegged a few tenant categories as sure signs of a dying retail property: unemployment offices, bingo parlors and DMV offices. Churches, too, were unpopular with the panel. “Try evicting a church if it stops paying rent,” Rutledge quipped.

Perhaps the most important solution for a hard-to-fill space is a tenacious and well-incentivized leasing agent, panelists said. Greg Sembler, chairman of The Sembler Co., said he often puts new agents on hard-to-lease cases because they are willing to make more calls and put in more legwork than more-established agents. Panelists also recommended paying a broker more per square foot for troubled space and bringing in college students to help canvass.

Additionally, prevention is better than a cure, Breslau noted. “You need to keep these anchors from going empty in the first place,” he said, by staying on top of anchor prototypes and identifying tenants that might be candidates for downsizing before they actually do downsize.

View Original Article…


When it comes to retail shopping center leasing, Triple Net Leases (commonly abbreviated as NNN) are generally the law of the land.

Retail leases, however, function much differently than residential leases. And this often creates lots of confusion for new or inexperienced retail tenants.

Of course, if you’re an experienced commercial real estate broker, long time shopping center investor or landlord, or a savvy retail tenant, NNN leases are nothing new. But for those who are new to the game, it can be difficult to grasp this unique form of leasehold.

Why Are NNN Leases The Standard in Retail Shopping Center Leases?

NNN leases are such so attractive to retail shopping center investors because tenants pay the vast majority of a landlord’s property expenses.

How Do NNN Leases Work?

A NNN lease is a common form of commercial property lease, in which the lessee must pay a pro rata share of the property’s NNN fees in addition to base rent.

These additional fees are actually the three Nets referred to in a NNN lease. And the three Nets break down as follows:

The First N – Taxes

Taxes covered by this “N” and include real estate taxes, rental taxes and business taxes.

The Second N – Maintenance and Utilities

The maintenance portion of the fee covers maintenance expenses (often expressed as Common Area Expenses, which covers the cost to maintain and clean the property, including sweeping, trash removal, etc…), as well as building repair (a portion this fee may be impounded to cover the cost of future large scale repairs, such as parking lot repaving, roof repair or landscape replacement). It also covers shared utilities (usually power and water, but many include others). And finally, property management fees (the fee the management company charges to administer the property).

The Third N – Insurance

This fee covers fire insurance and other potential extended coverage costs.

What’s the Pro Rata Share?

A tenants NNN fee is charged based on their pro rata share of the shopping center.

This means a tenant’s NNN fee is charged according to the percentage of space the tenant occupies in a shopping center. The percentage is determined based on the ratio of tenant’s space relative to the overall building size.

Therefore, if a tenant’s unit occupies 20% of the overall shopping center, their pro rata share CAM charge is 20%.

What Are CAM Charges?

NNN fees are often referred to as a CAM charges. Technically CAM refers to Common Are Maintenance (which is really only a portion of the NNN fees, which also include taxes and insurance).

How Are CAM’s Charged?

CAM fees are “reconciled” (also known as Common Area Reconciliation), once or twice a year. In the reconciliation process, the property manager reviews the monthly charges relative to the tax bill, insurance costs and maintenance charges. This review is to determine if there was a cost overrun or surplus. If there’s an overrun, tenants are issued a supplemental bill. If there’s a surplus, tenants are issued a credit.


By Bisnow, Wednesday, March 4, 2015

Caruso: Now Is the Time to Build

A much improved economy and low vacancies are driving LA’s current building boom. And according to the city’s top developers, who’ll speak at Bisnow’s Construction & Development and the Battle of Prop 13 event tomorrow, there’s no end in sight.

Caruso Affiliated EVP Matt Middlebrook, a panelist at our event which starts 8 am at the Millennium Biltmore Hotel, told us yesterday that it’s an opportune time to move forward on projects in the company’s market sectors—retail, residential and hospitality—where he notes that focus on a high level of amenities and service is a growing trend. For example, the company plans to launch construction before year-end on The Miramar Beach Resort & Bungalows, its long-awaited project in Montecito. “The economic downturn made luxury hotel development challenging, but the market’s finally turned in our favor.”

View original article…

 


Another CBM Original…

Whether you’re interested in jumping into the shopping center real estate investments, or you already own retail property, now is a great time to buy.

The marketing is surging, but price have by no means topped out (and are nothing compared to the pre-Great Recession boom). And there’s still plenty of inventory and deals to be had… if you know what you’re doing and understand the market.

Moreover, interest rates are at mind-bogglingly historical lows. And these rates certainly aren’t going to last forever. This may be your last ever chance to take advantage of such unprecedentedly cheap financing.

But the key to investing in shopping centers, as with any investments, is to act with the confidence. And that only comes with from knowledgeable, and well informed about the product you’re investing in.

Here are five crucial elements to keep in mind in your quest for productive shopping center investment properties.

Understand the Risks in Shopping Center Investments (And Don’t Over Extend Yourself)

As with any investment, real estate carries risk. In fact, risk is the name of the game with any form of investment – stocks, startup companies, product development. You name the investment, and guaranteed, there’s risk involved

You can put your money in the bank, and watch it grow at a pitiful .02% rate…but you can be assured its SAFE. If you invest those funds in real estate, the opportunities for rewards are significantly higher. But you also have to willing, and financially able, to part with those funds and possibly never say a dime of return.

There’s always a chance you could lose some, a great deal, or even all of the money you funneled into your investment. So you should only risk money you can afford to lose.

Understand the Shopping Center Market

Regardless of what you’re investing in, from real estate to stocks to new business ventures, you NEED to understand the market.

Even within the real estate sector, shopping centers are their own unique animal.

Property condition, location, area demographics, current tenant mix and allowable use type, among others, are all factors you must consider in selecting the shopping center in which you intend to invest.

If fail to consider any of these elements, or how they interact with one another, and you could wind up with a property that’s a real DUD (and squander your capital investment).

Choose Your Shopping Center Investments Wisely

Do your research. Analyze trends. Consider the retail and real estate markets in the area where the property the subject property is located. Be sure you form a COMPLETE picture of the investment you intend to funnel tons of cash into.

Do your work early, so you don’t end up lamenting your decision later.

Find The Shopping Center Best Deal (For You)

There are scores of brokers out there with product they’d absolutely love to sell you. And they’ll work hard to convince you the shopping center they’re selling is the hands down the best investment opportunity you’ll ever find.

Don’t be swayed, fooled or intimated by these brokers. They in business to do one thing: Sell properties (and the more than better). They may believe in the product they’re selling, and be convinced it’s a sound investment opportunity (and it may well be). But that doesn’t mean it’s the best investment for you.

If you (a) have a clear picture of your financial situation (and what you can risk losing), (b) you understand the shopping center market in the area where you plan to buy, (c) you understand the product, and (d) you’ve done your research – you know better than anyone what’s the best deal for you.

Basic Guidelines for Identifying Your Ideal Shopping Center Investment Properties

Sensible pricing – Always attempt to buy at or below market price, as buying above market properties only make sense under very special circumstances.

High occupancy rates – 80% or better occupied at the time of purchase.

Long term leases – Majority of tenant with five year (or more) lease terms, with ideally three (or more years left on those leases).

Strong area demographics combined with appropriate tenant mix – High area population and relatively high household income stats are key, but also the tenant mix must support the area population breakdown. For example, in a predominately Hispanic area, the tenant businesses should cater to the Hispanic market.

Loan-to-value – Target leverage is no more than 70% loan-to-value.

Here’s to Successful Shopping Center Investing

Follow these guidelines, you’ll be well on your way to building a productive and profitable shopping center portfolio.