CoStar's Retail News Roundup: Oct. 25 - 31, 2009

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

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By Sasha M Pardy

October 26, 2009

This week in the Retail Roundup, CoStar reports on expansions or new concepts at Wal-Mart and 77kids; closings, cutbacks, defaults, or bankruptcy news at Opus, Supervalu and Westgate Mall; acquisition, merger, loan, sale, or IPO activity at RioCan and Cedar; DDR and Macquarie, Weingarten and Jamestown, and Walgreens; new retail development news in NY, NC, MA, CT, and PA ; personnel or corporate announcements at Richard E. Jacobs Group and X Team; sustainability and green building news at JC Penney; and more.

Did you miss last week's CoStar Advisor national retail story, "CoStar Shines a Light on the Best and Worst Retail Markets in Third Quarter"? If so, click here to read the story

(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

Wal-Mart Focuses on Remodels, Still Adding Stores in 2010
Wal-Mart Stores, Inc. (NYSE: WMT) plans to spend more on store growth in 2010 than it does this year. In a recent update, the company said by the end of this fiscal year (closes Jan. 31 2010), it projects capital spending between $12.5 billion and $13.1 billion, which is up from the $11.5 billion it spent last year. However, in the next fiscal year (end Jan. 31 2011), Wal-Mart plans to up its growth even more, with capital spending between $13 billion and $15 billion.

By the end of this fiscal year, Wal-Mart estimates it will have added 38 million square feet globally and in the next fiscal year, plans on the addition of 37 million square feet globally. In the U.S., much of the capital expenditures are skewed towards remodels, as the company expects to have added 14 million square feet of Wal-Mart stores and 1 million square feet of Sam's Club stores by the end of this year and another 11 million square feet of Wal-Mart stores and 1 million square feet of Sam's Club stores by the end of next year, despite its increased capital spending budget.

Additionally, square footage is lower because average new store size is shrinking. New Wal-Mart Supercenters are planned to shrink to 150,000 square feet, down from a typical 195,000 square feet, and may get even smaller than that. Wal-Mart said the smaller stores will keep costs down and help the retailer further penetrate urban markets.

More than half of the retailer's square footage growth this year and next will take place overseas, particularly in China and Brazil.

By the end of this November, Wal-Mart estimates remodels will have been completed at more than 30% of its 3,538 U.S. stores -- it is aiming to have 70% of remodels complete by the end of January 2012.

At Sam's Club, Wal-Mart plans to add five to 10 new, expanded or relocated clubs next year, which is down from the 15 clubs opened in this fiscal year. Additionally, the company is remodeling a large percentage of Sam's Club stores to a new club layout. Specifically, it expects 50 to 55 clubs to undergo remodeling by the end of this fiscal year, with 70 to 90 clubs targeted for remodel in the next fiscal year.

American Eagle Opening First Physical 77kids Store
American Eagle Outfitters first announced the launch of its 77kids children's apparel concept in early 2008, which started with an online store. The retailer announced that its first physical store for the concept will open as a pop-up shop for the holiday season only, in The Mall at Robinson in the Pittsburgh area. The test store started on October 21 and will operate for 77 days. The retailer is locating the temporary store front next to the mall's food court. The concept is targeted at kids ages two to 10. Permanent 77kids stores are planned to open in 2010, said American Eagle, although the specific number of stores or locations was not publicized.

CLOSINGS/CUTBACKS/BANKRUPTCIES/DEFAULTS

Opus Parent Company Closing, by Laurie Forbes
After 56 years, Opus Corp. will shut its doors and Chairman/CEO Mark Rauenhorst will move into a new position.

The Minnetonka, MN-based development company is restructuring after three of its five subsidiaries, Opus West, Opus South and Opus East, went bankrupt. Rauenhorst will become a consultant with Rauenhorst Trusts, which owns the surviving Opus companies, Opus North and Opus Northwest. In this capacity, Rauenhorst will lend his more than 27 years of experience at Opus to advise on restructuring and investment strategies.

Opus North and Opus Northwest will take on responsibilities that were previously handled by the parent. Danny Queenan, president and CEO of Opus North, and John Solberg, president and CEO of Opus Northwest, will continue in their respective roles.

Rauenhorst joined the firm in 1982, was named president and CEO of Opus Northwest in 1996, was promoted to president of Opus Corp. in 1999, was tapped as CEO a year later and was named chairman in 2007. Gerry Rauenhorst, Mark’s father, started the earliest carnation of Opus as a general contractor and family business in the 1950s. He held several top leadership roles until his retirement in 2007.

Bank of America to Foreclose on Babcock & Brown's Westgate Mall
This week, Bank of America started the foreclosure process on Babcock & Brown's Westgate Mall in Brockton, Massachusetts (between Boston and Cape Cod) and hired the Boston office of CB Richard Ellis to evaluate and eventually broker the hopeful sale of the property, according to reports from Real Estate Finance & Investment and The Real Reporter.

According to Jones Lang LaSalle Retail, the firm that currently manages Westgate, the mall is 607,000 square feet and anchored by Macy's (140,000 sq. ft., not included in the workout), Sears (113,494 sq. ft.), Best Buy (30,012 sq. ft.) and Marshalls (28,000 sq. ft.). Built upon 50 acres in 1963 and last renovated in 2000, the one-level mall has about 65 specialty stores including Old Navy, Aéropostale, Victoria’s Secret, American Eagle Outfitters, The Children’s Place, and more. Additionally, a former anchor store was razed to build a 24,500-square-foot lifestyle center addition and a 55,000-square-foot, 12-screen Showcase Cinema theatre that are projected to open in Fall 2010.

Gregory Greenfield acquired the mall in 2004 for nearly $58.6 million -- the deal was financed with a $51.3 million mortgage loan that reportedly, has been whittled down to $30 million held by Bank of America.

In November of last year, Babcock & Brown, announced it would exit its U.S. mall business, which was comprised of 22 shopping malls totaling 15 million square feet that it absorbed as part of its summer 2007 acquisition of Gregory Greenfield & Associates. The company said it made the decision to attempt to sell off the retail assets in an effort to reduce its "excessive debt levels." In August of this year, Babcock & Brown was forced into liquidation by its creditors.

Supervalu Ceases Test of Urban Fresh Concept Store
Last September, supermarket giant, Supervalu, opened a new small format grocery concept in the Lincoln Park area of Chicago as a new test concept. The retailer designed the 16,000-square-foot store, dubbed "Urban Fresh, by Jewel", to cater to urban customers in affluent neighborhoods.

Similar to Tesco's Fresh & Easy Neighborhood Market, the store specialized in fresh foods , prepared meals, and had a wine and cheese shop, catering to time-strapped customers. The concept was intended to take the place of Supervalu's Sunflower Market, an organic grocery concept that closed its doors at 1910 N. Clybourn Ave in Lincoln Park in February 2008.

This week, Supervalu announced the test of this concept didn't work out, as Urban Fresh is scheduled to close on October 30, 2009. After gathering key sales data and customer feedback, the company decided to close the store and has no plans to open additional Urban Fresh stores.

ACQUISITION/MERGER/SALE/LOAN/IPO ACTIVITY

RioCan and Cedar Shopping Centers Enter into Strategic Alliance
Port Washington, NY-based shopping center REIT, Cedar Shopping Centers, Inc. (NYSE: CDR), and Toronto, Canada-based RioCan Real Estate Investment Trust (TSX: REI.UN) announced a strategic alliance; under which RioCan would invest more than $220 million into Cedar. Follow this link for details.

DDR Completes Dissolution of its Ownership Stake in Macquarie DDR Trust
Cleveland, OH-based shopping center REIT, Developers Diversified Realty Corporation (NYSE: DDR), has received approval from the unit holders of Macquarie DDR Trust (MDT) regarding the redemption of DDR's interest in the MDT US LLC joint venture. As a result, a 100% interest in three assets has been transferred to DDR in exchange for its 14.5% ownership stake in the joint venture, plus a $1.6 million cash payment has been made to the DDR Macquarie Fund.

The three shopping centers transferred to DDR include the 353,000-square-foot Perimeter Pointe in Atlanta, which is anchored by Stein Mart, Babies R Us, Sports Authority, L.A. Fitness, Office Depot and U.A. Theatre; the 327,000-square-foot Towne Center Prado in Marietta, GA, which is anchored by Publix, Stein Mart, and Ross Dress for Less; and the 197,000-square-foot Lake Brandon Plaza in Brandon, FL, which is anchored by Publix, Babies R Us, and JoAnn Fabrics.

As part of this transaction, DDR repaid $17 million of mortgage debt on the two Georgia centers, leaving $48 million in debt remaining on the properties. Lake Brandon Plaza is unencumbered. DDR continues to earn fees to actively lease and manage the remaining assets in the DDR Macquarie Fund.

David Oakes, Senior Executive Vice President of Finance and Chief Investment Officer for DDR said, "this transaction simplifies our structure and gives us 100% ownership interest in three high-quality, prime assets. Most importantly, the transaction is consistent with our goals of simplifying our structure, lowering leverage and eliminating near-term debt maturities."

Weingarten Announces $160M Joint Venture with Jamestown
Weingarten Realty Investors (NYSE:WRI) closed on the first phase a joint venture with German real estate fund manager, Jamestown, under which it sold four unencumbered shopping centers to the "Southeast Retail Joint Venture" for $114 million. The Joint Venture is currently in the secured market to leverage these assets and Weingarten anticipates closing the loan before the end of the year. The second phase of the Joint Venture will include two additional shopping centers that have existing mortgages and will be sold into the joint venture for $46 million once the loan assumptions are complete. Jamestown and Weingarten are targeting 60% leverage on this joint venture, under which Jamestown will own an 80% ownership stake and Weingarten a 20% ownership stake. Weingarten did not specify the assets involved in this joint venture.

Walgreens Acquiring Boston Area Eaton Apothecary Assets
Walgreen Co. (NYSE, NASDAQ: WAG) has agreed to acquire the assets of 12 Eaton Apothecary pharmacies in the Boston area from D.A.W., Inc., a subsidiary of Nyer Medical Group, Inc. (NASDAQCM: NYER). The transaction is valued at approximately $19 million. Walgreens plans to keep "most" of the pharmacies open. According to Eaton's website, the company currently has 18 pharmacy locations in operation.

NEW SUPPLY

CBL Holds Grand Opening of Settlers Ridge
Built atop 79 acres on Parkway West 22/30 in Robinson Township, the 600,000-square-foot lifestyle center is anchored by an 150,000-square-foot Giant Eagle Market District store (opens Nov. 6, a relocation of a nearby store into a new, larger format), a 16-screen Cinemark theater (now open), R.E.I. (opens next week), Barnes & Noble (also a relocation), and LA Fitness. P.F. Chang's and Omaha Steaks are already open and other restaurants include Cadillac Ranch, Red Robin and First Watch.

Reportedly, the center is already 94% leased, with about two-thirds of stores on the roster set to open by the end of November. In an announcement, CBL said phase two of the project "will offer shoppers more than 150,000 square feet of targeted specialty stores and restaurants."

Herky Pollock, Executive Vice President of Retail Services and Jason Cannon, Vice President, both of CB Richard Ellis Pittsburgh, are representing CBL in leasing this project.

$1.2B Steel Pointe Harbor Redevelopment Project Approved
Bridgeport Landing LLC and RCI Marine have received final City Council approval for the Steel Pointe Harbor redevelopment project in Bridgeport, Connecticut. The $1.2 billion project is to be situated on the 52-acre Steel Pointe peninsula and is expected to take approximately 15 years to complete.

The group plans to complete the retail portion of the urban mixed-use project first, starting with a restaurant and marina built to accommodate boats and yachts. Other waterfront plans include a boardwalk promenade and iconic lighthouse, designed to embody a classic New England harbor-side neighborhood.

Ultimately, Steel Pointe Harbor will encompass 2.8 million square feet, including 650,000 to 800,000 square feet of retail and entertainment space; 250,000 square feet of office space; 4,000 parking spaces; a hotel; 1,200 apartments; and a heliport.

Phase I of the project will include at least 135,000 square feet of vertical improvements featuring nationally recognized retail tenants that have yet to be announced.

RCI Marine and its affiliates currently operate Miami Beach Marina and Bayshore Landing in Coconut Grove, and also developed the Conch Harbor Marina in Key West. Bridgeport Landing is intended to become a larger version of the Miami Beach Marina with more retail and office space. Groundbreaking is anticipated in the last quarter of 2010 or the first quarter of 2011.

Federal and IKEA One Step Further on Assembly on the Mystic
Federal Realty Investment Trust (NYSE: FRT) and Swedish furniture and home accessories retailer, IKEA, recently completed a land swap at the site of Federal's Assembly on the Mystic redevelopment project in Somerville, MA (a Boston suburb). Under terms of the swap, Federal took on 16.6 acres of Mystic River waterfront property, while IKEA took on 11.9 acres closer to I-93.

Federal's vision for the 50-acre Assembly on the Mystic is an urban village including new public parks and open spaces; 2,100 residences; retail, dining and entertainment options (1.07M SF); office space (1.78M SF) and a MBTA Orange Line T stop, all of which could take 15 years to complete.

IKEA is already underway with infrastructure work for its 340,000-square-foot anchor store, which is projected to open in 2011. The store would be IKEA's second Boston-area store and the retailer's 38th in the U.S.

The first phase of the project plans for the opening of the IKEA store, a public park and restaurant situated along the waterfront, plus infrastructure improvements. The second phase, scheduled to start in the fall of next year, plans for 486 housing units; a 160-room hotel; 109,000 square feet of office space and 286,000 square feet of retail space, including a cinema; project to open in 2012.

Tanger Outlet Center of the Piedmont to Break Ground in December
Tanger Factory Outlet Centers recently closed on the purchase of 52 acres of land in Mebane, North Carolina, that is planned to host the "Tanger Outlet Center of the Piedmont."

Specifically located just off Interstate 40/85 at Exit 154, on Arrowhead Boulevard in Alamance County, Tanger plans for the outlet center to serve shoppers in the region of Raleigh/Durham, as well as Greensboro/Winston-Salem.

At 317,000 square feet, the outlet center would include 80 stores, including Saks Fifth Avenue OFF 5th, Banana Republic Factory Store, Coach Factory, Gap Outlet, J. Crew, Michael Kors, BCBG/Girls, Nike Factory Store, Tommy Hilfiger, and many more. At the end of July, Tanger said it had about 57% of its square footage either leased or in negotiation and that it would not break ground until this level reached 75%.

Currently, Tanger has ground breaking scheduled for the $60 million project to start this December, with completion slated for late 2010.

$135M Loan Fuels $225M Redevelopment of Cross County Shopping Center
Brooks Shopping Center, LLC, which is owned by Dollar Land Associates LLC, secured a $135 million first mortgage intended for the revitalization of Cross County Shopping Center in Yonkers, New York.

Built in 1954 and currently 1 million square feet, Cross County Shopping Center is being redeveloped into a modern, open-air retail venue featuring a mix of luxury and moderate-priced retailers. Plans include a 93,000-square-foot expansion of the existing Macy's anchor, as well as new retailers Bebe, AX Armani Exchange, H & M, Forever 21, American Eagle and Victoria Secret Pink. Once completed, Cross County Shopping Center will total 1.2 million square feet and be the largest retail center in Westchester County.

Prudential and New York Life provided the five-year, fixed-rate loan, which was arranged by Estreich & Company and Goldfarb & Fleece. Macerich Co. is managing the $225 million redevelopment project for the shopping center's managing member, Benenson Capital Company .

PERSONNEL ANNOUNCEMENTS

Former Richard E. Jacobs Group President and COO Passes Away
Martin J. Cleary, formerly president and COO of Cleveland-OH based mall development company, Richard E. Jacobs Group, passed away at the age of 74 on October 18, 2009. Cleary started his real estate career at age 18 working in the file room of TIAA-CREF and over the course of 28 years there, came to run the fund's mortgage and real estate investment division. In 1981, he was hired at The Jacobs Group, where he retired 20 years later.

Cleary served as a trustee of the International Council of Shopping Centers (ICSC) from 1980 to 1982 and as chairman of the organization from 1983 to 1984. Cleary was also a part owner and vice president of the Cleveland Indians baseball team; and served on the boards of the Guardian Life Insurance Co., the former Lamson & Sessions and CBL & Associates Properties.

X Team Adds Affiliate Companies in Seattle and Norfolk, VA
International retail real estate brokerage alliance firm, X Team International, has added two new U.S. partner companies: Seattle-based Rainier Commercial Real Estate Services and Norfolk, VA-based S.L. Nusbaum Realty Company.

In the Puget Sound area, Rainier's tenant representation clients include Marshalls, TJ Maxx, Home Goods, Panera Bread, Famous Footwear, Rite Aid, West Marine, and more. S.L. Nusbaum, a retail developer focused on community shopping centers in Virginia, manages a portfolio of 45 centers totaling more than 6 million square feet.

With this announcement X Team now has retail real estate affiliates in 45 major markets throughout the U.S., Canada and Europe.

SUSTAINABILITY / GREEN BUILDING

JCPenney Named to Dow Jones Sustainability Index; Provides Update on Sustainability Programs
J. C. Penney Company, Inc. (NYSE:JCP) has been named to the 2009 Dow Jones Sustainability Index (DJSI), which tracks leading companies in North America for corporate sustainability. Additionally, the department store retailer ranked No. 44 in Newsweek magazine’s first "Green Rankings" list, which ranked 500 of the “Greenest Big Companies in America.”

Launched in 1999, the DJSI North America selects, from the 600 largest companies in North America, companies that perform among the top 20% based on sustainability performance. Environmental research firms KLD Research & Analytics, Trucost, and CorporateRegister.com worked with Newsweek to evaluate companies based on their actual environmental performance, policies, and reputation.

JCPenney said that over the past several years, it has invested more than $130 million to install energy management technology, more efficient lighting and high-efficiency heating, ventilation and air-conditioning (HVAC) systems in its stores and said that in 2008, it reduced energy use and comparable CO2 emissions across its building portfolio by more than 80 million pounds. To top that off, JCPenney earned the ENERGY STAR Sustained Excellence Award earlier this year.

On the transportation front, JCPenney joined the EPA’s SmartWay Transport Partnership program in 2006 and just received its second SmartWay Excellence Award. The retailer is working to reduce “empty miles” on its third-party shipping carriers’ truck delivery routes and to put new, cleaner trucks into service at major port facilities.

JCPenney also reported that it recycles about 75% of its waste, which in 2008, translated into the recycling of 93,500 tons of cardboard and 13,000 tons of plastic. The company also managers a number of recycling programs for customers.

So far, JCPenney has installed rooftop solar power systems on nine stores in CA and NJ and is testing wind turbine power for its logistics facility in Reno, NV. In July, the retailer opened its first store qualifying for LEED certification and it is also working to achieve certification for its 1.9-million-square-foot Reno home office. Last, JCPenney has been selected to participate in the U.S. Department of Energy’s Net-Zero Energy Commercial Building Initiative.

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