January 13, 2015

NY's First Store Closures of 2015

We're two weeks into 2015, and already some retail chains are shuttering. But before you panic, ICSC's Jesse Tron reminds us that this is all just part of the circle of retail life. (We've asked Elton John to write a song about that. He hasn't responded by press time...to any of our letters....ever.)

Since 2010, roughly 44% of store closings happen in Q1, Jesse tells us. After the holiday season, stores weed out the underperformers. (Everything we know about retail, we learned in The Hunger Games.) Before the economy sank, they would hold on a little longer, he says, but now there's no time to lose. And since Q1 isn't over yet, expect more closings. Meantime, here are some store closings affecting New York businesses in 2015.

Large Chains

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Macy's Herald Square from Wikipedia

Macy's is shuttering 14 stores this spring, including two New York locations in Dewitt, NY, and Schenectady, NY. The closings will affect 192 jobs in New York and 1,300 jobs total. Macy's plans to put more energy into online sales and expanding its same-day delivery service.

JC Penney is closing 39 of its 1,060 stores, including one in Kingston, NY. However, Fortune reports this might not be a bad sign, partly because JC Penney is located in some pretty bad malls. That probably won't make employees feel better, as about 2,250 jobs will be affected.

Last month Sears announced it'd be closing 235 Sears and Kmart stores. That's almost double the initial 130 estimate this fall.

Walmart is only losing one store: a bi-level discount store in Massapequa, NY. But what's important is why: They're trading out discount stores in favor of supercenters that can accommodate a wider selection of food, including fresh and organic options, along with their other merchandise.

Teen Retail

Abercrombie & Fitch Hong Kong by Iflwlou from Wikimedia Commons

Teen retail has really taken a hit, not just because of the economy but also because consumer behavior is changing. (As always, teen retail insists adult retail just doesn't understand.) Millennials are buying electronics instead of clothes, and brick-and-mortar businesses can't compete with the convenience of online shopping. Each of the Big A's are affected—Abercrombie & Fitch, Aeropostale and American Eagle Outfitters.

Abercrombie & Fitch, founded in NYC, will lose 60 stores by February. Aeropostale, which is HQ'd in NYC, already shut down 75 stores over the holidays. Expect 50 to 75 more to follow. Meanwhile, American Eagle is expected to lose 150 stores over three years. And most famously, Wet Seal reportedly blindsided nearly 3,700 employees by closing down 338 stores after the holiday season. (No word yet on whether any New York stores are among the affected.)

Trendy New Business

Garden Scent Candle from C. Wonder website

Alas, even the boldly colored and the preppy are not immune. C. Wonder, a clothing and housewares chain founded in SoHo by Tory Burch's ex-husband Christopher Burch, is closing all 11 US stores, citing a competitive retail market.

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Three Tips for
Negotiating JV Equity

We stopped by Ackman-Ziff, which last year arranged a dozen JV equity partnerships representing nearly $500M of equity raised (on top of $6B by year-end of pref equity/mezz/debt). Boston office managing director Adam Steinberg offered three tips on negotiating JV equity.
 
1) Be comprehensive right off the bat. To maximize bargaining power, push the equity source to include all the significant terms in the LOI.  Too often sponsors push critical details to the contract phase (post-LOI) only to discover they don't like something and can't easily turn back having cut loose other potential backers.
 
2) Keep your options open. Maintain back-up choices for alternate partners. Gain bargaining power by ensuring your chosen investor knows it's not the only interested party.
 
3) Educate yourself. Know the market and push for aggressive (but not inconceivable) terms.
 

Adam will be attending the NMHC Conference in Palm Springs Jan. 20-Jan. 22. For more JV Equity advice from our education partner, Ackman Ziff, click here.

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Bed Bath & Beyond Looks Beyond Manhattan

Home goods retailer Bed Bath & Beyond has signed a lease for a 100k SF location in Sunset Park, Brooklyn, the Wall Street Journal reports. (Need to buy it a housewarming gift? Try Bed Bath & Beyond.) The new digs, in a massive eight-story building called Liberty View Industrial Plaza, will be the first retail space in the full-block structure. The store will be complemented by outlets of three affiliated brands: buybuy BABY, Cost Plus World Market and Harmon Face Values. Salmar Properties, which owns Liberty View, will charge about $30/SF for retail space--roughly double its industrial going rate. The area is thin on major retailers--let alone ones that patrons can access by car and snag an actual, honest-to-goodness parking spot. (Yes, Virginia, there will be customer parking.)

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2015 REBNY Banquet

The Real Estate Board of New York (REBNY) holds its 119th Annual Banquet at The New York Hilton on Thursday, Jan 15. This is one of the major industry events of the year (that's why dress is formal), attracting New York's most influential real estate and business community members. REBNY Chairman Rob Speyer (here at last year's event, flanked by REBNY president Steven Spinola and Governor Andrew Cuomo) tells us that this year's honorees are recognized for their outstanding accomplishments and impact on New York City's real estate market. Honorees include REBNY's longest-serving president of nearly thirty years Steven Spinola, Rudin Management Co. CEO William Rudin, Fox Residential's Barbara Fox, Eastern Consolidated CEO Peter Hauspurg, Brookfield SVP Daniel Kindbergh, and Vornado Leasing EVP Glen Weiss. Steven recently announced plans to retire at the end of 2015 and has presided over the organization's growth from 4,000 members in 1986 to more than 16,000 today. For more info on our sponsor, REBNY, click here.

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One Chase Manhattan Plaza Gets New Name, Makeover

Fosun International, the Chinese real estate investment firm that bought One Chase Manhattan Plaza in late 2013, plans to add 150k SF of new retail space and change the iconic building's name to 28 Liberty, the Wall Street Journal reports. The makeover will cost between $100M and $200M and office rents will be comparable to those in 1 World Trade Center. Origin of the new name: The building's views of the Statue of Liberty, and the association of the No. 8 with prosperity Chinese tradition, according to WSJ. But in American tradition, the word liberty sounds like making tons of money.

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111 W 57th St to Claim Title of
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111 W 57th St rendering from SHoP Architects

Someone grab an oxygen mask. After much speculation, city records are showing the final height for the JDS-developed 111 W 57th St to be 1,421 feet—25 feet taller than 432 Park Ave—making it the new tallest residential building in the Western Hemisphere, reports Crain's NY. And with a slenderness ratio of 1:23, the lanky tower also boasts the title of the slimmest building in the world, says 6sqft. (Unnamed sources have confirmed the Statue of Liberty will continue to turn her back in disgust.) Development began last year for the SHoP Architects-designed high-rise, which will sport a wall of glass on the North façade, giving residents Central Park views. The skyscraper, developed in partnership with Property Markets Group, will also have a courtyard wrapped by the landmarked Steinway Building.

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LG to Redesign to Protect View
From the Cloisters

LG Headquarters (old rendering from website)

When you're going up against the Met and John D. Rockefeller Jr's grandson, be prep on 27 acres in New Jersey, which sounds normal…until you realize it was expected to peek out above the treetops of the Palisades that Rockefeller donated to preserve the landscape. This minor detail did not go over well with a few people, namely Larry Rockefeller and the entire Natural Resources Defense Council, the Met, two Englewood residents, several environmental groups, and most likely the distant echo of the trees on the New Jersey cliff side. Well, New York Times architecture critic Michael Kimmelman tweets that after more than two years of debate, LG will redesign their building to "respect the Palisades." LG maintains that the HOK-designed $300M, 493k SF project will create jobs while still being environmentally friendly. No word on whether HOK is still slated for the new design, as they have removed the old renderings from their website.

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