If retail landlords didn't have enough problems already

David Goldsmith

All Powerful Moderator
Staff member

One of Soho’s priciest retail spaces sells at UCC foreclosure auction​

SL Green lost Spring Street property last year, after paying $80M for it in 2019​


One of Soho’s priciest retail properties, which SL Green Realty owned then lost, traded hands at a UCC foreclosure auction.
The roughly 6,000-square-foot retail space at 106 Spring Street, which has been vacant for years, sold to a Texas private equity firm earlier this month, Commercial Observer reported. The sale price was not disclosed.

The buyer, Paceline Equity Partners, called it a “unique asset” that could benefit from the post-pandemic economic recovery. CEO Sam Loughlin said the company has a “patient view of the recovery timeline for the Soho retail property market,” according to the publication.

SL Green bought the space in 2019 for $79.5 million from the Carlyle Group and 60 Guilders. The purchase price was a 25 percent discount from the $105 million those investors paid in 2016. SL Green had acquired a nearby retail space, 133 Greene Street, from the same sellers in 2018.
Citizens Bank was the lender on SL Green’s interest in both properties, and foreclosed on that interest, as well as the one at 133 Greene, late last year. The foreclosure triggered the UCC auction, which was originally set to happen in December.

Mezz lenders — which provide junior debt on real estate projects — are increasingly initiating UCC foreclosures on some major developments in need of “rescue funding.”
It was unclear how big Citizens’ mezzanine position was, but according to SL Green’s second-quarter financials, 106 Spring and 133 Greene streets carried a combined $53.5 million in senior and mezzanine debt as of late June.
 

David Goldsmith

All Powerful Moderator
Staff member
Soho "bounces back" with a deal at $73/SF where asking prices were $713 not much longer than a year ago.

Soho slowly bounces back with new retail leases​

Tenants drawn in by lower rents, favorable terms​

Like many of the city’s major retail districts, Soho has been hit hard by the pandemic, with foot traffic falling and landlords taking a hit on rents. But there are some signs of life in the neighborhood, with new leases being signed in recent weeks.
Notably, women’s clothing store Pinko inked a deal to take over a former Bed, Bath & Beyond at 143 Spring Street, the Wall Street Journal reported. The Italian brand will sublease the 4,925-square-foot retail space — a sign that retail subleasing may become more popular in the coming months, as stores sit empty.

Valentino SpA, another Italian clothing brand, also inked a deal to take over a more than 8,700-square-foot space near the Pinko flagship. Target also recently signed on to take 27,000 square feet at 600 Broadway,
Falling rents are helping lure retailers back to the ailing neighborhood. In the case of Pinko, the company is paying a yearly rate of about $73 per square foot to sublease the Spring Street space, according to the report. That’s a “significant discount” from what the main leaseholder pays, according to Alex Carini of the Carini Group, which helped broker the deal.

Asking rents along Manhattan’s main retail corridors have dropped dramatically as a result of the pandemic, with some neighborhoods hit harder than others. In Soho, asking rents along Prince Street fell in the fourth quarter of 2020 by nearly half, from $719 to $423 per square foot year over year.
 

David Goldsmith

All Powerful Moderator
Staff member

Believe it or not: Ripley’s, Modell’s, Liberty Theater abandon 42nd Street home​

Property now has nearly 65K sf of vacant space​

Just a year ago, the retail and entertainment complex at 234 West 42nd Street was a bustling part of Times Square, with Ripley’s Believe It Or Not, Dave & Busters and Applebee’s among the establishments anchoring the block between Seventh and Eighth avenues.
But in the wake of the pandemic, tenants have slowly emptied out of the building, and it’s struggling to regain its former glory.

The most recent casualties are Modell’s, Ripley’s Believe It Or Not and the Liberty Theater. The three spaces are currently being marketed as available to lease by Cushman & Wakefield, according to public property brochures. They would leave behind a combined 64,728 square feet of vacant space. A broker for the firm declined to comment.

Modell’s, which filed for bankruptcy last year, and the Liberty Theater have already closed their doors. Ripley’s Believe It Or Not was still open on a recent visit, and representatives for the company did not respond to a request for comment.

It’s not the first time that the prime Times Square property has been wounded during the pandemic. A Hilton Hotel at the same location closed permanently last year, and its owner, Sunstone Hotel Investors, turned the keys to the property over to one of its mortgage lenders in January. The hotel’s entrance is now surrounded by yellow caution tape.
Other businesses in the building, including an Applebee’s restaurant, have been closed due to the pandemic. The AMC Empire 25 movie theater was only given the green light to reopen in early March.
Times Square today is nothing like it was a year ago. Last January, the area was a hub of activity, with around 303,338 daily visitors on average. But in January 2021, foot traffic had fallen 70 percent to 89,856, according to the Times Square Alliance’s monthly pedestrian count.

That drop in foot traffic has resulted in bankruptcies, lawsuits and closures — and, consequently, hurt for landlords. The average asking rent per square foot in the area hit $1,643 in fall 2020, a 13 percent decline year-over-year, according to a REBNY retail report.
On a March 16 visit to the property, the Modell’s billboard on the front of the building was dark, as was the one for the Liberty Theater. Ripley’s still had some signs of life, with its doors swung open and videos of human wonders playing on its signage. Several visitors were inside taking pictures.
The Applebee’s, meanwhile, had a sign on its darkened storefront emblazoned with the words, “C’mon In.”
 

David Goldsmith

All Powerful Moderator
Staff member
"The average price of $1,996 was up from 2020, according to Avison Young, but down nearly 50% from $3,485 in the peak of 2016."

"A recent valuation of one Fifth Avenue retail property, for example, pegged its worth at just $37.8M — a 70% drop from six years ago. Last October, three retail properties on Madison Avenue sold for $1,340 per SF, a reported 80% drop from 2014."

""We sold it at over $2K a foot … Back in the day, we sold properties on Bleecker Street for north of $6K or $7K a foot,” he said. “We're talking about retail values, in some cases, that are less than half what the peak was.”
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
"The average price of $1,996 was up from 2020, according to Avison Young, but down nearly 50% from $3,485 in the peak of 2016."

"A recent valuation of one Fifth Avenue retail property, for example, pegged its worth at just $37.8M — a 70% drop from six years ago. Last October, three retail properties on Madison Avenue sold for $1,340 per SF, a reported 80% drop from 2014."

""We sold it at over $2K a foot … Back in the day, we sold properties on Bleecker Street for north of $6K or $7K a foot,” he said. “We're talking about retail values, in some cases, that are less than half what the peak was.”
wow, contrarian in me wants to buy it all
 

David Goldsmith

All Powerful Moderator
Staff member

Only 14% of restaurants closed permanently because of pandemic​

Predicted devastation did not quite materialize​


The number of restaurant casualties resulting from the pandemic may be far less than expected.
The National Restaurant Association found that 90,000 restaurants — approximately 14 percent of all eateries — across the U.S. have closed permanently or long-term, according to Bloomberg News. It was once predicted that one-third would shutter.

In a normal year, 50,000 restaurants close. That number rose during the pandemic, but initiatives such as the Paycheck Protection Program have limited the toll.
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Although most restaurateurs have been able to stay afloat, many have seen diminished sales. In the past 14 months, sales are $290 billion lower than expected pre-pandemic levels.

However, for April 2021 they were down just 2 percent from the $66.2 billion in sales in February 2020, the last month before the pandemic.
“The restaurant industry is definitely on a revitalization path now,” Hudson Riehle, senior vice president of research and knowledge for the National Restaurant Association, told Bloomberg. “Sales numbers are trending in the correct direction, and with the advent of warm weather, it bodes well for outdoor dining, which has been a lifeline to restaurant operators.”

Indeed, with customers returning, the biggest problem eateries seem to face now is replenishing their staffs. Some workers moved on to other occupations during the pandemic. Lack of child care with schools remaining closed is also keeping people out of the workforce, as are unemployment benefits that meet or exceed what many Americans could make in restaurant jobs.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member

Only 14% of restaurants closed permanently because of pandemic​

Predicted devastation did not quite materialize​


The number of restaurant casualties resulting from the pandemic may be far less than expected.
The National Restaurant Association found that 90,000 restaurants — approximately 14 percent of all eateries — across the U.S. have closed permanently or long-term, according to Bloomberg News. It was once predicted that one-third would shutter.

In a normal year, 50,000 restaurants close. That number rose during the pandemic, but initiatives such as the Paycheck Protection Program have limited the toll.
view
view

Although most restaurateurs have been able to stay afloat, many have seen diminished sales. In the past 14 months, sales are $290 billion lower than expected pre-pandemic levels.

However, for April 2021 they were down just 2 percent from the $66.2 billion in sales in February 2020, the last month before the pandemic.
“The restaurant industry is definitely on a revitalization path now,” Hudson Riehle, senior vice president of research and knowledge for the National Restaurant Association, told Bloomberg. “Sales numbers are trending in the correct direction, and with the advent of warm weather, it bodes well for outdoor dining, which has been a lifeline to restaurant operators.”

Indeed, with customers returning, the biggest problem eateries seem to face now is replenishing their staffs. Some workers moved on to other occupations during the pandemic. Lack of child care with schools remaining closed is also keeping people out of the workforce, as are unemployment benefits that meet or exceed what many Americans could make in restaurant jobs.
PPP had to have a big impact. Putting aside unintended consequences and bad actors that made out well from govt handouts, it helped put a floor to the devastation. Still think time needs to pass to see the full story, especially if a second deflationary cycle down should hit
 

David Goldsmith

All Powerful Moderator
Staff member
While I'm very happy for the reopening and seeing how excited everyone is about going out to shop, eat and play again, on my walk today down to Honest Chops on East 9th Street I walked down 1st Avenue and back up 2nd. I was still surprised to see the large amount of vacant retail storefronts.
What’s Really Going on With New York City Retail?
Last February, Loeffler Randall co-founders Brian Murphy and Jessie Randall signed a lease on the brand’s first store, a 625-square-foot space in Manhattan’s Nolita neighborhood. The timing couldn’t have been worse. By March, the city was in lockdown amid a surge of Covid-19 infections, and buying a new pair of shoes was the last thing on anyone’s mind.

Today, though, the boutique is open and the streets are once again bustling with shoppers. Half of New York City residents are now at least partially vaccinated against the virus, and sunny weather is here, bringing with it a renewed sense of optimism and appetite for products like the brand’s bow-adorned sandals.

“A lot of people told us to get out of the lease if we could, but we just hung in with it,” says Randall, adding that the store was a great motivator for her team. “It had been such a terrible year of horrible news and [the store] was just this wonderful, happy project that we were all working on and so excited about.”

While the company’s sub-landlords SMCP — the group behind brands including Sandro and Maje — didn’t forgive any rent during the year the space was shuttered, they were flexible with payment terms and became valuable mentors throughout the process, says Murphy. (SMCP operates more than 160 stores in North America alone.)
As the city’s public health outlook improves, he said, “I think there is going to be a big wave of enthusiasm for brands like ours and for retailers who are doing special things in special places.”
In nearby blocks, the Swiss running-shoe brand On opened its first global flagship in December, kitting out the floor with gait analysis technology and an invisible foot scanner to measure size and running style. Sustainability-minded sneaker brand Veja, meanwhile, recently launched a running club based out of its Nolita boutique, which opened in March 2020.
Even with foot traffic picking up and retailers pulling out every stop, though, there is still a long road ahead for New York City’s retail market: empty storefronts abound, office workers are just beginning to trickle back in, and tourism is expected to take years to recover.
The retail vacancy rate in Soho was 22.4 percent in the first quarter of 2021, according to data from the commercial real estate firm Newmark. In Times Square, Fifth Avenue, and Madison Avenue — pricey corridors that rely on international tourists and wealthy commuters — vacancies have soared north of 25%.

Average asking rents, too, have declined significantly: In Soho, they’ve fallen to $261 per square foot from $343 per square foot in the first quarter of 2020, per Newmark, and to $1,528 per square foot from $1,976 per square foot on Fifth Avenue.
Joseph Aquino, president of JAACRES, a New York City-based commercial real estate company, says he has seen even steeper declines in the market, with some properties on Madison Avenue that once asked rents of $1,500 to $1,800 per square foot now asking as low as $500 to $600 per square foot.
These major adjustments may be necessary in some cases, he says, especially in neighborhoods where foot traffic and sales could take years to return to pre-pandemic levels.
“People really have to have to recognize that this is not going to go away in a couple of quarters,” says Aquino, adding that he’s concerned that landlords may look at the signs of life around the city and prematurely hike their rents. “I understand the property owner doesn’t want to lock into a lower rent, but at the end of the day it’s all about sales. If there’s not a market here to support the rent, then why would the retailer even go through the exercise of renting the store?”
Subway ridership is still down by about 55% to 60% from pre-Covid levels, according to MTA data, and tourism officials project that the city will draw just over half as many visitors in 2021 as it did in 2019.
The pockets of strength in the retail real estate market so far have been mostly in neighborhoods with plenty of residential foot traffic: corridors on the Upper West Side and Upper East Side; Williamsburg, Brooklyn; suburbs such as Westport, Greenwich, and Northern New Jersey; and high-end summer enclaves like the Hamptons.
In April, Birkenstock chose Williamsburg for its third U.S. store, calling the location “another great example of being where our fans live, work and play.” Earlier in the year, luxury resaler The RealReal opened shop in Cobble Hill, Brooklyn, a residential neighborhood that’s also home to Rag & Bone and Bonobos outposts. Charleston Shoe Company, which signed leases for three New York-area locations in 2019 — Soho, Sixth Avenue near the Plaza Hotel, and Southampton — has since shuttered all but the Hamptons door. There, at least, sales remain strong, says Aquino, who brokered the deals.

The picture has been bleak, however, for major thoroughfares in Midtown. Asics, for one, closed its Fifth Avenue flagship in January, citing impacts from the pandemic. Ralph Lauren, meanwhile, is mired in a dispute with its landlord over the brand’s attempt to sublease its vacant, $27-million-per-year store for just $5 million annually to the fast-fashion chain Mango, according to a report from Insider.
“During Covid, you really had a tough time talking to any national chain about New York City, because they were looking at the store numbers and business was so drastically down compared to the rest of the country,” said Ariel Schuster, Newmark’s vice chairman of retail. “It was like, ‘Why would we do anything right now?’”
That’s changed in recent weeks, he says, as the city has set a target date for a full reopening — July 1 — with attractions such as Broadway shows and music festivals coming back soon thereafter.
Luxury retailers, too, are more interested in expanding to growing markets in Florida and Texas than in opening more stores in New York, says Newmark. Still, the city remains an essential hub.
In the coming weeks, Manolo Blahnik is expected to open its flagship store at 717 Madison Avenue, a lease it signed in March 2020. Schuster, who helped broker the deal, says rents have declined along the corridor since their peak in 2017 and the brand secured a “very fair lease.”
While recovery is set to be slow and uneven, few doubt its inevitability.
“New York is always going to be New York,” says Taylor Coyne, senior manager of retail research at JLL, a commercial real estate firm. “It will always be a global city and retailers want to be there. It’s just been a tough year.”
 

David Goldsmith

All Powerful Moderator
Staff member

Can Commercial Tenants Really Avoid Rent During the Pandemic Using the Frustration-of-Purpose Doctrine?​

Recent decisions and the use of the frustration-of-purpose doctrine to absolve commercial tenants of their obligation to pay rent could signal headwinds for the New York commercial real-estate market—and the economy more generally

 

David Goldsmith

All Powerful Moderator
Staff member
Vornado to sell five Manhattan retail properties, takes loss of $7M

The company said the properties have “negative income” and “street level occupancy is approximately 30 percent.”​

Vornado Realty Trust has agreed to sell off five struggling retail properties in Soho and the Upper East Side for $184.5 million, resulting in a loss of about $7 million.
The New York-based real estate firm, led by Steve Roth, is selling properties at 677-679 Madison Avenue, 759-771 Madison Avenue, 828-850 Madison Avenue, 478-482 Broadway and 155 Spring Street, according to a statement from the company. Vornado declined to comment beyond the statement.
Vornado, which didn’t disclose the buyer, said the properties have “negative income” and occupancy stands at just 30 percent.

The properties are being sold in three separate transactions. The sale of the Madison Avenue properties is expected to close in the third quarter, while the Soho ones are expected to close in the first quarter of 2022, according to Vornado.

The pending sale could be another signal of the demise of street-level retail on Madison Avenue. The iconic shopping corridor, which stretches from 57th Street to 72nd Street and has historically commanded some of the priciest retail rents in the city, has just 71 percent of its 2019 foot traffic, according to a recent estimate from location analytics firm Orbital Insight. Madison Avenue has a number of vacant storefronts and an availability rate of 39 percent, the highest in Manhattan. Some of the challenges can be attributed to Covid-19 and a decrease in tourism.

Soho has also been hit hard by the pandemic. In a sign of just how much the market has fallen, the valuation of Thor Equities’ 6,600-square-foot building at 470 Broadway has plummeted to $5.6 million in April from $29.2 million nine years ago, according to Trepp, a data provider that tracks mortgage-backed securities.

Vornado owned 20.6 million square feet of Manhattan office space in 33 properties, along with 2.6 million square feet of Manhattan street retail space, according to its 2020 letter to investors.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
Vornado to sell five Manhattan retail properties, takes loss of $7M

The company said the properties have “negative income” and “street level occupancy is approximately 30 percent.”​

Vornado Realty Trust has agreed to sell off five struggling retail properties in Soho and the Upper East Side for $184.5 million, resulting in a loss of about $7 million.
The New York-based real estate firm, led by Steve Roth, is selling properties at 677-679 Madison Avenue, 759-771 Madison Avenue, 828-850 Madison Avenue, 478-482 Broadway and 155 Spring Street, according to a statement from the company. Vornado declined to comment beyond the statement.
Vornado, which didn’t disclose the buyer, said the properties have “negative income” and occupancy stands at just 30 percent.

The properties are being sold in three separate transactions. The sale of the Madison Avenue properties is expected to close in the third quarter, while the Soho ones are expected to close in the first quarter of 2022, according to Vornado.

The pending sale could be another signal of the demise of street-level retail on Madison Avenue. The iconic shopping corridor, which stretches from 57th Street to 72nd Street and has historically commanded some of the priciest retail rents in the city, has just 71 percent of its 2019 foot traffic, according to a recent estimate from location analytics firm Orbital Insight. Madison Avenue has a number of vacant storefronts and an availability rate of 39 percent, the highest in Manhattan. Some of the challenges can be attributed to Covid-19 and a decrease in tourism.

Soho has also been hit hard by the pandemic. In a sign of just how much the market has fallen, the valuation of Thor Equities’ 6,600-square-foot building at 470 Broadway has plummeted to $5.6 million in April from $29.2 million nine years ago, according to Trepp, a data provider that tracks mortgage-backed securities.

Vornado owned 20.6 million square feet of Manhattan office space in 33 properties, along with 2.6 million square feet of Manhattan street retail space, according to its 2020 letter to investors.
Hmm, I mean, for every seller there is a buyer. For the seller it could be a signal of the demise of street level retail, for the buyer it could be an attractive long term yielding asset. Looking ahead 10 years, great buy. Short term, yea, some pain to work through still
 

David Goldsmith

All Powerful Moderator
Staff member
The losses keep rolling in.

Brookfield taking big loss on Fifth Ave retail condo​

Investor selling 530 Fifth Avenue for $190M, 36% less than it traded for in 2014​

 

David Goldsmith

All Powerful Moderator
Staff member

Thor Equities can keep $1.2M deposit on failed 933 Broadway sale: judge​

The lawsuit stemmed from dispute over a key deadline in now-collapsed transaction​

A judge has sided with Thor Equities in a lawsuit involving a failed sale of 933 Broadway, allowing Joe Sitt’s firm to keep the $1.2 million deposit from the would-have-been buyer, Mactaggart Family & Partners.
The lawsuit stemmed from a dispute over how to count days to determine a key deadline in a nearly $24 million now-collapsed transaction in the Flatiron District.

On March 11, 2020, Mactaggart Family & Partners signed a contract to purchase the Thor retail building. But the family office backed out on May 7, asserting that Thor defaulted on the agreement by not providing documentation for all leases held by the building’s tenants by the deadline, defined in the contract as “at least two business days before the closing date.”

The closing date was set for Monday, May 11, and in Mactaggart’s interpretation, the deadline for providing documentation passed at midnight on May 6. The firm sued Thor to get the deposit back.

Thor, however, argued that Mactaggart breached the contract by prematurely exiting on May 7, even though Thor had until midnight of that day to submit all documents. In its counterclaim, Thor asked the judge to dismiss Mactaggart’s lawsuit and to keep the deposit.

Justice Louis Nock, who presided over the lawsuit, agreed with Thor’s interpretation of the deadline, saying May 7 was the last business day “on which [Thor] could timely deliver” the documentation. On top of losing the $1.2 million deposit, Mactaggart is required to cover Thor’s costs for attorneys, according to the judge’s decision. Trial court rulings in state Supreme Court are almost always appealed, so Thor is not in the clear yet.

The dispute likely wouldn’t have happened if not for the pandemic. When the sale contract was signed, 933 Broadway was a thriving retail building with tenants such as Le Pain Quotidien and Godiva Chocolatier. But shortly after the contract signing, the pandemic ravaged the retail industry.
In April 2020, Le Pain was reportedly looking to close some of its stores. Around the same time, Godiva told Thor that it would cease paying rent. Mactaggart argued in court that these changed tenant conditions should have allowed it to terminate the contract even before the deadline, but the judge wasn’t convinced.

Mactaggart and law firms representing Mactaggart and Thor did not immediately respond to requests for comment. Thor declined to comment.
 

David Goldsmith

All Powerful Moderator
Staff member
Some good news for retail:

August retail rent payments close to 2019 levels​

National tenants paid 95% of owed rent last month​

Despite the delta variant causing a new wave of restrictions on businesses, most retailers are paying their rent at nearly pre-pandemic levels.
National chains have paid 95 percent of owed rent in August of this year. That’s just slightly below the nearly 97 percent paid during the same time in 2019, according to a monthly report by Datex Property Solutions.

“There’s resiliency in retail,” Datex Property Solutions CEO Mark Sigal said.
The chains included in Datex Property Solutions’ survey have a minimum gross monthly rent of $250,000, or lease 10 or more locations. The report does not account for rent relief provided to retailers by their landlords.

Even mom-and-pop stores are making a comeback. After lagging behind in previous reports, non-national retailers paid 89 percent of owed rent, just below 92 percent in 2019.
Despite the encouraging numbers overall, some categories are still falling behind. Auto stores paid 73 percent of collections. In June, collections for the category were at 92.62 percent.

Movie theaters, a category that has consistently struggled, managed to pay 82.09 percent of collections. The category is likely weighed down by certain chains, like Cinepolis, which paid 16.84 percent of what was owed in August.
Other individual retailers similarly paid less than was owed. Lululemon Athletica coughed up just 71 percent of collections, while Victoria’s Secret paid 69 percent. Sigal cited the rise in e-commerce as well as placement of stores, such as in malls, as potential reasons for the stores’ lack of rent payments.

In addition to paying rent, some stores have done exceedingly well overall, with occupancy costs declining. Beauty supply stores have seen occupancy costs drop 13 percent since 2019. In the fast food category, occupancy costs fell 15 percent.
Sporting goods is one of the most successful categories, with sales up 68 percent over 2019 and occupancy costs down two-thirds.
 
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