Some Light At the End of The Tunnel

Retail and restaurant expansion plans are perking up for the first time in two years.

The National Restaurant Association is reporting that its Restaurant Performance Index (RPI) index rose to its highest level in 27 months in February and capital expenditures and expansion plans are also in the rise.  Given that we have lost more than 280,000 eating and drinking place jobs during the recession, and an untold number of restaurant locations, this is a welcome sign for the industry (read the full press release).

At the same time, Retail Lease Trac is reporting an increase in projected store openings for the first time in a year.  Their tracking of 2,000 leading retail companies indicates plans to open over 65,000 stores in the next 24 months.

All of this bodes well for net lease investment which is leading the charge as one of the few bright spots on the commercial real estate horizon.  Many restaurants and a large number of expanding retailers are single tenant entities and often look to investors as landlords and to assist with their expansion plans.  Net lease investments have long had the attraction of very limited property management duties and maintenance compared to other real estate investments.  In addition,with banks paying a paltry .25% on money market accounts, the opportunity to receive an 8% or better return on that same cash, and limit investment risk, is a compelling opportunity in current environment.

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Posted May 8th, 2010 by John Fox No Comments »

Tags: , , , ,   Posted in Commercial Real Estate, General Retail, Retail Real Estate

GGP: Smaller, Leaner…but a Survivor

In a very anti-climactic fashion, the nation’s second largest mall operator General Growth Properties, Inc (GGP) filed for Chapter 11 bankruptcy protection last Thursday. This filing had been expected for months and was a result of the company’s inability to refinance its enormous debt, or otherwise find a way to satisfy its long list of creditors.

This is certain to be a long and complicated bankruptcy as the list of creditors includes holders of commercial mortgage backed securites (CMBS) that are tied to GGP mortgages on its mall properties. The is the first bankruptcy in commercial real estate that includes a large CMBS element. Pay close attention as this may determine the fate of others that follow.

The central question is what kind of GGP can emerge from Chapter 11? I think they will be smaller and leaner but they are probably only going to be able to sell a small number of assets, perhaps +/- 15% of the portfolio or about 25 malls. These could be sold to the likes of Simon Property Group, Taubman, Westfield, etc. I can’t see a stock swap with Simon because of the debt load that would have to be absorbed. But I can see Simon and other leading mall operators stepping up to the table to buy a few select assets at reduced rates.

Hunter has an excellent overview of the bankruptcy for those looking at the investment side here.

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Posted April 20th, 2009 by John Fox 1 Comment »

Tags: , , ,   Posted in Commercial Real Estate, Mall REITs, Retail Real Estate