CoStar's Retail News Roundup: Nov. 15-21, 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

November 16, 2009

The Flashy New and Improved Manhattan Mall

This week in the Retail Roundup, CoStar reports on expansions or new concepts at Apple and Urban Outfitters; closings, cutbacks, defaults, or bankruptcy news at Trans World, InkStop, and Hacketts; acquisition, merger, loan, sale, or IPO activity at Volkswagen and Regency Centers; personnel or corporate announcements at Glimcher, Forest City, CB Richard Ellis, and Grubb & Ellis; sustainability and green building news at Eat'n Park; and more.

Did you miss last week's CoStar Advisor national retail story, "Institutional Investors Throwing Big Money Around Over A Quality Retail Property?, 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

Apple to Open Up to 50 New Stores in 2010
Apple said last week that it plans to open 40 to 50 new retail stores in 2010, according to Reuters. However, about half of these stores are planned to open overseas. Apple's senior vice president of retail made the announcement at a media preview event for its latest New York City store, a transparent glass spectacle located at 1981 Broadway on Manhattan's Upper West Side.

Apple now operates 280 stores in 10 countries. According to the latest financial reports, Apple's retail division posted $1.87 billion in quarterly revenues, which was up 9% over the same period a year ago. The typical Apple store is located in an urban street retail setting, lifestyle center or mall and averages 7,333 square feet.

Urban Outfitters to Open 50 Stores Next Year
In its third quarter conference call on October 31, Urban Outfitters revealed plans to open up to 50 new stores in the next fiscal year, with between 15 to 20 new stores amongst each of its brands -- Urban Outfitters, Anthropologie and Free People. This number would be up from this year's openings, which the company projects will come in at 32 to 34 new stores.

Currently, the company operates 151 Urban Outfitters stores in the U.S., Canada and Europe; 133 Anthropologie stores in the U.S. and Europe; 34 Free People stores; and 1 Terrain garden center. In the call, management said it envisions an ultimate number of 250 Urban Outfitters and 250 Anthropologie stores in North America.

The retailer's stores typically reside in upscale malls. The average Urban Outfitters store is 9,500 square feet, followed by Anthropologie at 7,400 square feet and Free People at 1,400 square feet.

CLOSINGS/CUTBACKS/BANKRUPTCIES/DEFAULTS

Trans World Shuttering 125 Stores; Cutting Chain Size by Half Since 2006
Albany, NY-based Trans World Entertainment Corporation plans to close 125 stores after this holiday shopping season ends, according to the Albany Business Review. Reportedly, the music, video and movie stores are underperforming and primarily comprised of stores with naturally expiring leases. The closures would affect approximately 650 retail level employees.

Following this latest closure effort, Trans World would be left with about 565 stores. The company has been aggressively closing stores for the past few years, at it has been "in the red" since the first quarter of 2007. Trans World hit a peak store count of 1,091 in 2006, following its acquisition of Musicland. The majority of Trans World's stores are F.Y.E., but its portfolio also includes Saturday Matinee, Coconuts, Spec's and Wherehouse Music.

In Chapter 7, InkStop Retail Chain to Liquidate
Warrensville Heights, OH-based printer ink and toner chain, InkStop, abruptly closed all of its 152 stores on October 1, 2009. At the time, the company said the closures were temporary, giving the company time to restructure and focus on its cash flow problems.

Unfortunately, the company's efforts have resulted in a Chapter 7 bankruptcy filing. InkStop will not be re-opening stores and instead will liquidate all of its assets. Reportedly, the company owes more than $48 million to about 1,000 creditors, plus $1.1 million in wages and benefits to laid off employees the company's CEO and co-founder. Additionally, InkStop is the subject of numerous lawsuits and legal complaints, including 95 evictions.

This latest action by InkStop is in stark contrast to an April 2009 Crain's article. At that time, company co-founder, Dirk Kettlewell said that InkStop was benefiting from "not being involved in the banking thing," as its growth was fueled by more than $80 million in private equity funding from 150 investors worldwide that expected InkStop to grow into a large chain of 2,000 to 3,000 stores. According to Crain's, Kettlewell said he expected InkStop to become profitable later in 2009 "for the first time ever."

According to CoStar Tenant, the average InkStop is about 1,500 square feet.

Hackett's Department Store Chain Files Bankruptcy
Ogdensburg, NY-based Hackett's department store chain filed Chapter 11 bankruptcy in a New York Court on Nov. 10, 2009. Herbert Becker, the company's chief operating officer, said that under previous management, Hackett's expanded too fast and racked up enormous amounts of bills, according to Reuters. Hackett's intends to emerge from bankruptcy in a timely manner.

Hackett's currently employs about 100 people and operates four stores in Upstate New York in Ogdesnburg, Gouveneur, Tupper Lake, and Massena, plus a seasonal store in Sackets Harbor. On April 7, Hackett's put out a press release that said it had nine Hackett's stores and four Radio Shack stores at the time.

Hackett's is a wholly owned subsidiary of Seaway Valley Capital Corporation, a private equity company that also owns Alteri Bakery, Sackets Harbor Brewing Company, North Country Farms and Seaway Restaurant Group.

ACQUISITION/MERGER/SALE/LOAN/IPO ACTIVITY

$84M Gets Volkswagen the Potamkin General Motors Building in Manhattan
The Volkswagen Group of America acquired the Potamkin General Motors building and car dealership, located at 798-804 11th Avenue in Manhattan, for $84 million, according to a Nov. 12 announcement from CB Richard Ellis.

With an additional $41 million investment, Volkswagen plans to transform the 265,000-square-foot building into flagship dealerships for its Audi and Volkswagen brands. This deal will make Volkswagen well-represented on the "auto sales autoban" section of Manhattan's West Side, which also include such dealerships as Mercedes, Lexus, BMW, Toyota, and others.

The CBRE team representing Volkswagen included Jedd Nero, executive vice president, and Michael Kadosh, senior associate, in New York; Lauren Scarpace, vice president; Paul Beitz, first vice president; Tim Luke, alliance director for Volkswagen Group of America account, and Allen Dresselhouse, vice president, Project Management Services, in Detroit.

Volkswagen Group of America, Inc. was represented by the CBRE team of Jedd Nero, executive vice president, and Michael Kadosh, senior associate, in New York; Lauren Scarpace, vice president; Paul Beitz, first vice president; Tim Luke, alliance director for Volkswagen Group of America account, and Allen Dresselhouse, vice president, Project Management Services, in Detroit. Allen and Robert Potamkin, the sons of the company founder, along with Peter Paris, of Potamkin, negotiated the deal on behalf of their company.

"Volkswagen Group of America engaged CBRE in the search for a flagship Manhattan site back in February 2007, and identifying opportunities on 11th Avenue, which eventually stood out as a preferred location, was extremely challenging," said Mr. Nero. "However, Volkswagen was committed to its strategic plan to grow in the U.S. market and the Potamkin site ended up fitting perfectly into their business and marketing plan in New York," he added.

Scarpace said, "The current Potamkin building will be recreated from the inside out, leading to specific efficiencies and an extraordinary Volkswagen and Audi brand experience, with two distinct, cutting-edge architectural experiences."

Regency Centers Increasing Its Ownership Interest in $1.73B Retail Portfolio
Jacksonville, FL-based shopping center REIT, Regency Centers (NYSE:REG), exercised its options to increase its interest in Macquarie CountryWide-Regency II, LLC (MCW II), its existing co-investment partnership between Global Retail Investors LLC (GRI), Regency and Macquarie that currently owns 86 retail shopping centers across the country.

In July 2009, GRI (a joint venture between the California Public Employees' Retirement System and First Washington Realty) agreed to purchase the majority of Macquarie's interest in MCW II. At that time, MCW II's total was estimated at $1.73 billion. The first phase of that transaction, which involved the sale of 45% of the partnership to GRI, closed July 31, 2009. The second phase, in which an additional 15% of the partnership is set to be sold by Macquarie to GRI, is scheduled to close upon receipt of lender consents.

Also under the agreement, Regency had two options to purchase the remainder of Macquarie's interest (up to 15% in total) at a 7.7% discount; which Regency has exercised and this transaction is expected to close December 1, 2009. Following this closing, Regency's ownership in MCW II would amount to 40%. Additionally, Regency would continue to act as the managing member of MCW II and retain management and leasing responsibilities of its portfolio.

For more background on this transaction, click here.

NEW SUPPLY

Vornado Completes Revamp of Manhattan Mall
Vornado Realty Trust has completed its massive renovation and repositioning project involving the Manhattan Mall in New York City. The property is located in Herald Square and encompasses the full Avenue of the Americas block front extending from 32nd Street to 33rd Street.

The redesign of Manhattan Mall, which was completed in 18 months, was highlighted with the July opening of JC Penney's first Manhattan store -- a 153,000-square-foot design. GreenbergFarrow, the project architect, said Manhattan Mall now has improved site access and circulation, a renovated core and atrium, relocated and additional escalators and elevators, and new facades.

Vornado acquired Manhattan Mall in January 2007 for $689 million. At the time of sale, CoStar COMPs reported the building as 1 million square feet and 14 stories tall, primarily consisting of office space, but also encompassing 50+ retail shops and a food court totaling nearly 170,000 square feet.

Greenberg said the retail space now encompasses 400,000 square feet, consisting of two lower levels and two above-ground levels, featuring Victoria’s Secret, Charlotte Russe, Lids, Aeropostale, Express, Foot Locker and Sunglass Hut, among others.

Vornado has registered the Manhattan Mall with the US Green Building Council.

PERSONNEL ANNOUNCEMENTS

Glimcher Hires Ward Kampf as VP of Leasing
Glimcher Realty Trust (NYSE: GRT) recently hired Ward A. Kampf as Vice President of Leasing. Kampf most recently served as President of Retail Leasing for Newman, GA-based Thomas Enterprises, where he directed all aspects of retail leasing for the company's lifestyle, power, grocery-anchored and mixed-use retail projects; including management of the leasing team, overseeing strategic merchandising plans, and reviewing new sites for development.

Prior to Thomas, Kampf served as managing partner at Columbia 27 Partners, a retail real estate company that providing development and leasing services. Prior to Columbia, Kampf held positions as senior director of development of lifestyle centers and build-to-suits for Gap Inc., SVP of leasing and anchor leasing for General Growth Properties for eight years, and also worked in leasing at Glimcher.

Kampf is a member of the Urban Land Institute and the International Council of Shopping Centers. He received dual Bachelor of Art degrees in marketing and history from Southern Methodist University.

Ward Kampf, partner in the Blanton Property Co. "They wanted to be a part of that and saw the opportunity for growth." Before joining the Blanton Co., Kampf worked for General Growth Properties for eight years.

Forest City Promotes Ratner to President of Forest City West as Jones Retires
Brian Jones, chairman of west coast development for Cleveland-based developer, Forest City Enterprises, is retiring from the company. In his place, Kevin Ratner, Forest City's current president of residential west, has been named as president of Forest City West.

During his 30 years at Forest City, Jones played a key role in the development of approximately 17 million square feet of Class A retail projects -- including Westfield San Francisco Centre, Victoria Gardens, South Bay Galleria and The Promenade in Temecula in California, as well as the Galleria at Sunset in Nevada, Orchard Town Center in Colorado and many others.

In his new role, Ratner will assume overall direction of both residential and commercial development in the western United States, as well as leadership of Forest City's core market offices in Los Angeles and San Francisco.

Ratner has served as president of Forest City Residential West, where he was responsible for all of Forest City's western multifamily residential business, including leadership of major development projects in California. He serves on the board of directors of the LA Conservancy, SCI-Arc, the American Jewish University, USC LUSK Center, and UC Berkeley Fisher Center among other organizations. Ratner holds a Master's degree in real estate development from the University of Southern California.

CBRE and EWB Form Value Retail / Outlet Center Alliance in Interest of Adaptive Re-Use
CB Richard Ellis Group, Inc (CBRE) and EWB LLC (EWB) formed a non-exclusive alliance specializing in acquisition, leasing, marketing and disposition services for the value retail/outlet sector. The group intends to serve existing outlet and value centers, as well as reposition other types of retail assets into value, outlet and/or hybrid projects, and new developments in under-served markets.

Richard Frolik and Derrick Almassy of CBRE Retail will assist in the delivery of services, while EWB principals Lisa Quier Wagner, Peter Edelmann and Andrew Boyle will coordinate the alliance's activities. CBRE and EWB have worked together on several outlet centers, including Gettysburg Village, Gettysburg, PA, Quality Center, Lancaster, PA and Lake Park Outlets in Lake Park, Georgia.

"This alliance was formed in response to the proliferation of retail assets in need of adaptive re-use, and the orientation toward value being expressed by the American consumer. CBRE has been serving outlet owners, but only on the capital markets and property management segments since the late 90's and realized that if we could link with a provider of the leasing and marketing functions required of an operating outlet center, we could offer a complete solution for owners and their tenants of both existing value and outlet centers and assets that could be adapted," stated Anthony Buono, Executive Managing Director, CB Richard Ellis.

Grubb & Ellis Names D'Arcy New President and CEO, by Randyl Drummer
Santa Ana, CA-based Grubb & Ellis Company (NYSE: GBE) has named real estate veteran Thomas P. D'Arcy president and chief executive officer. D'Arcy, 49, who will also take a seat on Grubb's board of directors, has led both public and private real estate… click here for full story.

SUSTAINABILITY / GREEN BUILDING

Eat'n Park Breaks Ground on Silver LEED Restaurant in Pittsburgh
Eat'n Park breaks ground this month on what is planned to be the first LEED-certified restaurant in Pittsburgh. Located in the Waterworks shopping center in Fox Chapel, the company is building the restaurant to achieve Silver-level LEED certification.

Planned to open in May 2010, the restaurant's sustainable features include energy efficient equipment and appliances, use of recycled construction materials, sensor-driven lighting, sky lights, an exposed lobby, an information wall dedicated to educating patrons on the restaurant's sustainable elements, reserved parking for carpooling and low emission vehicles, and more.

This effort to open a LEED-certified restaurant is part of Eat'n Park's "EcoSteps" program, under which it has sourced food locally, reduced waste by eliminating paper towels and placemats, recycling used fryer oil into bio-fuel, and utilizing CFL light bulbs, among other initiatives.

In business for fifty years, Eat'n Park has grown to a 75-restaurant chain with units in Pennsylvania, West Virginia, and Ohio.

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