Mall Madness — The Art of Abstracting Tenant Termination Rights — How Situs Can Help
Mall operators are being left in the lurch as thousands of retailers are shutting their doors.
Sears’ store closing count alone this year is about 1,200 (Sears and Kmart), and there are calls from stock analysts for J.C. Penney to shut another 300 stores by 2020. Ascena Retail Group, the women’s clothing retailer that owns Ann Taylor, Loft, Dress Barn, Lane Bryant, Justice and several other brands, is planning to close hundreds of stores.
Situs works with clients, providing a critical human element that can parse complex clauses, leases and lease terminations in ways software cannot. There are various ways in which these stores’ leases can end. The appropriate method of termination depends on several factors that can complicate the situation further. Of most concern today for our clients are co-tenancy provisions that offer tenants a remedy if a particular retail store or percentage of stores in a retail property close. Identifying co-tenancy provisions and their impact are among the most complicated and laborious analyses that owners of and lenders to retail real estate undertake. Software exists that can capture those provisions, but is it accurate?
Situs has had direct hands-on experience with co-tenancy analysis. Sears and J.C. Penney also had quite a few closures in 2014. JCP in particular was closing its mall stores and moving to stand-alone buildings. One of Situs’ commercial real estate clients with a sizable mall portfolio stipulated that we focus on the co-tenancy provisions for those leases and the occupancy levels at each property.
Situs Director Cheryl Clark says, “Software might be able to capture the co-tenancy terms, but it is unable to analyze and summarize them, or find them if they are hidden. In one case, the drafter of the lease put the tenant termination rights in a section of the lease where they wouldn’t normally show up in an apparent attempt to get the lease signed without the landlord finding it.”
With experience comes knowledge. With the rapid advances in lease automation technology, it is often more effective, efficient and profitable to go with the tried-and-true method of using real-life experts to make sense of lengthy and (sometimes intentionally) confusing lease provisions.
To learn more on how Situs can uncover tenant termination rights and co-tenancy provisions, please click here.
Retail Landlord Troubles Persist: Retailers Push For Shorter Leases
Retailers are pushing for shorter lease terms when it comes time to renew as the industry responds to bankruptcies and thousands of store closures. Instead of the typical five- or 10-year leases, retailers are negotiating one- or two-year leases in an apparent attempt to stay nimble in an industry that is experiencing major turbulence lacking visibility, Bloomberg reports.
The head of A&G Realty Partners, Andrew Graiser, told Bloomberg he is seeing a trend toward short-term renewals, and said landlords are looking at retailers with a closer eye than they historically have. The excess retail real estate on the market is not helping matters. Overambitious pre-recession expansion plans have been eating away at retailers’ sales for some time now, leading to store closures and further exacerbating challenges for landlords. Cushman & Wakefield Vice President of Americas Retail Research Garrick Brown said between 9,000 and 10,000 U.S. stores will close this year, and projected that number will rise to around 13,000 next year. While short leases can help retailers respond quickly in today’s environment, the Journal reports, they present another hurdle for landlords trying to keep properties filled.
read more: BizNow
Amazon Creating a Secret Bank?
Amazon.com says Amazon Lending service has surpassed $3 billion in loans to small businesses since it was launched in 2011.
In the last 12 months alone the eCommerce giant has loaned over $1 billion to small businesses. Hiking up the sales for third party merchants is a plus for Amazon, as the company gets a piece of the transaction.
“We created Amazon Lending to make it simple for up-and-coming small businesses to efficiently get a business loan, because we know that an infusion of capital at the right moment can put a small business on the path to even greater success,” Amazon Marketplace VP Peeyush Nahar said.
Over 20,000 small businesses have received a loan from Amazon and more than 50% of the businesses Amazon loans to end up taking a second loan.
Amazon’s stock were unchanged by Friday’s opening at $1,009.63.
read more: TheStreet.Com
Moody’s Sees Delay in Brexit Due to May’s Election Losses
The Brexit negotiations with the EU were due to start on June 19, but Moody’s said the fact that the Conservatives had lost their majority would delay the start of the talks.
It will “complicate and probably delay Brexit negotiations,” it warned. Moody’s said it could also further pressure the UK’s public finances.
The “inconclusive” outcome of the general election could mean the government places less of a priority on cutting the budget deficit. This would be negative for the UK’s credit rating and make it more expensive for the country to borrow money.
As a result, Moody’s said it expected fiscal risks to increase, because in its view the budget deficit will increase this year and next.
“The election outcome, with significant gains for the Labour Party, which had campaigned for increased public spending, will likely be seen as a ‘vote against austerity’,” it added.
“The public debt ratio will rise further and for longer than we had expected, placing the UK among the few highly rated European sovereigns whose public debt is still rising.”
However, Moody’s said the election result suggested an “electoral shift” away from the “hard Brexit” that Prime Minister Theresa May had ostensibly sought. As a result, Moody’s said the government may now consider “softer” Brexit options, which would be positive for the country’s credit rating, it said.
“Hence, a move towards “softer” versions of Brexit — potentially with continued access of some sort to the single market — might now be considered,” it said.
read more: BBC
France’s Amazing Quick Changes
President Emmanuel Macron expanded his control of French politics as voters put his party on track to a sweeping majority in the National Assembly in the first round of legislative elections, ousting establishment stalwarts in the process.
The new president’s year-old party, Republic on the Move, won 32.3 percent of the vote alongside its centrist ally MoDem, more than 13 percentage points ahead of the Republicans’ group, according to the Interior Ministry’s final vote count. The first round was marked by record-low turnout with less than half the registered voters casting a ballot. In an alliance with the centrist MoDem party, Macron’s group will have between 415 and 455 seats out of 577 in the lower house of parliament, according to projections by Ipsos.
The results — which need to be confirmed in a final round of voting next Sunday — would give Macron the biggest majority in the Assembly since 1993. That offers the 39-year-old president the power to push through his recipe for fixing France over the next five years — and no one else to blame if his plan fails.
“French voters chose renewal,” government spokesman Christophe Castaner said on France 2 television on Monday morning. “They are coherent. They elected a president and they voted to give him a majority.” He said turnout below 49 percent represented a “defeat.”
Sunday’s result marks the end of an era of dominance for France’s mainstream parties. Almost all of the Socialist Party’s parliamentary heavyweights were eliminated, including First Secretary Jean-Christophe Cambadelis who had been a member of the Assembly for 19 years. The Republicans are slated for their smallest number of seats in decades while the National Front, despite Marine Le Pen reaching the presidential runoff against Macron, may get between one and five seats, Ipsos said — though Le Pen herself is well placed to enter parliament for the first time.
read more: Bloomberg
Mortgage Regulation Revamp Proposed by Treasury Department
A Treasury Department report gives the most detailed road map yet for President Donald Trump’s promise to review regulations put in place after the financial crisis. The proposals would affect activities ranging from mortgage lending to Wall Street trading.
The recommendations would pare back restrictions put in place by President Barack Obama’s administration, which argued they were necessary to guard against excessive risk-taking and a repeat of the 2008 financial crisis.
“In the housing and housing finance markets, you really only need to look at two data points to stiffen up over how onerous and problematic regulation has gotten, says the Collingwood Group Chairman Tim Rood. “First, the cost to originate a mortgage is at an all-time high at over $8,000, and second, the regulatory and compliance costs to build a home is over $80,000. Both of those numbers most directly and negatively impact households with small-balance mortgages and entry-level homes, which tend to be minority and low- to moderate-income households. The Treasury proposal is a step in the right direction.”
Given the time that has elapsed since the recession and the strengthened position of the financial system, the Treasury Department said in a 149-page report, it is time for a “sensible rebalancing of regulatory principles.”
Mr. Trump’s team said those rules, many of which were part of the 2010 Dodd-Frank financial law, have become overly restrictive, unnecessarily preventing banks from activities that help the economy function and grow.
The report called for significantly limiting the power and discretion of the Consumer Financial Protection Bureau, the agency created to establish protections for consumers using mortgages, credit cards, payday loans, and other credit products. The report stated that the agency’s “unaccountable structure and unduly broad regulatory powers have led to predictable regulatory abuses and excesses,” and called for it to be brought further under the oversight of Congress and the administration, and for it to lose its ability to directly supervise banks, mortgage companies, payday lenders, and other businesses.
“We tried to have the right balance between eliminating undue, burdensome regulations while not putting taxpayers at risk,” Treasury Secretary Steven Mnuchin said.
The report drew praise from the financial industry and Republicans and sparked criticism from consumer groups and many Democrats.
“Regulations imposed after the financial meltdown have meant increased costs for lenders and borrowers, the tightest credit box in my 25-year career, all of which have contributed to what now is the lowest homeownership rate in 51 years,” adds Collingwood’s Rood.
Collingwood’s Tim Rood joins Fox Business Network’s Cavuto at noon ET.
We invite you to tune in.
How Bad is It? 93,000 People Apply for 104 Subsidized NYC Apartments
More than 93,000 people applied for the first 104 affordable apartments to open up at New York’s sprawling Essex Crossing development, city officials said.
A total of 93,361 applicants are hoping to score a subsidized apartment at 145 Clinton St., one of nine new sites that will spring up on a stretch of Delancey Street as part of the mega-project, according to the city’s Department of Housing Preservation and Development.
The 104 subsidized apartments at 145 Clinton St. — the project’s “Site 5” — range in price from $519 for a studio to $3,424 for a three-bedroom, depending on the applicant’s income. The city began accepting applications for the units through its affordable housing lottery in early March.
read more: DNAinfo
Everything’s Up To Date in Kansas City
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As might be expected, San Jose and San Francisco, the bookends of Silicon Valley, rank first and second among top U.S. tech cities in a new report from global commercial real estate firm Cushman & Wakefield.
But the top 25 list published as part of the Tech Cities 1.0 report also includes some more unexpected markets, such as Madison, Wis.; Columbus, Ohio; and Kansas City.
Kansas City emerged in 22nd place on the list, joining the ranks of more obvious tech-centric markets as a result of an enduring, community-wide effort.
“This accomplishment is the result of more than a decade of work from different parts of the community,” said Mike Mayer, managing principal of Cushman & Wakefield’s Kansas City office. “One of the most exciting parts of being included in this list is that it will generate more attention to the diverse successes that led to this national recognition. The city is a great place to be now, and it just keeps getting better.”
The top 25 tech cities were determined by analyzing six metrics that the Cushman & Wakefield researchers deemed the key ingredients in creating a “tech stew.” They are: institutions of higher learning, capital, tech workers, knowledge workers, educated workers and growth entrepreneurship.
The Kansas City-based Ewing Marion Kauffman Foundation developed the growth entrepreneurship index used in Tech Cities 1.0. Although not strictly a tech index, the growth entrepreneurship index, which factors in startup activity and high-growth company density, was included in the ranking process for a good reason: Cities that have higher concentrations of growth engines are generally great tech locations.
Kansas City scored a 2.5 on the index, far below Washington’s leading score of more than 14. But Kansas City’s growth entrepreneurship score was well above the national average of 0.32 and ahead of the scores of two other tech cities on the top 25 list: Portland, Ore., and Chicago.
“If you’re sitting in Chicago reading that, you may be surprised,” said Miles McCune, a senior director in Cushman & Wakefield’s Kansas City office.
But McCune said Kansas City’s high marks won’t come as much of a surprise in the city, where organizations such as the Kauffman Foundation, Pipeline Inc. and Think Big Partners have helped build robust, overlapping tech and entrepreneurial communities.
read more: Biz Journals
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