CoStar's Retail News Roundup: Mar. 14 - 20, 2010

CoStar's weekly column covering expansions, new concepts, store closings, bankruptcies, cutbacks, acquisition, mergers, sales, loans, shopping center development activity, personnel changes, sustainability and green building news, and more in retail real estate.

By Sasha M Pardy

March 15, 2010

This week in the Retail Roundup, CoStar reports on expansions or new concepts at Urban Outfitters and Genesco; closings, cutbacks, bankruptcy, default, receivership or foreclosure news at French Connection, Men's Wearhouse, American Eagle and Williams-Sonoma; acquisition, merger, loan, sale, or IPO activity at General Growth, Tommy Hilfiger, CKE Restaurants and Ahold; new retail development news in DE, FL and TX; personnel or corporate announcements at Taubman Centers, Hanley Investment Group, Cole, APR Investment Group and Lincoln Harris; sustainability and green building news at Home Depot; and more.

If you missed last week's CoStar Advisor national retail story, Shopping Center Execs Voice Improving Confidence Despite Major Challenges, follow this link.

(Editor's Note: To keep up on happenings and trends in retail real estate, subscribe to CoStar's Retail News Roundup, a weekly column covering retailer expansions and new concepts, store closings, bankruptcies, cutbacks, acquisition, mergers, sales. new shopping centers, personnel changes, and sustainability. Follow this link for access to back issues of the roundup. In addition to appearing every week in the national news and retail news sections of our web site, you may also receive the Retail News Roundup for free via email by requesting to be added to the distribution list by contacting senior editor, Sasha Pardy at spardy@costar.com Also, click here to subscribe to CoStar's dedicated Retail RSS Feed.

EXPANSIONS / NEW CONCEPTS

Urban Outfitters to Open 45 Stores in 2010; Launch Bridal Concept
During 2009, Urban Outfitters, Inc. (Nasdaq:URBN), opened 33 new stores including: 13 Urban Outfitters stores, 16 Anthropologie stores and four Free People stores. The company ended the year 155 Urban Outfitters stores, 137 Anthropologie stores, 34 Free People stores, and one Terrain garden center.

During 2010, Urban Outfitters plans to open 45 new stores. Additionally, the retailer is developing a new bridal concept store that would offer wedding gowns, accessories, décor and gifts -- the goal is to open the first store by Valentine's Day 2011. Citing research that the average wedding costs $45,000 and the average bride spends $4,500 on clothing and accessories, Urban Outfitters said a try at the wedding business made sense, as brides currently frequent its stores for bridal parties and wedding accessories, décor and gifts.

Urban Outfitters stores average 9,500 square feet and are located in large metropolitan areas, select university communities, specialty centers and enclosed malls. Anthropologie stores average 7,400 square feet and are located in specialty retail centers, upscale street locations and enclosed malls. Free People stores average 1,400 square feet and are located in enclosed malls, upscale street locations and specialty retail centers.

Genesco to Open Up to 72 New Stores This Year
In a conference call with analysts on Mar. 5, Genesco management said that during 2010, it planning to open 72 new and close 57 stores, increasing square footage by 2%. This compares to 102 new stores opened and 43 stores closed during 2009 and 229 new stores opened during 2008.

"We will be taking a very conservative approach in opening new stores this year. Stores will only be opened where there is a compelling reason to open a store in a specific location. We will not open stores to the predetermined number if we don’t feel the location is outstanding," said James Gulmi, the retailer's CFO.

The average Journeys store is 1,400 to 2,125 square feet, the average Underground Station store is 1,775 square feet, the average Hat World store is 775 square feet and the average Johnston & Murphy store is 1,400 square feet. Most of Genesco's stores are located in regional malls.

Assuming Genesco opens and closes this number of stores as planned, the company would end 2010 with 818 Journeys stores, 151 Journeys Kidz stores, 58 Shi by Journeys stores, 891 Hat World stores, 170 Underground Station stores, 116 Johnston & Murphy shops, and 45 Johnston & Murphy factory stores, for a total of 2,249 stores.

Crown Retail Services announced this week that Lids, part of the company's Hat World division, has signed leases to open two new stores in Times Square. These include a 1,340-square-foot location at 1501 Broadway and a 1,000-square-foot location at 2 Times Square.

CLOSINGS/CUTBACKS/BANKRUPTCIES/DEFAULTS

French Connection Pulling Nearly All U.S. Stores
As part of a restructuring effort that it hopes will return the company to profitability, London-based French Connection Group said it would close 17 of its U.S. stores. Here, the retailer's stores, which carry the store banner "F.C.U.K.", are located in prime locations on retail high streets and the country's most upscale malls. Additionally, French Connection operates four outlet stores at Chelsea Premium Outlet Centers. According to CoStar Tenant, the typical F.C.U.K. store is 4,500 square feet, with sizes ranging from 3,000 to 6,000 square feet.

F.C.U.K. has not released the specific location of the 17 stores it would but close. For a complete U.S. store list, follow this link.

Men's Wearhouse Identifies 145 Stores for Probable Closure
During 2009, Men's apparel retail chain, Men's Wearhouse, opened 6 new, but closed 41 stores. Due to geographic overlap caused by its 2006 acquisition of the AfterHours Formalwear chain, the company has identified 145 stores that it would likely close.

In a conference call with analysts on March 10th, George Zimmer, Chairman & CEO said, "what we have been experiencing since the acquisition over three years ago, is that customers would rather shop in a regular Men's Wearhouse store than a Men's Wearhouse and Tux store. So there are hundreds of these stores that are very close to each other, and there are about 145 stores that we have right now that we think should probably close when their leases expire or before. We have already closed 35 tuxedo rental stores in 2009. So it is reasonable to assume that we will be closing well over 100 tuxedo rental stores. However, this is going to strengthen our business as opposed to weaken it, because we have such a high rate of recapture. Most of those customers are just going to the nearest Men's Wearhouse store."

The combination Men's Wearhouse and Tux stores typically range between 1,000 and 4,000 square feet and are primarily located in regional malls and lifestyle centers.

American Eagle Shuttering 28 MARTIN +OSA stores
Pittsburgh, PA-based specialty apparel retailer, American Eagle Outfitters (NYSE:AEO), is shuttering its MARTIN + OSA banner, including its 28 stores and online business. The company expects to conclude the liquidation of the MARTIN + OSA stores, which are typically 6,500 to 7,500 square feet, by the end of this July.

In a statement, management said the concept performed better in fiscal 2009 than it did in 2008; however, MARTIN + OSA still generated an after-tax loss of $44 million in 2009, so the company deemed the brand as "not achieving performance levels that warrant further investment."

"Closing MARTIN+OSA was a difficult decision, particularly in light of the progress that was made over the past year. Creating new brands is never an easy endeavor. The valuable lessons and experiences we gained will serve us well, as we continue to develop and launch new lifestyle brands," said Jim O'Donnell, chief executive officer. The company opened the first MARTIN + OSA stores, which carried sportswear and casual apparel for men and women age 25 to 40, in fall 2006.

American Eagle said it would turn its efforts and resources to its other brands -- American Eagle, aerie, and 77kids. It currently operates 939 American Eagle stores and 137 aerie stores. Its 77kids brand, a moderately-priced concept targeted at children ages 2 to 10, was launched online during 2008.

During 2009, American Eagle closed 16 net American Eagle stores, but also opened 21 new aerie stores. This year, American Eagle is planning to open 14 new, but close between 15 to 25 American Eagle stores; as well as open 20 new aerie stores and five stand-alone 77kids stores. The average new aerie store is 4,200 square feet, while the company has been opening new and remodeling existing AE stores to 7,000 square feet.

For a list of MARTIN + OSA store locations, follow this link.

Williams-Sonoma Selectively Closing Stores
Williams Sonoma opened 17 new, but closed 34 stores during 2009, reducing its square footage by about 1% in the process. The company ended 2009 with 627 stores among its six concepts, including Williams-Sonoma (264), Pottery Barn (204), Pottery Barn Kids (95), West Elm (36), Williams-Sonoma Home (10), and outlet (10) stores. By the end of 2010, the Williams-Sonoma plans to create a reduction in its store square footage by another 1% to 2%, primarily through store closures.

At the Bank of America Merrill Lynch 2010 Consumer Conference on Mar. 11, Williams-Sonoma CFO, Sharon McCollam, said "Our strategy for store closings is to optimize our cost per square foot," reported the Wall Street Journal.

Reportedly, Williams-Sonoma expects that over the course of the next three years, 25% of the leases on its current portfolio of stores will terminate. The company is working on negotiating more favorable lease terms, store relocations and store closures. By brand, the company does not currently view its upscale Williams-Sonoma Home chain as a growth vehicle; but does view its West Elm stores as such.

ACQUISITION/MERGER/SALE/LOAN/IPO ACTIVITY

Pershing Square & Fairholme Capital Offer $3.925B to General Growth; Simon Not Phased
General Growth Properties (NYSE:GGP) announced that a joint venture between Pershing Square Capital Management and Fairholme Capital Management said they would commit $3.925 billion of new equity capital, at a value of $15.00 per share, to facilitate GGP's emergence from bankruptcy.

Both Fairholme and Pershing are among GGP's largest unsecured creditors. Pershing, owned by General Growth board member William Ackman, accumulated an estimated 25% share of the company by acquiring shares for less than $2 a piece at the end of 2008. However, in connection with this proposal, Ackman has resigned from GGP's board.

The group said this offer could be paired with the previously-announced $2.625 billion proposal from Brookfield Asset Management, for a combined $6.5 billion of committed equity capital. "The Company believes that this combined equity capital along with its anticipated new $1.5 billion debt issuance - or the reinstatement of a comparable amount of existing debt - would, if accepted, deliver substantially all of the cash required to fulfill the Company's capital needs in connection with its emergence from bankruptcy and provide unsecured creditors with par plus accrued interest in cash," said General Growth.

Under terms of the Fairholme - Pershing proposal, $3.8 billion would be used to purchase shares of GGP stock at $10.00 per share, and $125 million would be used to backstop the remaining portion of a $250 million rights offering by General Growth Opportunities, a new company that would own GGP's land and redevelopment candidate properties, at a price of $5.00 per share. These terms line up closely with Brookfield's offer, which involved investing $2.5 billion at $10.00 per share for new GGP common stock and up to $125 million in General Growth Opportunities at $5.00 per share.

To date, Simon Property Group has maintained its $10 billion offer to acquire General Growth. Under terms of that deal, GGP shareholders would receive $6.00 per share in cash, plus a $3.00 per share distribution from GGP for the company's master planned community division. Simon's offer includes the pay-off of $7 billion in claims owed to GGP's creditors, bond and note holders. GGP shareholders and creditors would be given the option to receive the payouts or convert it to Simon common stock.

According to Reuters, Simon Property Group CEO, David Simon, said at real estate conference in New York on Mar. 11 that the Fairholme - Pershing Square offer, in combination with the Brookfield offer, eliminates some of the uncertainty that existed in the Brookfield plan on its own, but not all uncertainty. Regardless, Simon said the new plan would not put pressure on his company to sweeten its existing $10 billion offer.

Phillips-Van Heusen Acquiring Tommy Hilfiger for $3B
Apax Partners has agreed to sell its Tommy Hilfiger business to Phillips-Van Heusen Corporation (NYSE: PVH) for approximately $3 billion, plus the assumption of approximately $137 million in debt. Van Heusen plans to finance the transaction with $2.63 billion in cash and $377 million in PVH common stock. If this transaction closes, the combined company would generate revenues in the range of $4.6 billion.

THL's $928M Bid for CKE Restaurants May be Challenged by Offer from Wendy's Owner
CKE Restaurants, owner of the Carl's Jr. and Hardee's quick-service restaurant chains, announced Feb. 26 that Thomas H. Lee Partners ("THL") would acquire CKE for $928 million, including the assumption of $309 million in debt. Under the terms of the agreement, CKE stockholders would receive $11.05 per share they hold, which represents a 24% premium to CKE's closing share price on the day before the announcement.

The agreement with THL allows CKE to solicit superior proposals from third parties through April 6, 2010; but the company expect to close on this merge in the second quarter of 2010.

According to a Mar. 11 report from the NY Post, citing an anonymous source close to the process, Nelson Peltz, owner of the Wendy's and Arby's fast food chains, may submit a bid for CKE.

There are currently 1,221 Carl's Jr. and 1,913 Hardee's restaurants in operation. THL's private equity investments include Aramark, Ceridian, Dunkin' Brands, Experian, Fidelity National Information Services, HomeSide Lending, Houghton Mifflin, Michael Foods, The Nielsen Company, Snapple, Warner Music Group, West Corporation, and more.

Ahold's Acquisition of 25 Ukrop's Stores is Complete
Supermarket chain magnate, Ahold, announced Feb. 8 that it successfully completed the acquisition of 25 stores from Ukrop's Super Markets. Ahold is in the process of re-branding the stores to its Martin's banner, which is held under its U.S. Giant-Carlisle division. For CoStar's full coverage on the deal, follow this link.

NEW SUPPLY

CBL & Benchmark Celebrate Grand Opening of The Pavilion at Port Orange
CBL & Associates Properties, Inc. (NYSE: CBL) and The Benchmark Group on March 10th held a grand opening celebration of The Pavilion at Port Orange in Port Orange, Florida. The 415,000-square-foot open-air lifestyle center is located upon 73 acres at the intersection of I-95, Taylor Road and Williamson Boulevard in this town just south of Daytona Beach.

According to the joint venture, the center opened at more than 92% leased or committed, with anchors including Belk, a 14-screen Hollywood Theater (opened Dec. 2009), Homegoods, Marshall’s, Michaels, PETCO and ULTA. Also among the center's 30 retail and restaurant tenants are Hibbett Sports, Kirkland’s, Adornments, Café Fresh, Mattress One, Maurices, Rue21, Sally Beauty, Takara Japanese Steakhouse, Trendy Room, Malibu Beach Grill, AT&T, Five Guys Burgers and Fries, and David's Bridal. The center also includes more than 34,000 square feet of office space.

The Pavilion at Port Orange features coastal-style architecture, two-story themed buildings, extensive landscaping, seven-acre lake with lakeside walking path, a children's play area, and green space as a gathering place. Environmentally friendly features of the development include: highly reflective roofing materials, Dark Sky compliant lighting fixtures, draught tolerant native Florida plants, water-wise "smart" irrigation heads, storm water ponds for irrigation, and dual flush toilets.

Simon Opens Another Phase of The Domain in Austin
Simon Property Group has opened another expansion phase at The Domain mixed-use project in Austin, TX. Dillard's opened its three-story, 206,000-square-foot store on Mar. 11, 2010. This newest phase, at 34 acres, also includes Dick's Sporting Goods, Gold Class Cinema, American Eagle Outfitters, Aeropostale, Buckle, Express, The Limited, Sushi Zushi, Maggiano's, a 340-room Westin hotel, 78,000 square feet of office space occupied by an orthopedic group, and a 438-unit apartment complex, scheduled to open this October.

The Domain is located in northwest Austin along North MoPac (Loop 1) between Braker Lane and Burnet Road. The project opened in 2007, with the 57-acre first phase including an upscale Main Street-style center anchored by Macy's and Neiman Marcus, nine upscale restaurants, 75,000 square feet of Class A office space and 390 high-end apartments. In 2011, an 149,000-square-foot Nordstrom is scheduled to open, as well as a Saks Fifth Avenue.

McGinnis Green Retail Center Under Construction
In December 2009, construction began on McGinnis Green Retail Center in Cheswold Deleware. Anchored by a 225,000-square-foot Walmart Supercenter, the project will also include 20,000 square feet of adjacent retail space and two retail outparcel tenants. McGinnis Green is located on the east side of U.S. 13 just south of Simms Woods Road, north of Dover, Delaware.

Ongoing development services for the project are being provided by Trout Development, Louis A. DiBitonto, Development Principal. Initial site development was coordinated by Cheswold Village Properties, LLC. Trout Daniel & Associates is handling leasing and management for the retail center.

PERSONNEL ANNOUNCEMENTS

Former Taubman Executive, Robert Larson, Passed Away
Robert C. Larson passed away on Mar. 11, 2010 at the age of 75, following a long illness. Larson most recently served as chairman of Larson Realty Group and Lazard Real Estate Partners; however, Larson is most recognized in the industry for his time with Taubman Centers (1974-2000). He became president and COO of the mall company in 1978 to be appointed as CEO and vice chairman 10 years later. In December 1988, he retired as CEO, but maintained his position as vice chairman and director until 2000. A Minneapolis native, Larson also served as a director for a number of industry organizations, including the Urban Land Institute.

Hanley Investment Group Hires Patrick Kent as SVP
Hanley Investment Group hired Patrick Kent as a senior vice president. In this capacity, he will provide retail disposition and acquisition advisory services to clients.

Kent's more than 20 years of industry experience includes most recently serving as a director of retail investment sales at the Irvine, CA office of Faris Lee Investments. During his career, Kent has closed investment sale transactions in excess of $500 million.

Kent holds a B.S. in Finance, with emphasis in Real Estate, from Fort Lewis College and is an active member of the International Council of Shopping Centers.

Lincoln Harris Hires Chris Vasbinder as VP of Retail Brokerage
Chris Vasbinder has joined the Charlotte office of Lincoln Harris as vice president of retail brokerage. In this capacity, Vasbinder's focus will be on leasing the Bank of America Corporate Headquarters third-party retail portfolio and assisting in identifying retail leasing and development opportunities in the Carolinas.

Vasbinder brings more than 16 years of commercial real estate experience to Lincoln Harris. He most recently served as marketing principal for Childress Klein Properties in Charlotte where he was involved in more than 200 reail transactions and was instrumental in the successful lease-up of Promenade on Providence, RiverGate Shopping Center, Afton Ridge and Wachovia’s retail on the Green.

A graduate of the University of Georgia, Mr. Vasbinder earned his Masters of Business Administration (MBA) from Georgia State University. He was recognized as a multi-million dollar sales member by the Carolina Region Commercial Board of Realtors (CRCBR) for seven years and is a licensed real estate broker in North Carolina and South Carolina.

Scott Holmes Joins Cole as VP of Acquisitions
Phoenix-based Cole Real Estate Investments recently hired Scott Holmes as vice president of acquisitions. In this capacity, Holmes will identify, evaluate, screen and underwrite multi-tenant acquisition opportunities for the company in the Northern United States. Prior to Cole, Holmes served as principal and director of acquisitions for AEW Capital Management in the regions of Southern California, Arizona, Washington, Colorado and Hawaii. During his career at AEW he successfully acquired more than $750 million of both core and value added properties. Prior to that, Mr. Holmes was Director of Acquisitions for American Realty Advisors. Holmes holds a B.S. in Real Estate Finance from San Diego State University and an M.B.A. from Pepperdine University.

Allison Chapleau Joins APR Investment Group as Senior Sales Associate
Allison Chapleau has been hired as a senior sales associate at the San Francisco office of Alain Pinel Realtors Investment Group. Chapleau specializes in the sale of retail and multi-family properties in San Francisco and the Bay area. Chapleau joins the company from Marcus & Millichap, where she worked for eight years in similar business lines.

SUSTAINABILITY / GREEN BUILDING

Home Depot Sets Energy Efficiency Goals
The Home Depot announced that it has reduced its store energy use by 16%, or 2.6 billion kilowatt-hours (kWh), since 2004. Additionally, Home Depot said it plans to achieve a 20% reduction in kWh per square foot usage in its U.S. stores by 2015 and it has set a goal to reduce greenhouse gas (GHG) emissions in its domestic supply chain by 20% within the next five years. Methods Home Depot has used to increase its store energy efficiency include upgrading store HVAC systems, using CFL bulbs and T5 lighting, installation of white reflective roofs, and more.