Situs Newswatch 8/29

Mall Madness – The Changing Face of Shopping Centers
Macy’s closing 100 stores, JC Penny reporting mixed earnings results, Nordstrom sales off at it’s flagship-stores, but reporting good results at its off-brand Nordstrom Rack, discounter Kohl’s reporting good results.

With the traditional anchor department stores losing sales to online retailers, malls are turning to “lifestyle” tenants, such as healthcare, fitness, movies, food and beverage retailers to bring in the foot traffic.

“The big mall operators like Simon and GGP, are looking to redo those anchor spaces into more of the entertainment type stores like restaurants and smaller, unique retail shops,” said Zenobia Tambuvala, Situs Executive Managing Director in Houston.

“Competition from the Amazons of the world are really affecting sales of the typical type of mall department stores,” adds Tambuvala. “The millennials want to get most of their shopping done online and you’re going to see different types of uses for those malls, something that will guarantee traffic.”

Roughly 200 U.S. malls are at risk of shuttering in the coming several years, according to Green Street Advisors. The analytics firm also estimates retailers will need to close about 800 locations, or a fifth of total mall anchor spaces, in order to achieve sales productivity of the mid-2000s.

“While ticket prices may be too high for millennials at the new, upscale move theaters at many malls, reserved-seating, waiter service and drinks make the experience far more enjoyable and a date-night destination,” says Situs’ Tambuvala.

New York’s latest mall is the Westfield World Trade Center Shops, an architecturally stunning structure in downtown Manhattan.

The bone-like structure of The Oculus — the main passageway through the World Trade Center Transportation Hub — is becoming one of the most ‘Instagrammed’ buildings in the city. The addition of more than 100 stores for the thousands of daily commuters who pass through is an added bonus.

“Apple stores have been part of this mix for a while, now Microsoft and even Amazon are opening new brick and mortar retail stores in these spaces so people can touch and feel their product,” says Tambuvala.

The risk for mall operators is falling for seemingly sexy new tenants that may not have the staying power of experienced retailers that better understand their market bases.

“Shopping center owners need to continue to reevaluate tenants’ sales to see if it’s the right store for the mall, to bring in needed foot traffic and to fit into their overall concept,” cautions Tambuvala.

On the topic of the Fed Interest rate, Tambuvala had this to say:

“The market has been expecting a raise in the short-term interest rates for some time. In fact we are seeing an uptake in CRE mortgage refinancing even if the maturity date is a year ahead and borrowers have to pay defeasance in light of the current low rates. If the raise does not exceed 0.25 basis points, no significant impact on the market is projected.”

Fed Chairwoman Janet Yellen Sees Stronger Case for Interest-Rate Increase

Federal Reserve Chairwoman Janet Yellen signaled growing conviction that the central bank will raise short-term interest rates in the weeks or months ahead.

“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” Ms. Yellen said in remarks delivered here Friday.

The remarks left the door open for a Fed rate increase at its Sept. 20-21 policy meeting, but the chairwoman hedged her comments in ways that give the central bank an out if economic data disappoint in the next few weeks.

Most important, the Fed’s decision appears to hinge on whether the Labor Department’s Sept. 2 jobs report shows steady gains in hiring. Job gains have averaged 190,000 a month over the past three months.

read more: WSJ

Economy in U.S. Grew at 1.1% Rate, Slower than First Estimated

The U.S. economy grew less than previously reported last quarter on lower government outlays and a bigger depletion of inventories, capping a sluggish first-half performance propped up mainly by consumer spending.

Gross domestic product, the value of all goods and services produced, rose at a 1.1 percent annualized rate, down from an initial estimate of 1.2 percent, Commerce Department figures showed Friday in Washington. Household spending, the biggest part of the economy, was revised higher on used-car sales.

The economy’s failure to develop a sustained pickup has helped keep Federal Reserve policy makers from pulling the trigger on an interest-rate increase so far this year. Economists project a third-quarter rebound driven by household purchases and more stockpiling, and the report showed wages and salaries were revised sharply higher, indicating consumers have the wherewithal to continue spending.

“The only real area of strength was consumer spending,” David Sloan, senior economist at 4cast Inc. in New York, said before the report. At the same time, “the general view is that things are going to pick up in the third quarter.”

Republican presidential nominee Donald Trump has been trying to hammer home to voters the message that the economy can do better. Earlier this month, he blamed President Barack Obama and Democratic nominee Hillary Clinton for policies that produced “the weakest so-called recovery since the Great Depression.”

read more: Bloomberg

British Economy Escapes Brexit Blow, For Now

Britain’s high streets are heaving with shoppers despite June’s shock vote to leave the European Union, big companies have reported few signs of distress and some tabloid newspapers are even talking about a post-Brexit economic boom.

The overwhelming view from economists is that it is too early to know how Britain will cope with years of Brexit uncertainty – but there is a growing belief the country can avoid a recession that only weeks ago was regarded as likely.

On the face of it, the early optimism contrasts with the pre-referendum warning from former Prime Minister David Cameron that a Brexit vote would put a “bomb under the economy”.

Retail sales in August reversed much of an immediate post-Brexit vote fall, with retailers reporting their strongest sales in six months, industry data showed on Thursday, partly due to a weaker pound attracting overseas buyers. Official figures out last week showed the number of people claiming unemployment benefit fell unexpectedly in July.

read more: Reuters

FinTech Danger – Hackers Target Cell Phones in Mobile Bank Heists

Cyberthieves have a new way to hack into consumer bank accounts: mobile phones.

Malicious software programs with names like Acecard and GM Bot are gaining popularity around the world as criminals look for new and lucrative ways to attack the financial-services industry. Cyberthieves are using such so-called malware to steal banking credentials from unsuspecting consumers when they log on to their bank accounts via their mobile phones, according to law-enforcement officials and cybersecurity specialists.

It is difficult to quantify how much money has been stolen as a result of the mobile-phone malware, mostly because the thieves can access an account through any normal channel after they steal credentials through a phone. Still, the prevalence of the malware is significant enough that it has caught the attention of the Federal Bureau of Investigation and U.S. banking regulators.

The FBI is seeing new types of malware specifically aimed at banking applications for the purpose of stealing account credentials, says Richard Jacobs, an assistant special agent in charge who handles cybercrimes. He has been warning the financial-services industry about the trend, which is typically aimed at large banks.

Attacks have occurred on the two most common mobile operating systems— Apple Inc.’s iOS and Alphabet Inc.’s Android. Phones typically come with built-in security protections, but the devices can still be vulnerable. On Thursday, Apple urged some iPhone users to update their software due to a security flaw that could allow a hacker to remotely take control of the operating system.

The Federal Financial Institutions Examination Council, which brings together five banking regulatory bodies, in April updated its guidance for banks to include potential threats facing mobile financial services, including mobile-phone malware.

Ian Holmes, banking-fraud-solutions manager for analytics firm SAS, estimates that the Acecard malware has customized overlays to imitate 50 financial-services apps. The malware “is gaining credibility in the criminal underworld,” said Mr. Holmes.

read more: Wall Street Journal

Multifamily Leads in Annual NOI Growth

Multifamily led all other property sectors in year-over-year NOI increases for 2015, Fitch Ratings said Friday. Basing its assessment on the performance of properties within its universe of multi-borrower CMBS loans, the ratings agency said NOI increased 3% across the board, compared to 3.2% in 2014, 2.5% in 2013 and 2.5% in 2012.

Fitch expects NOI growth for multifamily properties to continue, given stable market fundamentals and favorable demographics for the sector. From ’14 to ’15, 73% of the multifamily properties within Fitch’s multi-borrower CMBS universe reported NOI increases.

Although apartments topped the list with 5.4% NOI growth for ’15, compared to 3.8% the year prior, all property types saw increases, according to Fitch. That being the case, not all sectors experienced greater NOI increases in ’15 than in ’14.

read more: GlobeSt

Money Market Dysfunction Helps Fuel Corporate Bond Bonanza

U.S. companies feeling pain in short-term debt markets are seeking relief by borrowing longer term, pushing already-high levels of corporate bond issuance toward fresh records.

Google parent Alphabet Inc. and food processor Archer-Daniels-Midland Co. are among the companies that have sold more than $5 billion of corporate bonds in the past two months to pay off at least part of their short-term debt known as commercial paper. They’re looking to tame their interest expenses after new regulations have lifted some issuers’ borrowing costs for near-term debt to seven-year highs.

The changes underscore how money-market rules that take effect in October are distorting debt markets. Total sales for corporate bonds maturing in more than eighteen months are around $950 billion this year, above levels for this time in 2015 and on track to beat the full-year record of about $1.3 trillion, according to data compiled by Bloomberg. Commercial-paper markets, where debt typically matures in 270 days or less, have shrunk by $108 billion since May, according to Federal Reserve data.

“It’s very smart for some of these companies to try to seek other forms of funding if they can because rates in the commercial-paper market are probably going to be moving higher in the near term,” said Mark Cabana, head of U.S. short rates strategy at Bank of America Corp.

read more: Bloomberg

For Sale: World’s Priciest House

The world’s most expensive house is up for sale for a reported $1.1 billion.

The spread in Saint-Jean-Cap-Ferrat, France, comes with a 35-acre garden, Olympic-size pool, 10 bedrooms, 30 stables and its own chapel. The 1870 home was once owned by the family that created Grand Marnier, but when Campari bought the liquor in March for $760 million, it got the digs and has decided to sell.

The price of the estate, which has hosted Charlie Chaplin and Elizabeth Taylor, has already skyrocketed: Campari CEO Bob Kunze-Concewitz previously told Bloomberg, “We’re not used to dealing with such assets. We just sell bottles . . . Many people who are in the real estate industry see it above 300 million [euros].”

read more: Page Six