CoStar's Retail News Roundup: Oct. 4 to 10, 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.

By Sasha M Pardy

October 5, 2009

Movie Gallery Closing 200 Game Crazy Stores

This week in the Retail Roundup, CoStar reports on expansions or new concepts at Walgreens and Muscle Maker Grill; closings, cutbacks, defaults, or bankruptcy news at Game Crazy, InkStop and Audit Integrity; acquisition, merger, loan, sale, or IPO activity at Macerich and Heitman, Glimcher and Merlone Geier, and Getty Realty; new retail development news in MS and WI; personnel or corporate announcements at Cole Real Estate and Cedar Shopping Centers; sustainability and green building news at Vitamin Shoppe and Darden Restaurants; and more.

Did you miss last week's CoStar Advisor national retail story, "Outlet Centers Rise to the Top During Recession"? 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

Walgreens Opens 7000th Store; Planning Up To 570 New Stores Through 2011
Walgreens (NYSE:WAG)(NASDAQ:WAG) celebrated the grand opening of a new store at 2950 Coney Island Ave in Brooklyn, NY -- its 20th location in the borough. The Oct. 1 opening marked the drugstore retailer's 7,000th store nationwide. Over the past 10 years, Walgreen has grown from 3,000 stores and with this latest opening, reached its stated goal of 7,000 U.S. stores by 2010. Walgreens President and CEO Greg Wasson said, “Today, more than 50% of the U.S. population lives within two miles of a Walgreens and close to 75% lives within five miles."

In its fourth quarter report on Sept. 29, Walgreens said it opened 554 net new drugstores this past year, including 70 acquired stores. The retailers is planning organic store growth of 4.5% to 5% during fiscal 2010 (315 to 350 stores) and 2.5% to 3% annually beginning in 2011 (translates to 183 to 220 new stores in 2011).

Muscle Maker Grill Has 200 Restaurants in the Pipeline
In December 1995, Rod Silva opened the first Muscle Maker Grill restaurant in Colonia, NJ. With the tag line "great food with your health in mind," the restaurant concept locates near gyms and fitness centers and is geared towards providing healthy food for gym members and the like.

Through franchising, the chain has grown to 17 units in New Jersey and this month, its first New York location opens in the Bronx. Reportedly, the company has franchises agreements sold for another 200 units, with locations coming soon in Manhattan, Philadelphia, Houston, Miami, Port St. Lucie, Fort Lauderdale, plus several more New Jersey locations.

According to CoStar Tenant, the typical Muscle Maker Grill ranges from 1,400 to 2,000 square feet. The company continues to seek franchisees to open new restaurants in California, Texas, Phoenix, Las Vegas, Atlanta, Denver, New Orleans, the Florida Coast, Ohio, Hawaii, the Bahamas and Virgin Islands.

CLOSINGS/CUTBACKS/BANKRUPTCIES/DEFAULTS

Movie Gallery Closing 200 Game Crazy Stores
The country's second largest movie rental retailer, Movie Gallery, is closing 200 of its 680 Game Crazy stores. The stores, which sell new and used video games and accessories, are located adjacent to Hollywood Video locations across the country. The inventory liquidation process at the 200 stores has already begun and the locations will shutter by the end of this month -- their adjacent Hollywood Video stores are expected to remain open.

In a statement, Movie Gallery described the affected stores as "underperforming" and said the "unprecedented consumer/retail environment" has been challenging. According to CoStar Tenant, the typical Game Crazy store is 500 square feet, but select locations run as large as 7,000 square feet.

This closure announcement follows Blockbuster's recent plan to close 960 stores through 2010. Meanwhile, the world's largest video game retailer, GameStop, has opened at least 776 net new stores over the past year, to now operate 6,333 stores in 17 countries.

InkStop Abruptly Closes All 152 Stores
Warrensville Heights, OH-based printer ink and toner chain, InkStop, sent a letter to its employees last week that read, "The company has elected to temporarily close all stores at the close of business today, October 1, to focus on a restructuring plan... All employees are laid off until further notice." The company cited cash flow problem among its key issues.

After closing six stores early this year, the chain reported in an April Crain's article that it had 155 stores in 14 states from Ohio to Texas, which according to various reports, was down to 152 stores by the time the Oct. 1 closure letter was issued.

The latest action by this ink retailer is in stark contrast to the April 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.

Audit Integrity Identifies Five Retail Companies with High Probability for Bankruptcy
Los Angeles-based Audit Integrity, an independent research firm that rates more than 12,000 public companies based on their "corporate integrity", recently released the results of a corporation bankruptcy study designed to identify the companies (with a market capitalization of $1 billion or more) most likely to declare bankruptcy.

Of the 20 companies Audit Integrity identified as having the "highest probably of declaring bankruptcy", five firms with a significant amount of retail stores were listed: Macy's, Oshkosh, Rite Aid, Sprint Nextel and Goodyear Tire & Rubber.

"According to the U.S. Bankruptcy Courts, the number of business bankruptcy filings during the first six months of the year rose 64 percent over the first half results in 2008," said Audit Integrity in its report, warning that "bankruptcy filings tend to lag after an economic downturn."

ACQUISITION/MERGER/SALE/LOAN/IPO ACTIVITY

Heitman Acquiring 49.9% Interest in Two Macerich Malls for $167.5 Million
Macerich (NYSE:MAC) and Chicago-based Heitman have entered into a joint venture on two of Macerich's malls -- Freehold Raceway Mall and Chandler Fashion Center. Under the terms of the deal, Macerich receives $167.5 million in net cash proceeds and Heitman acquires a joint venture interest of 49.9% and assumes a pro rata share of the property level debt. Macerich will continue to manage the properties.

Anchored by Nordstrom, Macy's, Lord & Taylor, JCPenney and Sears, the 1.67-million-square-foot Freehold Raceway Mall was built in 2001 in Freehold, NJ. Macerich acquired the mall in 2005 as part of a $2.3 billion portfolio deal with Wilmorite Properties. Since, the REIT has remodeled and expanded the 95% occupied mall by 96,000 square feet. As of June 30, Macerich reported a $168.6 million loan on the property maturing in July 2011.

Chandler Fashion Center, a 1.33-million-square-foot mall in Chandler, Arizona is anchored by Nordstrom, Dillard's, Sears and Macy's. Built in 2001 and 96% occupied, Macerich acquired the mall as part of its $1.5 billion 2002 acquisition of Westcor Realty. As of June 30, Macerich reported two loans on the property totaling $164.8 million that mature in November 2012.

During 2008, Macerich said both malls averaged $500 in tenant sales per square foot; which is 13.4% higher than its mall portfolio average.

This transaction is yet another piece of Macerich's ongoing deleveraging strategy, in which it has sold significant interest in some of its best malls as part of joint ventures. In early September, it sold a 75% interest in its Flatiron Crossing Mall to GI Partners for $116 million. In July, the REIT sold a 49% interest in its Queens Center mall for $150 million to Cadillac Fairview.

Merlone Geier Terminates $192M Acquisition of Glimcher's Lloyd Center Mall
Glimcher Realty Trust (NYSE: GRT) announced that Merlone Geier Partners terminated its previously announced deal to buy the REIT's Lloyd Center Mall in Portland, Oregon. According to the release, Merlone had the option to terminate the sale agreement at its sole discretion before September 30, 2009. Merlone was expected to buy the 1.4 million-square-foot mall for $192 million. For more on this cancelled transaction, click here.

Getty Realty and DAG Enterprises Complete $49M Sale-Leaseback Deal
Getty Realty Corp. recently acquired 36 Exxon-branded gas / convenience store properties as part of a $49 million sale-leaseback transaction with White Oak Petroleum. Under terms of the transaction, White Oak acquired the stations from ExxonMobil and then sold the properties to Getty Realty, simultaneously signing a triple-net, 20-year lease agreement on the sites. The stations, located primarily in Prince George's County in Maryland, will continue to operate under the Exxon brand.

White Oak is affiliated with DAG Enterprises, one of the largest fuel distribution companies in the Mid-Atlantic region. Getty is the largest U.S. REIT specializing in the ownership and leasing of convenience store / gas stations.

Petroleum Capital & Real Estate negotiated the transaction for DAG and said the company has acquired 111 sites from Exxon and Shell already this year. DAG also recently completed the acquisition of 19 Shell-branded sites in the Arlington and Alexandria, Virginia areas.

NEW SUPPLY

Opus North's Shoppes at Fox River Now Open
Opus North, which broke ground on The Shoppes at Fox River last summer, has opened the 250,000-square-foot first phase of the power center on Sunset Drive in the Milwaukee suburb of Waukesha, WI.

The 90% leased center, situated on 54 acres that were formerly home to a Supervalu distribution facility, is anchored by a 132,000-square-foot Target and 60,000-square-foot Pick 'n Save grocery store. Other tenants scheduled to open this fall include CVS (14,000 sq. ft.), Chili's (5,000 sq. ft.), Buffalo Wild Wings, Subway, GNC, Verizon, GameStop and Noodles & Company. A Petco (13,500 sq. ft.), Maurice's, and Famous Footwear are scheduled to open at the center this spring.

Opus plans to start construction on the 250,000-square-foot second phase in spring 2010, with opening penciled in for summer 2011.

KKE Architects serves as the architectural firm on the project, while Michael Fitzgerald and Dan Rosenfeld of Mid-America Real Estate Wisconsin serves as leasing agents.

CBL & Forum to Celebrate Grand Opening of The Promenade D'Iberville
On October 11, 2009, CBL & Associates and its joint venture partner, Forum Development Group, are celebrating the grand opening of The Promenade D'Iberville, a 700,000-square-foot power center situated on 72 acres at the northwest corner of I-10 and I-110 in D'Iberville, MS.

Anchored by Target (132,000 sq. ft.), Kohl's, Dick's Sporting Goods (50,000 sq. ft.), Best Buy (30,000 sq. ft.), Marshalls (28,000 sq. ft.), PetSmart and Michael's (21,000 sq. ft.), the center has 80,000 square feet of small shop space and 13 pad sites. Restaurants include Olive Garden, Red Lobster, and Newk's Express Café.

CBL said the center's grand opening marks the largest retail opening within the Mississippi Gulf Coast since Hurricane Katrina.

PERSONNEL ANNOUNCEMENTS

Former Opus West President & CEO Hired at Cole Real Estate Investments
Phoenix-based Cole Real Estate Investments hired Thomas Roberts as President of its Real Estate Group. In this capacity, Roberts will oversee Cole's acquisitions, underwriting, asset management, leasing and other real estate activities.

Roberts most recently served as President and CEO of Opus West Corporation, where he worked for about 16 years and was responsible for the design, construction and development of over 50 million square feet of commercial real estate valued at more than $8 billion. Under his tenure, Opus West's revenues grew from $50 million to more than $750 million annually and the group's size grew from 13 to 300 employees at nine offices throughout the western states. News first surfaced of Roberts departure from Opus West in May 2009. Prior to Opus, Roberts worked as a VP of Real Estate Development at the Koll Company.

Roberts has been active in organizations including the Greater Phoenix Economic Council, International Council of Shopping Centers, National Association of Industrial and Office Properties, Young Presidents Organization, Urban Land Institute, Phoenix Boys and Girls Club, and Xavier College Preparatory Board of Trustees.

Cedar Shopping Centers Director Resigns for U.S. Senate Seat
Port Washington, NY-based retail REIT, Cedar Shopping Centers (NYSE:CDR), announced that Paul Kirk, Jr. has resigned from the company in light of his appointment as a U.S. Senator for Massachusetts. Senator Kirk, a Director of the Cedar since 2005, also served as Lead Director and Chairman of the Company's Nominating and Corporate Governance Committee.

SUSTAINABILITY / GREEN BUILDING

Vitamin Shoppe Launches New Concept - "Eco Shoppe"
The Vitamin Shoppe has launched a new retail concept -- "Eco Shoppe" sells products geared towards sustainable living. The first Eco Shoppe opened in August in a 4,400-square-foot space in Austin, TX and a second will be opening soon in Walnut Creek, California.

The company said the decision to launch a stand-alone store for the concept materialized after successful sales of a small range of eco-friendly products in its Vitamin Shoppe stores. The store sources recycled, fair trade, local and eco-friendly products primarily from small companies ranging from home, garden and office products to pet, kid and baby products, and more.

Vitamin Shoppe aims to earn LEED Silver-level certification from the USGBC for the build-out of its Austin store. "Green" elements of the build-out include reclaimed wood flooring, fixtures with 36% recycled content, energy efficient and sensor-controlled lighting, signage made from recyclable materials, and more.

For now, the retailer is testing the concept with these two stores before any further expansion plans are made.

Darden Restaurants' LEED Gold Headquarters Complete
Trammell Crow Company completed Darden Restaurant Corporation's new headquarters building in Orlando, Florida. The three-story, 469,000-square-foot facility was built to achieve LEED Gold certification from the USGBC -- it would be the largest LEED Gold building in Florida.

Elements of the building's LEED design include: recycling of construction waste, energy efficient HVAC and lighting, a 114,000-square-foot glass curtainwall exterior, a reflective roof, use of reclaimed water, and landscaping with native materials and highly absorbent soil.

The Darden headquarters is designed to house 1,300 employees that support the chain's 1,800 Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52 restaurants. The new building includes a fitness and wellness center, dining facility, bank, and one-half mile walking trail. Previously, employees worked in 12 different buildings spread across a two-mile radius -- they will complete moving into the new headquarters this month.

Perkins + Will served as architects on the project, while the general contractor was Hardin Construction, corporate services were provided by Value Partners and Trammell Crow Company oversaw the project.