On the leasing front, we are certainly seeing the realization of many pundits predictions that when larger companies layoff many talented workers a common strategy is for those individuals to seek out independent careers by starting their own businesses. Franchise trade groups are reporting record numbers of inquires by potential franchisees. ICSC, the premier retail, real estate trade organization is predicting franchises will be the most significant driving force in filling the large retail vacancies around the country.
At Baceline, we are educating our leasing teams on the opportunities to work with new franchisees. As you might expect one of the biggest challenges these talented entrepreneurs face in today's environment is financing the significant upfront costs associated with opening a location. Hefty franchise fees, FF&E, advertising, working capital all add up to an enormous hurdle when there is very little financing available. We tell our leasing teams that for a new franchisee with strong management skills, a good plan and support of a strong franchisor we are willing to take a chance on their success by being more creative with our lease structuring.
Even non-franchised entrepreneurial concepts have been popping up throughout our portfolio. Specifically we have seen interests from individuals starting a glass blowing retail shop with supportive classroom training, lingerie shops for plus-sized women, homemade cakes and of course, only in Texas, a 35,000 square foot combination movie theatre and microbrewery. Interestingly it is not only our retail portfolio that is seeing some of this entrepreneurial spirit but it in our industrial portfolio the most active prospects are start-ups looking for small suite spaces on short term leases.
Another benefit of these local businesses is, in our experience, it is rare for them to request a lease restructuring unless they have come upon very hard times. Whereas the national tenants as a matter of course request lease restructurings regardless of store performance.
For this Fourth of July here's to the American spirit may it grow and prosper.
Wednesday, July 1, 2009
Tuesday, June 9, 2009
ICSC Las Vegas
Baceline sent two team members to this year's annual International Council of Shopping Centers (ICSC) Spring RECon gathering in Las Vegas, NV. This normally over-crowded retail conventional was significantly different than previous years - attendance was down approximately 50 percent. This is evidence of the rough waters that the retail industry is currently navigating. However, there was still plenty to see and participate in. Some of the highlights and trends reported by Baceline representatives include:
• 80% of the retailers present were either fast food/quick serve restaurants or discounters of some sort
• Retailers are generally at a standstill as far as store expansions go, with some notable exceptions: quick serve restaurants, gaming stores and value teen fashion.
• Luxury retailers are taking the biggest hits to profits because of higher ticket prices and less consumer spending. Some will be forced to reduce prices.
• Retail landlords will need to work with struggling tenants and decide whether to work with and keep those they think will make it, or cut the cord and let those go they think won't make it.
• Continued layoffs will continue to impact the sector.
Baceline is well positioned on both the landlord front and the acquisition front. Baceline's assets are well positioned to attract and retain the active retailers mentioned above. Our properties are mostly in-fill locations with attractive demographics. These desirable locations result in healthier bottom lines for both the tenant and the owner.
On the acquisition front, Baceline is seeking acquisition prospects through numerous avenues. As motivated sellers continue to see declining property performance, Baceline is poised to benefit from discounted prices and re-position opportunities.
• 80% of the retailers present were either fast food/quick serve restaurants or discounters of some sort
• Retailers are generally at a standstill as far as store expansions go, with some notable exceptions: quick serve restaurants, gaming stores and value teen fashion.
• Luxury retailers are taking the biggest hits to profits because of higher ticket prices and less consumer spending. Some will be forced to reduce prices.
• Retail landlords will need to work with struggling tenants and decide whether to work with and keep those they think will make it, or cut the cord and let those go they think won't make it.
• Continued layoffs will continue to impact the sector.
Baceline is well positioned on both the landlord front and the acquisition front. Baceline's assets are well positioned to attract and retain the active retailers mentioned above. Our properties are mostly in-fill locations with attractive demographics. These desirable locations result in healthier bottom lines for both the tenant and the owner.
On the acquisition front, Baceline is seeking acquisition prospects through numerous avenues. As motivated sellers continue to see declining property performance, Baceline is poised to benefit from discounted prices and re-position opportunities.
Tuesday, May 12, 2009
We're in this together
More so than any other product type, retail requires a partnership between the landlord and tenants for mutual success. As compared to office space, a retail tenant’s location and fellow tenants are directly linked to the company’s profitability and therefore a justifiable lease rate. If I am an international bond trader does it really matter a great deal who the tenant is next to me or if I am on the second floor or the twentieth? Not so with retailers – location, location, location and neighbors, neighbors, neighbors. Maybe that is why the experts classify the type of retail centers Baceline owns as Community Centers or Neighborhood Centers.
And with the challenging economy for most retailers AND landlords now is the time to make the most of the “partnership.” Neither party has any dollars available for aggressive marketing yet there is opportunity for both to capture market share from nearby, disgruntled customers. The same local tenant down the street whose customers could also boost revenues for our tenants if they were a closer neighbor, may be a friend, supplier, competitor or complementary business to one of our tenants. Our existing tenants are one of the best sources for not only identifying new tenants but closing the deal.
Let’s do some low cost, creative marketing campaigns together, providing more time and resources than thousands of dollars in print advertising. As a landlord we can provide vacant space and signage for a community event, the tenants can provide discounted merchandise for giveaways and personnel to work the event. The community event sponsor can provide the much needed foot traffic and public relations buzz to the retail center. Let’s be a neighbor in the community.
Maybe like my nephew, who manages a YMCA in Eugene, Oregon, we can announce that all unemployed get free memberships. That little well intentioned, community supportive idea ended up being shown on the Today Show for the whole nation to see, much less the unemployed in Eugene…who of course showed up in droves. And of course the Y was overwhelmed. Seems like it is always the smallest, well intentioned actions that get all the attention and the mega campaigns bomb. We could only be so lucky.
Misery may love company but certainly retailers and landlords certainly love company. We’ll all feel better in the long run and hopefully make it there!
And with the challenging economy for most retailers AND landlords now is the time to make the most of the “partnership.” Neither party has any dollars available for aggressive marketing yet there is opportunity for both to capture market share from nearby, disgruntled customers. The same local tenant down the street whose customers could also boost revenues for our tenants if they were a closer neighbor, may be a friend, supplier, competitor or complementary business to one of our tenants. Our existing tenants are one of the best sources for not only identifying new tenants but closing the deal.
Let’s do some low cost, creative marketing campaigns together, providing more time and resources than thousands of dollars in print advertising. As a landlord we can provide vacant space and signage for a community event, the tenants can provide discounted merchandise for giveaways and personnel to work the event. The community event sponsor can provide the much needed foot traffic and public relations buzz to the retail center. Let’s be a neighbor in the community.
Maybe like my nephew, who manages a YMCA in Eugene, Oregon, we can announce that all unemployed get free memberships. That little well intentioned, community supportive idea ended up being shown on the Today Show for the whole nation to see, much less the unemployed in Eugene…who of course showed up in droves. And of course the Y was overwhelmed. Seems like it is always the smallest, well intentioned actions that get all the attention and the mega campaigns bomb. We could only be so lucky.
Misery may love company but certainly retailers and landlords certainly love company. We’ll all feel better in the long run and hopefully make it there!
Tuesday, April 21, 2009
Only Time Will Tell....
Last week, General Growth Properties ("GGP"), the second largest U.S. mall
owner, filed for bankruptcy. Laden with too much corporate and property
debt, they could not longer fend off their creditors. Interestingly, it
was their smaller, in terms of dollars, creditors at the property level
that applied the most pressure. Now the bankruptcy court will have to
sort out the mess and most likely GGP will have to sell under-performing
properties at distressed prices. This will be a more straight forward
task than what happened at the end of 2008 when another large real
estate sponsor went bankrupt.
When DBSI file bankruptcy at the end of last year, they left many
investors twisting in the wind, particularly those who owned assets that
were underperforming. Because of the Tenant in Common structure of the
DBSI ownership entities, and the master leases that were dissolved, the
eventual outcome for the investors is much more muddled than GGP
shareholders (who will retain their passive investor roles). DBSI Tenant
in Common owners, on the other hand, now have to give up their passive
roles and operate real estate assets, most without the benefit of
previous commercial real estate experience.
We have been receiving many calls from frustrated Tenant in Common owners (as well as their lenders)
to lend a hand to the process and in some cases we will see a way to
provide a liquidity event that can resolve a difficult situation. Only
time will tell how many of these properties can be saved.
owner, filed for bankruptcy. Laden with too much corporate and property
debt, they could not longer fend off their creditors. Interestingly, it
was their smaller, in terms of dollars, creditors at the property level
that applied the most pressure. Now the bankruptcy court will have to
sort out the mess and most likely GGP will have to sell under-performing
properties at distressed prices. This will be a more straight forward
task than what happened at the end of 2008 when another large real
estate sponsor went bankrupt.
When DBSI file bankruptcy at the end of last year, they left many
investors twisting in the wind, particularly those who owned assets that
were underperforming. Because of the Tenant in Common structure of the
DBSI ownership entities, and the master leases that were dissolved, the
eventual outcome for the investors is much more muddled than GGP
shareholders (who will retain their passive investor roles). DBSI Tenant
in Common owners, on the other hand, now have to give up their passive
roles and operate real estate assets, most without the benefit of
previous commercial real estate experience.
We have been receiving many calls from frustrated Tenant in Common owners (as well as their lenders)
to lend a hand to the process and in some cases we will see a way to
provide a liquidity event that can resolve a difficult situation. Only
time will tell how many of these properties can be saved.
Tuesday, April 14, 2009
No Big Surprise.... but there is good out there
As an owner of commercial retail properties, we have seen an interesting
trend. It appears that some of the larger retailers that have corporate
debt problems are capturing all of the news. They are the tenants that
are going out of business. The smaller retailers seem to be doing
better then their bigger box competitors. They are not leaving their
locations in droves as the press reports would indicate. They are
holding their own and running their business in a leaner environment.
As the landlord, this is a welcome sign. It means that our tenants are
still paying rent (on time!) and that we can operate our properties in a
normal fashion. The negativity that the press portrays seems to be
sensationalistic. I guess that's not a big surprise.
trend. It appears that some of the larger retailers that have corporate
debt problems are capturing all of the news. They are the tenants that
are going out of business. The smaller retailers seem to be doing
better then their bigger box competitors. They are not leaving their
locations in droves as the press reports would indicate. They are
holding their own and running their business in a leaner environment.
As the landlord, this is a welcome sign. It means that our tenants are
still paying rent (on time!) and that we can operate our properties in a
normal fashion. The negativity that the press portrays seems to be
sensationalistic. I guess that's not a big surprise.
Thursday, October 9, 2008
Distressed Real Estate Opportunities
With the financial and credit markets imploding in the last few weeks, Baceline sees opportunity. We have implemented a strategy to take advantage of our investment footprint, infrastucture and track record in America's Heartland to seek out and purchase distressed real estate. Although we have not seen distress so far in our sector, most certainly distress will pop up in isolated cases and Baceline is ready to seize on this opportunity. Large investment funds have been formed to seek out distress in the major markets, but few investment groups will be looking in the smaller markets for distress. Since Baceline is already buying healthy properties in these areas, it's a natural fit to include distress into its investment portfolio. Real estate investors who are looking for the risk and potential return of investing in distressed assets will now have an outlet in working with Baceline. We will be tracking this segment closely over the next few weeks and months and hope to capitalize on opportunity when it arises.
Wednesday, September 10, 2008
Sustainability
Baceline has announced and now implemented its sustainability program, where it will be the first company in the country to bring an organized green effort to Main Street real estate ownership. In addition to its implementation company-wide, through its sustainability initiatives program, Baceline will education its vendors and tenants on sustainable practices and work towards making its portfolio of properties green. This is an exciting project for Baceline and is one that will not only help the world in which we live but increase operating efficiencies and values of the assets that it owns.
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