Is retail really resurging?

David Goldsmith

All Powerful Moderator
Staff member
Appraisal cuts Kushner Companies’ Times Square retail value 80%
Once bustling space is now half empty as tourists stay away

New York Times food critic Pete Wells’ epic takedown of Guy Fieri’s restaurant is no longer the worst review ever at the Kushner Companies’ Times Square property.
Eight years after that devastating writeup, an appraisal of Kushner’s 248,457-square-foot retail condo at 229 West 43rd Street slashed its value by 80 percent, to $92.5 million, from $470 million in 2017, according to Trepp.
The property is now valued well below the $225 million commercial mortgage-backed securities loan backing the property.
It was reappraised after two of its major tenants vacated: the miniature buildings store Gulliver’s Gate and National Geographic. That dropped occupancy down to 52 percent from 95 percent last year.
The appraisal’s drastic reduction shows how severe the pandemic’s impact has been on Times Square retail. With tourism falling by more than 80 percent and nearly 9 in 10 office employees still working remotely, retailers in Times Square are vacating and landlords are finding it difficult to find new tenants.

“There are a lot of issues with retail in the city, but I would say no area has been hit harder than Times Square,” said David Firestein, a retail broker with the Shopping Center Group.
The Kushner Companies’ retail property is located on the first four floors of an 18-story office building where the New York Times was headquartered until 2007.
Kushner bought the property for $296 million in 2015 from Lev Leviev’s Africa-Israel. The company soon secured $370 million in refinancing, including a $70 million mezzanine loan from Paramount Group, a $15 million mezzanine loan from SL Green and a $285 million CMBS loan from Deutsche Bank.

Even before the pandemic, the property faced challenges with its retail and restaurant space.
In 2017, five years after being taken apart by Wells, celebrity chef Fieri’s Guy American Kitchen closed with 10 years left on its lease. Then plans to open a food hall led by Chef Todd English fell apart as the Kushner Companies became entangled in litigation.
The CMBS loan backing the property went into special servicing in November after Kushner defaulted on a smaller, high-interest part of the debt in October 2019.
The mezzanine lender, Paramount Group, was seeking in June to take the property through a foreclosure auction, but backed away at the last minute to allow for more negotiations, according to the New York Times.

The CMBS loan remains in special servicing, according to Trepp. In September, the loan was more than 90 days delinquent, but Trepp now shows the loan is no longer delinquent, but rather is in a “grace period.”
The remaining tenants at the property include Bowlmor, The Ribbon, Guitar Center, Haru and Los Tacos, according to Trepp.
A spokesperson for Kushner Companies did not immediately return a request for comment.
Some office tenants are also looking to get out of Times Square. Thomson Reuters is reportedly considering selling its stake in its Times Square headquarters. The media company hired an adviser to solicit interest for the 50 percent stake it owns in the 885,000-square-foot building at 3 Times Square, Bloomberg News reported.
 

David Goldsmith

All Powerful Moderator
Staff member

54% of NY restaurants expect to close in six months​

4,500 restaurants in NYC have closed this year

New York restaurants are faring worse than their counterparts in other states.
Fifty-four percent of New York restaurants said they would likely not survive the next six months without federal relief, according to the most recent survey by the New York State Restaurant Association and the National Restaurant Association. That’s compared to 37 percent of restaurants nationwide.

“Our once-vibrant restaurant industry is suffering,” said Melissa Fleischut, president and CEO of NYSRA. “Our members are in worse economic shape than most restaurants across the country, and today’s numbers make that picture crystal clear.”
The industry groups surveyed 6,000 restaurant operators, 238 of which were located in New York, in the last two weeks of November. Of those, 78 percent of New York restaurants expect layoffs in the next three months, as opposed to 49 percent nationally. And 58 percent of New York’s restaurateurs, compared to 36 percent across the country, are considering halting operations until the pandemic passes.

One in six restaurants nationwide are estimated to have closed in the past year, according to the National Restaurant Association, which — by NYSRA’s estimate — means 4,500 in New York City have already shuttered.
Still, restaurant closures aren’t rare: A 2014 study found U.S. restaurants had a 5% to 15% likelihood of closing in a given year, depending on how long they had been open.

The association also sent a letter to Gov. Andrew Cuomo, urging him to put pressure on the federal government for financial assistance for restaurants. The RESTAURANTS Act, which would provide such aid, was introduced in June, but there’s been little progress since. Congress is still hashing out a larger Covid-19 relief bill.

But Congress may not act soon enough to save the city’s struggling restaurants: Earlier this week, Cuomo threatened to shut down indoor dining in New York City if the region’s rising rate of hospitalizations from Covid-19 has not stabilized after five days. As of Dec. 10, hospitalizations were still on the rise.
 

David Goldsmith

All Powerful Moderator
Staff member

Leisure and hospitality lost 500K jobs in December​

Bars, restaurants hammered, but homebuilding, holiday shopping created jobs

The coronavirus continued to have disparate effects on real estate in December, with some sectors continuing to shrink while others regain ground.
A rise in Covid cases and government closures of indoor dining contributed to a loss of nearly 500,000 leisure and hospitality jobs. Restaurants and bars accounted for 372,000 layoffs.
Nearly half of all restaurants expect further layoffs in the next three months, according to a recent survey. In New York, 78 percent of restaurants anticipated layoffs.
Overall, the economy lost 140,000 jobs last month, ending seven months of economic growth, according to government employment data. The unemployment rate remained at 6.7 percent.

Holiday shopping provided a reprieve to retailers in December. Consumers supported the return of 120,000 retail jobs, although the industry currently employs 411,000 fewer people than it did last year.
The rise of e-commerce has resulted in an industrial real estate boom while the pandemic remains a drag on brick-and-mortar outlets. Macy’s recently announced it will close 125 stores over the next three years; Bed Bath & Beyond said it will close 200 in the next two years.

Residential homebuilding helped the construction industry add 51,000 jobs last month. Active listings for homes in the U.S. have reached an all-time low while home prices climbed to record levels. In November, spending on new single-family homes was up 18 percent year-over-year and single-family housing starts reached levels not seen since 2007.

“The lack of inventory is the biggest constraint to further growth in home sales this year,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association. “More workers in the sector should support the faster pace of housing construction the market needs,” he said.
A national shortage of available homes predating the pandemic has drawn the attention of investors, who are building new homes en masse to rent.

Warehousing and storage facilities added 8,200 jobs last month. About 5,000 jobs were gained by rental and leasing services providers.
Job gains in November were stronger than previously estimated. The economy added 336,000 jobs that month instead of the 245,000 first reported.
But these numbers pale in comparison to the 22 million jobs lost in March and April of last year. While 12 million have been recovered, overall employment remained 9.8 million below February’s level.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member

Leisure and hospitality lost 500K jobs in December​

Bars, restaurants hammered, but homebuilding, holiday shopping created jobs

The coronavirus continued to have disparate effects on real estate in December, with some sectors continuing to shrink while others regain ground.
A rise in Covid cases and government closures of indoor dining contributed to a loss of nearly 500,000 leisure and hospitality jobs. Restaurants and bars accounted for 372,000 layoffs.
Nearly half of all restaurants expect further layoffs in the next three months, according to a recent survey. In New York, 78 percent of restaurants anticipated layoffs.
Overall, the economy lost 140,000 jobs last month, ending seven months of economic growth, according to government employment data. The unemployment rate remained at 6.7 percent.

Holiday shopping provided a reprieve to retailers in December. Consumers supported the return of 120,000 retail jobs, although the industry currently employs 411,000 fewer people than it did last year.
The rise of e-commerce has resulted in an industrial real estate boom while the pandemic remains a drag on brick-and-mortar outlets. Macy’s recently announced it will close 125 stores over the next three years; Bed Bath & Beyond said it will close 200 in the next two years.

Residential homebuilding helped the construction industry add 51,000 jobs last month. Active listings for homes in the U.S. have reached an all-time low while home prices climbed to record levels. In November, spending on new single-family homes was up 18 percent year-over-year and single-family housing starts reached levels not seen since 2007.

“The lack of inventory is the biggest constraint to further growth in home sales this year,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association. “More workers in the sector should support the faster pace of housing construction the market needs,” he said.
A national shortage of available homes predating the pandemic has drawn the attention of investors, who are building new homes en masse to rent.

Warehousing and storage facilities added 8,200 jobs last month. About 5,000 jobs were gained by rental and leasing services providers.
Job gains in November were stronger than previously estimated. The economy added 336,000 jobs that month instead of the 245,000 first reported.
But these numbers pale in comparison to the 22 million jobs lost in March and April of last year. While 12 million have been recovered, overall employment remained 9.8 million below February’s level.
ugly side effect of this pandemic driven deflationary cycle. I worry 2021 will bring out the insolvency phase of this crisis and that these stories will be more frequent. Hope Im wrong
 

John Walkup

Talking Manhattan on UrbanDigs.com
You're probably right, unfortunately. Bottom will be a washout and will be ugly. That will be the opportunity as well. Not sure how long the window will be open, but I'd bet it won't be that long.
 

David Goldsmith

All Powerful Moderator
Staff member
More Than 90 Percent of NYC Restaurants Could Not Pay Full Rent in December: Survey
A new survey shows the city’s restaurants can’t pay rent while subsisting on takeout, delivery, and outdoor dining — especially during the winter
As New York City approaches the one-year anniversary of its first reported case of coronavirus, the citywide rent crisis continues to deepen. A new survey of more than 400 businesses from the New York City Hospitality Alliance shows that a staggering 92 percent of restaurants could not pay full rent in December.

The portion of businesses unable to pay their rent has steadily increased since last June, when the citywide organization first started collecting survey data, and an estimated 80 percent of restaurants could not pay rent. Those numbers have only worsened as temperatures dipped, funds from the Paycheck Protection Program dried up, and uncertainty around the status of indoor dining in NYC continues to loom.
The latest survey data accounts for rent payments during the month of December, when restaurants and bars were restricted to takeout, delivery, and outdoor dining service following a citywide ban on indoor dining. At that time, many businesses decided it would be cheaper to temporarily close for the winter season and pay for multiple months of rent than to remain open for service.

According to the December survey, 60 percent of landlords had not waived any rent payments during the coronavirus pandemic. Among the 40 percent that did, less than a fifth waived more than half of a business’ rent. An alarming — though perhaps unsurprising — 86 percent of respondents say they have not been able to renegotiate the terms of their leases during the pandemic.
Indoor dining is now allowed at 25 percent capacity across the five boroughs, a move that the NYC Hospitality Alliance applauded — and then criticized, calling on elected officials to expand indoor dining to 50 percent capacity, as is the case elsewhere in the state. “While the reopening of highly regulated indoor dining is welcome news, we need to safely increase occupancy to 50 percent as soon as possible, and we urgently need robust and comprehensive financial relief from the federal government,” says Andrew Rigie, executive director of the NYC Hospitality Alliance.

Some restaurant and bar owners have declined to partake in indoor dining, citing safety concerns for restaurant workers and staff, while others say that 25 percent is not enough to stay afloat. The return of indoor dining, an extended 11 p.m. curfew, warmer weather on the horizon, and a possible infusion of federal aid may all be cause for optimism in the months ahead, but experts say a full economic recovery in NYC will likely take years.

 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
yeah 2021 will be riddled with this. Im looking forward to the years ahead and fully expect retail to come back in a big way, starting slowly then accelerating as this decade roars on...but it prob wont start for another 8-12+ months
 

John Walkup

Talking Manhattan on UrbanDigs.com
According to the December survey, 60 percent of landlords had not waived any rent payments during the coronavirus pandemic. Among the 40 percent that did, less than a fifth waived more than half of a business’ rent. An alarming — though perhaps unsurprising — 86 percent of respondents say they have not been able to renegotiate the terms of their leases during the pandemic.
I suppose it's easy to think of landlords as greedy here, but it's most likely the case the they aren't lowering rents because they cannot. For many, if their portfolios are marked-to-market, the covenants come crashing down hard. Hopefully, it will be less ugly than it sounds, because it sounds pretty ugly...
 

David Goldsmith

All Powerful Moderator
Staff member
When the news first came out about the "huge surge in retail sale for January 2021" I questioned if the numbers had been adjusted and was chastened by a national expert "we never use adjusted numbers." ¯\_(ツ)_/¯

Here’s What’s Hiding Behind the Massive Seasonal Adjustments in January Retail Sales​

In whiplash charts. For example, department store sales soared 23% “seasonally adjusted” but collapsed 42% “not seasonally adjusted.” What gives?

We had another mind-twister this morning when the media proclaimed that in January retail sales “burst higher,” after the opposite had happened in December, when the media bemoaned the third month in a row of dropping retail sales.
But these are “seasonally adjusted” retail sales, and the seasonal adjustments in December and January are always huge. “Not seasonally adjusted,” retail sales collapse by about 18% to 22% every January during the merchandise-return binge (returns are negative sales) after December’s holiday shopping binge. So I noted a month ago that the massive “seasonal adjustments” in December had gone awry and that Americans had not actually cut back but had splurged in a record manner, documenting this with charts that showed both “seasonally adjusted” and “not seasonally adjusted” retail sales.
And in January, seasonal adjustments went awry again, but in the opposite direction, sort of balancing out December’s “seasonally adjusted” debacle. And then there was maybe a small-ish added oomph of the stimulus checks.
“Seasonally adjusted,” which is what you read in the media this morning, retail sales in January jumped by 5.3% from December, to $568 billion.

But “not seasonally adjusted,” retail sales plunged by 17.3% in January from December, to $510 billion. That plunge was not quite as deep as the normal December-January plunge of 18% or more. And compared to January last year, retail sales were up 5.8%, after December’s year-over-year increase of 4.3%.
Green = “seasonally adjusted” retail sales; note the dip in December and the rise in January. Red = “not seasonally adjusted” retail sales; note the record spike in December that I’d pointed out a month ago, and now the plunge in January:

All this “seasonally adjusted” and “not seasonally adjusted” data was released by the Census Bureau this morning.
Sales at ecommerce sites and other “non-store retailers” (mail-order operations, stalls, vending machines, etc.) in January, seasonally adjusted, jumped 11%.
In December, these seasonal adjustments had gone awry, showing a 5.8% decline from November. But “not seasonally adjusted,” sales in December blew through the roof and hit a huge record of $112 billion, with an enormous spike from November, and were up 19% year-over-year, which I pointed out in my analysis back then.
In January, with the flood of merchandise returns, “not seasonally adjusted” sales plunged 29.5% to $79 billion. So seasonally adjusted sales jumped 11%; not seasonally adjusted sales plunged 29.5%. That’s how huge the seasonal adjustments are. And when they go awry just a little, it makes a big difference.
But year-over-year, sales in January were up 22%. And the ecommerce boom continued unabated in December and in January – there is no sign, as was alleged a month ago, that Americans cut back in December:

Sales at new & used auto dealers and parts stores rose 3.1% in January from December, seasonally adjusted. “Not seasonally adjusted” sales plunged by 11.9% from December, to $103 billion, but was up 10.4% from January last year:

But wait…. these figures are not adjusted for inflation, and there have been and broad price increases in recent months in new and used vehicle retail sales, and these price increases were confirmed yesterday by the largest chain of auto dealerships in the US, AutoNation. And the year-over-year sales increase of 10.4% appears to be mostly accounted for by price increases of new and used vehicles – and not an increase in demand.
Sales at building materials, garden supply and equipment stores are subject the gigantic seasonal adjustments. In January, “not seasonally adjusted,” sales plunged 10.7% in January from December, to $32 billion. But “seasonally adjusted,” sales rose by 4.6%.

Sales at brick-and-mortar department stores have always been brutally seasonal, with enormous spikes in December, and drop-dead plunges in merchandise-return-January. Huge seasonal adjustments attempt to iron out those plunges and spikes.
Seasonally adjusted, sales soared 23.5% from December. But “not seasonally adjusted” sales plunged 41.6% from December to just $8.3 billion, the worst January and the third-worst month overall in the data going back to 1992 (does not include the thriving ecommerce sales of department stores; they’re included in ecommerce).
The fact that department store sales went from +23.5% “seasonally adjusted” to -41.6% “not seasonally adjusted” indicates just how ridiculously huge the adjustments were to smoothing this out.
From January 2001 to January 2021, sales have collapsed by 45% despite 20 years of population growth and inflation. As you can see from the chart, there is zero hope for brick-and-mortar department stores. Their business model has been obviated by ecommerce:

To avoid further vertigo, the we will stick to “seasonally adjusted” data below.

Sales at Food and Beverage Stores rose by 2.4% in January from December to $72 billion (seasonally adjusted) and were up 11.8% from a year ago. Work from home and restaurant restrictions continue to shift consumption to the home from restaurants, cafés, cafeterias, office vending machines, office supply closets, business trips, and vacations:

Sales at Restaurants & Bars rose 6.9% in January from December to $55 billion (seasonally adjusted), roughly in the same range since July. This was down 16.9% year-over-year:

Sales at general merchandise stores (minus department stores) rose 2.5% in January from December, to $53 billion, and were up 8.0% from a year ago. This includes the brick-and-mortar stores of Walmart, Costco, and Target, but not their ecommerce sales:

Sales at clothing and accessory stores rose 5.0% in January from December, to $20 billion (seasonally adjusted), but were down 11% year-over-year. Despite 13 years of population growth and inflation, sales are up only 7% from 2007 levels, with growth having shifted to ecommerce:

Sales at sporting goods, hobby, book and music stores jumped 8.0% in January from December, to $8.2 billion (seasonally adjusted), and by 22.5% year-over-year:

Sales at furniture and home furnishing stores jumped 12.0% in January from December, to $11 billion (seasonally adjusted), and 11.7% year-over-year.
To get back to the theme of seasonal adjustments and how huge they are in January: “not seasonally adjusted” sales plunged by 13% in January from December.

Sales at Electronics and appliance stores soared 14.7% in January from December, to $7.8 billion (seasonally adjusted), but were down 3.5% year-over-year.
Alas, “not seasonally adjusted,” sales plunged by 27% month-over-month. Going from +14.7% “seasonally adjusted” to -27% “not seasonally adjusted” implies a mega-ton of seasonal adjustments, and even small shifts cause the results to go awry in a large way:

January is the worst month to draw conclusions on retail sales due to the seasonal plunge in sales from the surge in December, and due to the massive seasonal adjustments used to somehow iron out that plunge. The seasonal adjustments are much smaller for the rest of the year.
December had already been strong based on not-seasonally adjusted data, and sales in January were seasonally a lot lower, as they should be, but indicated a solid follow-up on the strong December. But the seasonal adjustments in both months went awry, showing December and the prior two months as way too weak and January as way too strong. And the $600 stimulus checks may have added a little oomph to the seasonal adjustments gone awry.
 
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