CoStar's Retail News Roundup: Feb. 7-13, 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

February 8, 2010

This week in the Retail Roundup, CoStar reports on expansions or new concepts at Casual Male, Coach, Subway and Chick-fil-A; closings, cutbacks, bankruptcy, default, receivership or foreclosure news at Disney Store, Movie Gallery, Car Dealerships, Walking Company, McGrath's Fish House; acquisition, merger, loan, sale, or IPO activity at JBG Rosenfeld and REIT Management & Research; new retail development news in NJ, NY and MD; personnel or corporate announcements at Cushman & Wakefield and Lee & Associates; sustainability and green building news at McDonald's; and more.

If you missed last week's CoStar Advisor national retail story, Forecasted Growth in Retail Franchise Stores May Fuel Demand, follow this link 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

Chick-fil-A to Open 78 New Restaurants in 2010
Quick service chicken restaurant chain, Chick-fil-A, said 2009 marked its 42nd consecutive year of sales growth. During the year, the company opened 83 new restaurants, comprised of 69 stand-alone restaurants, one mall location, and 13 licensed outlets (e.g. college campuses, hospitals, airports, businesses, and industrial sites).

During 2010, Chick-fil-A plans to open 78 new restaurants, comprised of 66 stand-alone locations, two mall/in-line restaurants, and 10 licensed outlets. Among these openings will be a new restaurant in Aurora, IL, which will mark the chain's entry into the Chicago market. Also during 2010, the company plans to renovate 86 existing restaurants. According to CoStar Tenant, the typical Chick-fil-A is a 4,300-square-foot, free-standing, drive-thru restaurant.

Subway Opened 2000 Restaurants During 2009; Big Plans for Boston Market
The Subway chain of quick service restaurants topped Entrepreneur Magazine's annual 2010 Franchise 500 ranking -- for the 17th time in 23 years. Subway reported that during 2009, more than 2,000 new restaurants were opened across the world. The openings bring Subway's system-wide unit count to 32,000 restaurant in 90 countries.

In the Boston area, Bob Hurley, Subway Development Agent for the territory, is planning to open 130 new Subway restaurant in the Boston market over the course of the next five years. Hurley expects to lease a total of approximately 150,000 square feet of retail space through these openings; which translates to an average size of 1,153 square feet per new restaurant. Subway places preference on end-cap retail spaces with two sides of glass.

Casual Male to Open Big & Tall Menswear Superstores
Casual Male Retail Group, the nation's largest retailer of big & tall menswear, currently operates 461 Casual Male XL (396 full-price, 65 outlet) stores in 47 states. The company also operates 17 stores under its upscale Rochester banner. Rochester stores average 8,156 square feet and produce an average of $256 per square foot in sales, while Casual Male XL stores average 3,500 square feet.

Over the last year, the retailer has opened and tested a few hybrid stores, which combine the Casual Male and Rochester product assortment under one roof. Tests show that customers are spending more at these hybrid stores than they did at the single-banner stores.

This hybrid store test has led to the company's latest concept -- a superstore format, dubbed "Destination XL" -- that would carry a comprehensive selection of big & tall menswear, plus offer tailoring services. The typical Destination XL store would be 10,000 to 12,000 square feet.

Casual Male plans to open five to ten Destination XL stores annually in major markets over the next several years. This move is somewhat of a consolidation effort, however, as the retailer is projecting that Destination XL customers will be willing to drive from as far as a 60-minute radius to shop the store; therefore, it plans to close an unidentified number of Casual Male stores in response.

Coach Opening First Men's Store
Late this spring, luxury handbag and accessories retailer, Coach, is set to open its first men's-only store at 370 Bleecker Street in New York City's West Village. This first concept store will stock leather goods, footwear, outerwear, watches, fragrances, and other accessories for men. Coach said the store will give it a chance to showcase and enhance its men's business, but did not say whether this first store is a test for future store.

CLOSINGS/CUTBACKS/BANKRUPTCIES/DEFAULTS

Movie Gallery Files Bankruptcy, Closing 800+ Stores
Late Tuesday night, the country's second largest movie rental chain, Movie Gallery, brought to fruition circulating rumors that it would file Chapter 11.

Like most retailers, Movie Gallery was hit hard from lack of consumer demand during the recession, but in addition, it has been struggling to keep its foothold in a marketplace where consumers can rent movies through so many other outlets -- from mail order to kiosks and direct downloads. On top of this, Movie Gallery is underwater with more than $540 million in debt that was primarily created from its 2005 acquisition of Hollywood Entertainment Corp, which it acquired for $800 million.

This is the second bankruptcy filing for Movie Gallery. The retailer first filed Chapter 11 on October 16, 2007 when it operated 4,430 stores. In May 2008, Movie Gallery emerged from bankruptcy much lighter -- with 3,300 stores.

Since, Movie Gallery has closed another 700 stores; as it reported in Tuesday's Chapter 11 filing that it currently operates 2,600 stores under banners Movie Gallery, Hollywood Video and Game Crazy. Of these stores, 184 are operated by Movie Gallery Canada, which has been excluded from this bankruptcy filing. Movie Gallery reported $1.4 billion in annual revenues (down from $2 billion in 2008) and said 19,082 people are employed by the company.

As part of its reorganization efforts, Movie Gallery has requested the cancellation of 856 store leases. Follow this link to download the list, which is weighted with more Hollywood Video than Movie Gallery lease cancellations.

Gordon Brothers Group has been selected to help liquidate the retailer's closing stores.

On February 4, Movie Gallery received court approval to have DJM Realty assist the company in evaluating and renegotiating the retailer's current leases. Additionally, the court approved Gordon Brother Group to handle Movie Gallery's store closing sales at 760 stores.

According to CoStar Tenant, the typical Movie Gallery is between 4,000 and 5,000 square feet, while the typical Hollywood Video is between 5,000 and 7,000 square feet.

NPD Group Records 1,652 Net Closures of Restaurants in 2009
Retail industry research firm, NPD Group, reports that the total number of restaurants in the U.S. fell by .3% during 2009, representing the closure of 1,652 net restaurants. NPD attributes the net loss in restaurants primarily to independent quick service restaurant operators, as well as both full-service and quick service chain restaurants with 50 to 499 units -- major chains (500+ units) actually increased their total unit counts by about 1%, said NPD. Geographically, NPD said that Michigan, Ohio and Illinois saw the largest decline in the total number of restaurants during the year.

Greg Starzynski, director of product development-foodservice at NPD said the group's findings reflect a “slowdown in chains expanding and two years of a challenging economy already weeding out the poorest performing restaurants." He added, "The economy has been particularly hard on independent restaurants and smaller regional chains that don’t have the same financial resources as the national chains.”

Urban Science Reports 1,605 Car Dealership Closures in 2009
Automotive industry research firm, Urban Science reports that the number of auto dealerships that closed in 2009 broke an all-time record. The nation's car dealership count fell by 1,605, or 8% during 2009 to end the year with 18,841 dealerships, said Urban Science. This compares to the 881 dealership net closures recorded during 2008. "Normal Attrition is 1%," said Urban Science.

States losing the largest percentage of dealerships were Alaska, Mississippi, South Carolina, Arkansas and Missouri, while markets with the largest percentage net decline included Charleston, S.C. (-16.3%), Stockton, Calif. (-16.2%), Albany, N.Y. (-15.5%), Poughkeepsie, N.Y. (-15.2%), and Greensboro, N.C. (-14%).

"The numbers were mostly a result of automakers taking proactive action to reduce dealer count, with GM and Chrysler accounting for approximately 90 percent of the consolidation," said the research firm.

Disney Closing 8% of Disney Store Fleet
Disney recently announced that over the course of the next few months, 24 U.S. and three Canada Disney Store locations would be liquidated and shuttered. As of October 2009, there were 340 Disney Stores in the fleet. This closure effort is part of its overall plan to revamp its existing store base into the "Imagination Park" concept, which is intended to transform stores to be interactive and have a feel that more closely matches its Magic Kingdom theme park.

The locations of the closing U.S. stores follows: Riverchase Galleria in Birmingham, AL; South Bay Galleria in Redondo Beach, CA; Southwest Plaza in Littleton, CO; Broward Mall in Plantation, FL; Arbor Place in Douglasville, GA; Boise Town Square in Boise, ID; Yorktown Center in Lombard, IL; Spring Hill Mall in West Dundee, IL; Glenbrook Square in Fort Wayne, IN; Greenwood Park Mall in Greenwood, IN; Florence Mall in Florence, KY; Silver City Galleria in Taunton, MA; RiverTown Crossing in Grandville, MI; Southland Center in Taylor, MI; Coronado Center in Albuquerque, NM; Belden Village Mall in Canton, OH; Broadway at the Beach in Myrtle Beach, SC; Coolsprings Galleria in Franklin, TN; Opry Mills in Nashville, TN; The Parks At Arlington in Arlington, TX; West Oaks Mall in Houston, TX; Collin Creek Mall in Plano, TX; Dulles Town Center in Dulles, VA; and Valley View Mall in Roanoke, VA.

Walking Company Plans to Emerge from Bankruptcy this Spring
The Walking Company Holdings, Inc. (PINKSHEETS: WALK) filed a reorganization plan on Feb. 2, under which the company plans to keep 207 of its 214 stores open. Additionally, the retailer said it would pay off all of its debts and future obligations to trade creditors. The Walking Company expects to emerge from chapter 11 this spring. For prior CoStar coverage on the retailer's bankruptcy, follow this link.

McGrath's Fish House Chain Files Bankruptcy
Salem, OR-based McGrath's Publick Fish House filed bankruptcy on Feb. 3, 2009. The company operates a chain of 20 McGrath's seafood restaurants in OR (8), UT (4), AZ (3), WA (3), CO (1) and ID (1). According to CoStar Tenant, the typical McGrath's is between 6,000 and 9,500 square feet.

McGrath's reported assets and liabilities between $10 million and $50 million in the filing. The first McGrath's Fish House opened in downtown Salem, OR in 1980.

According to the Statesman Journal, company founder John McGrath said the restaurant chain's ill-timed expansion into Southwestern states had a lot to do with the company's bankruptcy. "The company hopes its reorganization will allow it to keep many, if not all, of its restaurants. We have to kind of wait and see what happens with the lenders," McGrath said.

ACQUISITION/MERGER/SALE/LOAN/IPO ACTIVITY

Hill Country Galleria Sold at Bankruptcy Auction for Fraction of Development Cost
Chicago-based REIT Management & Research is the new owner of Hill Country Galleria, a 1.28 million-square-foot mixed-use lifestyle center located in Bee Cave, TX (a suburb of Austin) that filed bankruptcy in May of last year. The investment company won the center at a bankruptcy auction with a $75 million bid. This price is well below the $161 million outstanding on the $192 million construction loan Opus obtained to develop the project.

Hill Country Galleria's anchor tenants include Dillard's, Cinemark Theatre, Barnes & Noble and Dick's Sporting Goods. Opus' grand opening of the center was held on Oct. 24, 2007. At the time of the grand opening, Opus said Hill Country Galleria was comprised of 650,000 square feet of retail, 145,000 square feet of Class A office space, 300,000 square feet of multifamily housing, 80,000 square feet of retail pad space, 100,000 square feet of residential condominiums and 50 acres of green space. The project is situated upon 152 acres at the convergence of FM 620 & Texas Highway 71.

Note that the multi-family housing and some retail outparcels at the project were not included the bankruptcy filing or this sale.

Opus West put Hill Country Galleria into bankruptcy when its efforts to refinance the construction loan failed. The company said the loan was especially difficult to refinance because a consortium of 10 banks were involved.

JBG Rosenfeld -Buvermo JV Acquire Village at Waugh Chapel, by Laurie Forbes
An investment group led by Chevy Chase, MD-based JBG Rosenfeld Retail purchased a 390,000-square-foot retail center in Gambrills, MD. Institutional clients advised by Prudential Real Estate Investors sold the property known as The Village at Waugh Chapel for an undisclosed price. JBGR, JBG’s Funds VI and VII and Buvermo Investments partnered to acquire the multi-building shopping complex.

Greenberg Gibbons of Owing Mills developed the complex between 2001 and 2002 on Chapel Lake Drive and Brandermill Boulevard in the Baltimore-Interstate 97/Crain Highway Corridor submarket. It is 25 miles northeast of Washington, DC, and 15 miles northwest of Annapolis.

The open-air town center is only 4% vacant and includes more than 60 tenants -- among them are Safeway, Marshalls, L.A. Fitness, Home Goods, Rite Aid, Robert Andrew Day Spa, Pier 1, Italian Market, Dress Barn, Four Seasons Grille, Bob Evans, Atlanta Bread, Chick-fil-A, and many more

Bill Kent and Gary Lawrence of CB Richard Ellis represented the selling group. Broker information for the buyers was not disclosed. Northwestern Mutual Life Insurance Co. provided the financing.

NEW SUPPLY

Talks May Resurrect Meadowlands Xanadu Project in NJ, by Randyl Drummer
If negotiations with billionaire Stephen Ross come to fruition, it’s expected that Xanadu - perhaps with a new name and a new look - could open before the end of 2010.

Billionaire Stephen Ross - whose Related Companies real estate firm is a major player in Manhattan development projects - has been in negotiations with Xanadu developer Colony Capital, as well as New Jersey state officials, about becoming a partner in the project, according to three sources familiar with the negotiations. The sources said Monday that a formal announcement could come this week.

If the negotiations with Ross, owner of the Miami Dolphins NFL team and a major builder in Manhattan, come to fruition, it’s expected that Xanadu - perhaps with a new name and a new look - could open before the end of 2010. The mix of entertainment and retail components is not expected to change dramatically under Related.

Earlier plans have included a 286-foot Pepsi Globe Ferris, child-friendly attractions such as Legoland and Magiquest, more than 200 stores and kiosks totaling 1 million square feet, a 2,000-seat movie theater, an indoor ski slope and a 17-screen movie theater.

A subsidiary of bankrupt Lehman Brothers missed payments in early 2009, causing other lenders to withdraw from the project. Financing for Xanadu and its partners, Colony, KanAm and Dune Capital to build out the retail and facility's 2 million-square-foot interior, quickly evaporated.

$48M Construction Loan Ensures 2010 Delivery of Canarsie Plaza
Acadia Strategic Opportunity Fund and P/A Associates secured a $48 million construction loan for Canarsie Plaza, a 256,783-square-foot neighborhood shopping center under construction in Brooklyn, New York. Mike Tepedino, senior managing director and Steven Klein, director, of the New York office of HFF (Holliday Fenoglio Fowler, L.P.) worked on behalf of the joint venture to secure the loan through M&T Bank and Capital One Bank.

Scheduled to deliver this November, Canarsie Plaza will be anchored by BJ’s Wholesale Club (173,460 sq. ft.) and the Brooklyn Police Department (33,044 sq. ft.). Situated on nearly 14 acres at the intersection of Remsen and Foster Avenues in the Canarsie area of Brooklyn, the center will also include 44,000 square feet of retail space along the perimeter of the development. The center is being built adjacent to the Brooklyn Terminal Market, a wholesale market that's been in business since 1942.

General Growth Secures Approval for 13M-SF Downtown Columbia Master Plan
General Growth Properties announced that its 30-year master development plan for 390 acres in downtown Columbia, MD was approved by the Howard County Council.

General Growth said this plan for downtown Columbia is "seen by many as the final realization of the original master plan created" by the Rouse Company, which "founded Columbia in the 1960s on largely undeveloped property and created 10 villages surrounding what was to be a downtown." Those villages are now home to nearly 100,000 people, but to date, the downtown Rouse envisioned never materialized, as it has been limited to The Mall in Columbia and some other commercial and residential projects.

The three-phase plan for the project encompasses up to 5,500 new residential units, 4.3 million square feet of commercial office space, 1.25 million square feet of retail space and 640 hotel rooms at full build-out. Additionally, General Growth plans to renovate the existing outdoor performance venue, Merriweather Post Pavilion, plus add a multi-modal transportation system.

PERSONNEL ANNOUNCEMENTS

Rufrano Named CEO of Cushman & Wakefield, by Andrew Deichler
Cushman & Wakefield said Tuesday that Glenn Rufrano has been appointed as the firm's new president and chief executive officer. Based in New York, Rufrano takes office on March 22 and will also join the company's board of directors. He succeeds Bruce Mosler, who moved to the role of co-chairman of the board at the beginning of the year. Follow this link to read the full story.

Lee & Associates Hires Retail Investment Sales Associate
The Los Angeles North / Ventura office of Lee & Associates has hired Eric Nishimoto as an investment sales associate. Nishimoto's expertise is in the sale, pricing and underwriting of retail and industrial properties, as well as long term investment strategy advisory services. Nishimoto joins Lee from Marcus & Millichap, where he was most recently an investment sales associate and member of The Azzi Group.

SUSTAINABILITY / GREEN BUILDING

Cary, NC McDonald's Earns LEED Gold Certification
At the Saltbox Village shopping center in Cary, North Carolina, a McDonald's restaurant has earned LEED Gold certification from the USGBC. The restaurant, located at 1299 Kildaire Road in Cary, is the third McDonald's in the nation to meet the USGBC's gold standards -- the other two are located in Savannah, GA and Chicago, IL. The restaurant opened last July.

To achieve this LEED rating, the McDonald's franchisee, Ric Richards, tore down the 25-year old building that stood at the site to re-open the new McDonalds $2 million and four-and-one-half months of construction later. Elements of the project leading to its certification include recycling and reuse of 99% of construction waste, energy efficient lighting, low-flow toilets, draught-tolerant landscaping, energy start-rated kitchen equipment, recycled building materials and furniture, use of low-VOC paints, and more.

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