• 1-800-123-789
  • info@webriti.com

Category ArchiveEastern Consolidated

Barneys Shuttering Upper West Side Store After More Than a Decade

Barneys New York is closing its Upper West Side store store on Feb. 18, a company spokeswoman confirmed to Commercial Observer.

“Barneys New York has enjoyed serving the community on the Upper West Side for over a decade. We sincerely appreciate the loyalty of our customers, and we look forward to continuing to serve them at our Madison, Downtown and Brooklyn locations,” the spokeswoman emailed.

West Side Rag first reported the news on Feb. 2 based on information provided by a manager.

The roughly 10,000-square-foot clothing store, which is on the ground and lower levels at 2151 Broadway between West 75th and West 76th Streets, opened in 2004, according to retail broker Faith Hope Consolo of Douglas Elliman Real Estate, who represented the landlord in the original lease negotiations with Barneys. The space underwent a renovation in July 2013, which included rebranding it from a Co-op store—selling lower-price fashion—to a Barneys New York. (The company has converted Co-ops stores to Barneys New York shops.) The lease is slated to expire at the end of 2023, according to CoStar Group.

Once it shutters, there will be two remaining Barneys stores in Manhattan: one at 660 Madison Avenue between East 60th and East 61st Streets and one at 101 Seventh Avenue between West 16th and West 17th Streets.

“This is a big loss for the Upper West Side,” Consolo said. The deal was unique at the time as most retailers were focused on Columbus Avenue, but Barneys took a Broadway space.

Broker John Brod, a partner at ABS Partners Real Estate, said the news is of no surprise.

“Customers can go on line at Bonobos, UNTUCKit, Allbirds, Amazon, Suitsupply and manufacturers’ own online e-commerce store to purchase the same merchandise so the need for Barneys to have a brick-and-mortar presence has past,” Brod emailed. “Specifically, Barneys is a multi-brand retailer and as such the need for a second store in a secondary market becomes redundant in today’s retail and shopping environment. The issues are further challenged by the general state of retail in this area—note that Sephora has opted to downsize from their 2162 Broadway location—they passed on their right to renew. Moreover, Anthropology who was negotiating to replace Sephora here after many months of negotiation, decided not to proceed. Additionally Eastern Mountain Sports vacated this area [at 2152 Broadway] as well. The fact is there is a very limited demand for large flagships in both primary and secondary markets. Clearly the Upper West Side is a secondary market.”

The market and neighborhood combined to hurt Barneys.

“Barneys closing is a reflection of the current market,” said SCG Retail Partner David Firestein. “With that said, they were never right for the neighborhood, in the mid 70s. A better fit would have been closer to Lincoln Center, near Century 21.”

And the popularity of online food shopping has impacted the area, including Barneys.

“That stretch of Broadway has always been local, and much of its traffic from shoppers that live or work outside the market area was based on the food anchors—Citerella, Fairway and Zabars—all on the west side of Broadway in a seven-block stretch,” said Robin Abrams, a vice president at Eastern Consolidated. “Once it became possible to get fresh produce and a wide array of prepared foods at the various Whole Foods [stores], Fairway’s other locations and a variety of other competitors, the pedestrian traffic on Broadway diminished. Now the retailers on Broadway must be strong to cater to local traffic, and even stronger if they are to pull from a broader customer base.”

Source: commercial

While Occupancy Skyrockets, NYC Hotel Players See Cause for Concern

Over the past several years, the unofficial motto of the New York City hotel market has been “If you build it, they will come.” The city has seen tens of thousands of new hotel rooms crop up across the city this decade, and there are tens of thousands more in the pipeline due to arrive in the coming years—but despite all that new supply, the rooms keep getting absorbed.

That’s undoubtedly good news for the hotel developers and operators who built those new rooms and plan on bringing more to the market in the near future. But a closer look at the statistics and conversations with hotel market participants reveal a more mixed view of the city’s hotel landscape—one that finds it attempting to strike a balance between the number of rooms sold and the prices being paid for those rooms, and bracing for a variety of headwinds that could make it hard to sustain future development.

The clear, undoubtedly positive story is that while the U.S. hotel industry has struggled recently—with declining tourism figures among the factors that have made it difficult to absorb the roughly 2 percent supply growth experienced nationally last year—New York City has shown little problem handling the 4 percent growth in its supply that it saw in 2017. As Jan Freitag, the senior vice president of lodging insights for data and analytics firm STR, put it, the city’s hotel market is experiencing a dynamic that “doesn’t make sense in any other market but does make sense in New York City.”

The average occupancy of New York hotels in 2017 stood at 86.7 percent, up 1.1 percent from the previous year—with the city now home to more than 119,000 hotel rooms across the five boroughs, according to STR. That 86.7 percent occupancy rate means that nearly nine out of 10 hotel rooms available in the city were sold out through the course of last year—a “stunning” figure given the added supply, Freitag said.

“What demonstrates the strength of the New York market is that all of those hotel rooms are being absorbed in the year that they open,” said Mark VanStekelenburg, a managing director in the hotels division at CBRE. “From an occupancy standpoint, the market is at or near its peak occupancy and is continuing to be, even while we’re experiencing 4 to 6 percent [annual] supply growth. We’ve never really seen something like that in the U.S.”

That should give confidence to the city’s hotel developers, given that room supply will only continue to grow in the next few years; STR tracks more than 22,000 new rooms presently in the city’s development pipeline, including nearly 12,000 that are presently under construction.

But while the city has shown an ability to absorb that kind of supply influx, the underlying economics of doing so—such as the daily rates those rooms are able to command and the revenues flowing into the pockets of hoteliers—are somewhat murkier.

Though hotel occupancy in New York has been on an upward trajectory, average daily rates have not; those slipped 1.4 percent to $255.54 in 2017, according to STR. Room rates in the city have continued to slide since peaking at more than $271 per night in 2014, as has the metric of revenue per available room (RevPAR), which has fallen 4.6 percent to $221.60 in that time.

Market observers attribute this inability to translate high occupancy rates to improved room rates and revenues to a number of factors. Some noted that most of the city’s new hotel rooms fall under the booming limited- or select-service category, where rates are on the lower end of the spectrum (such rooms comprise more than 6,000 of the nearly 12,000 rooms currently under construction in the city, per STR). Others cited the influence of Airbnb, which has forced hoteliers to re-evaluate the prices they ask of consumers who can now choose a cheaper, often more spacious lodging alternative.

Still, despite softening rates and the promise of even more supply to come, it’s not hard to find real estate players willing to bet on the hotel market’s continued viability.

“You can see from our commitment to the city hotel market that we’re still very bullish in our long-term view of hospitality investments,” Mitchell Hochberg, the president of the Lightstone Group, said.

Hochberg pointed to his development firm’s hotel projects around the city, such as its Moxy brand hotels in Times Square, NoMad and the East Village, as examples of Lightstone’s continued faith in the hotel sector. “New York is one of the strongest economies in the country, and it’s a global center for finance and media,” he said. “Although there’s been a supply increase in the last couple of years, the data indicates that demand has kept up with supply.”

1713 pod twin 026 While Occupancy Skyrockets, NYC Hotel Players See Cause for Concern
Guest room at the Pod Times Square Hotel. Photo: The Pod Hotels

But other hotel market players are far less convinced. Richard Born, the co-founder of BD Hotels and the hotelier behind boutique Manhattan brands such as the Mercer Hotel, the Greenwich Hotel, the Ludlow Hotel and the Jane Hotel, espoused his view that, “with some exceptions, by and large the hotel market in New York is terrible.”

He cited a combination of factors including the “erosion” of daily rates (which he attributed to the influx in room supply as well as Airbnb’s vast “shadow inventory”), higher property taxes and operating costs, and the increased influence of third-party booking websites like Expedia and Travelocity (which have brought more transparency and reduced hotels’ “pricing power” while also charging booking commissions that are an additional “line item” for operators).

“Any hotel operator operating today is making a fraction of their net operating income compared to what they were making 10 years ago,” Born said. He added that the operators best positioned to succeed in such a challenging market are the ones capable of differentiating themselves from the more malleable product of their competitors. “There’s a fungibility to the hotel market that makes pricing very difficult because everyone is looking at everyone else’s rates. But the exceptions are the hotels that are not fungible—the ones that are unique, designed and have something different to offer their customers.”

In addition to its higher-end boutique brands like the Mercer, Bowery, Ludlow and Maritime hotels—where rates are on the higher end of the pricing spectrum—BD Hotels has sought to differentiate itself from the landscape with projects like its Pod hotels, which have parlayed the micro-apartment trend into a concept the hotelier terms the “micro-hotel.” With four locations in New York and one in Washington, D.C., the Pod hotels offer nightly rooms of around 100 square feet but also come equipped with food-and-beverage concepts and boutique-minded aesthetics (such as the mural from Brooklyn artist JM Rizzi that adorns the elevator shaft at the recently opened Pod Times Square).

Born pointed to the Pod BK—the brand’s Williamsburg, Brooklyn location—as offering something specifically different from the new luxury hotels that have cropped up in that neighborhood in recent years, such as the Wythe Hotel and the William Vale. “We have a hotel that we don’t think is fungible, in a marketplace where all the hotels are four-star boutiques looking for high rates,” he said.

Hochberg cited a similar rationale behind Lightstone’s Moxy brand; the developer teamed up with Marriott International with the goal of “delivering an affordable product with a lifestyle component to it”—one that offers the sensibilities of a boutique product at a lower price point with smaller rooms and limited-service offerings.

“The industry has introduced many more products and choices for the consumer of the past few years,” Hochberg said. “There’s a whole variety of new genres and brands that are focusing more on the consumer and trying to understand what today’s consumer is looking for.”

Hoteliers may also receive a boost from the fact that, beyond this decade, the city’s hotel development pipeline is slated to slow down significantly, making it easier for the incoming supply to be absorbed and potentially driving up room rates again.

Multiple market observers and participants noted that the supply influx the city is now seeing is the result of plans initiated a few years ago, adding that a variety of factors—from risk-averse lenders shying away from financing new projects to regulatory pressures being placed on the hotel sector by the de Blasio administration—could slow future development significantly.

“When we go out to find financing, there are less people able to provide debt than there were before,” said Eastern Consolidated’s Adam Hakim, a managing director in the brokerage’s capital advisory division. “Lenders control supply and demand; when they give hotel developers money, people build hotels, and when they don’t, they can’t.”

Hakim’s colleague James Murad, a director at Eastern, described the hotel market as “one of the thinnest construction financing markets you can go out for” to procure funds, with lenders mindful about the sheer volume of new supply and how that may affect borrowers’ abilities to refinance in the future.

“That said,” Murad added, “for quality sponsors and the right product, there’s appetite.”

wythe guestroom 4 credit matthew williams While Occupancy Skyrockets, NYC Hotel Players See Cause for Concern
Guest room at the Wythe Hotel in Williamsburg. Photo: Matthew Williams

Jared Kelso, a senior managing director in  Cushman & Wakefield’s global hospitality group, echoed that sentiment. “The last 24 months have been very challenging to find construction financing [for hotels],” he said, attributing the slowdown to lenders being in a “checklist underwriting” mind frame in considering hotel market fundamentals.

But Kelso added that financing is still available to “sponsors with a long and proven track record” with debt funds and alternative lenders also stepping in to fill the void left by the more risk-averse banks. He also noted that the tightening of the financing market is “frustrating for developers but not a bad thing at large” given the impact it will have on restricting supply. “After 2018, the supply pipeline thins dramatically, and that will ultimately be a good thing for the [hotel market] at large.”

And then there are regulatory obstacles that market observers say will impede hotel development in the future. That includes the de Blasio administration’s proposal to limit projects in industrially zoned M1 manufacturing districts by requiring developers to obtain a special permit, as well as the extension of Local Law 50, which prohibits large hotels (150 keys or more) from converting more than a fifth of their rooms to residential units or other non-hotel uses without city approval.

Both measures are perceived by many observers as meant to preserve the interests of the influential hotel workers’ unions and potentially damage the city’s future hotel supply. In the case of the zoning proposal, it will make it harder for developers to find parcels to build on and likely subject those projects receiving a special permit to higher-cost union labor requirements; in the case of Local Law 50, its preservation of existing hotel rooms would dampen the need for new supply in the interest of preserving existing hotel jobs.

According to Hakim, some of the developers behind the current supply pipeline—such as prolific hotel builder Sam Chang of McSam Hotel Group, a client of Eastern’s—are operating on the “thesis that hotel values are going to go up significantly in the next few years. The inventory is going to stabilize, and once it stabilizes, the theory is that you won’t be able to build new ones.” (Chang did not return a request for comment.)

“Twenty-four months from today, in 2020, I think your pipeline of hotels is going to drop to pretty close to zero,” Hakim added. “From there, you’ll see an increase in [room] prices.” But he was also critical of the influence that the current regulatory environment has had on exacerbating this dynamic. “I believe markets should correct themselves properly; you have a lack of [financing], and that’s a correction you’re seeing. But public policy and zoning laws being arbitrarily changed—that’s not how it should work.”

The de Blasio administration, for its part, does not think the proposed zoning regulations will negatively impact the flow of new hotel projects in the city. “We don’t believe the proposed rules will hinder hotel development across the city, which remains strong,” a mayoral spokeswoman said in a statement. “But we do aim to prioritize manufacturing businesses in the zones specifically designated for manufacturing. While hotels have a lot of options for where they can open and operate, these industrial firms don’t.”

The impact of all these various influences could start making themselves felt sooner rather than later, sources said. C&W’s Kelso said that the brokerage believes New York City room rates could start ticking upward as soon as the fourth quarter of this year, while Hochberg said Lightstone projects RevPAR “to be flat to slightly increased in 2018.”

That would be good news for hotel operators in the city—and a testament to its voracious appetite for hotels. Despite all the new supply, the city’s churning economy and robust tourism sector seems to always make room for even more places where people can stay.

“It’s a cultural mecca for the world,” Born said. “Every 14-year-old lives on a handheld device, looking at all this and dreaming of coming to New York, whether you’re in Oklahoma or Bangladesh, to live, work, study and visit here. It’s always going to be a dynamic place for tourism—the issues are going to be the costs of operating and the supply. But we do live in the greatest tourism market in the U.S. and in the world.”

Source: commercial

Slow Season: NYC’s Investment Sales Brokers Are Optimistic Despite a Challenging 2017

Two thousand seventeen “was still good—it just wasn’t great.”

Those are the comforting words that Aaron Jungreis, the co-founder and president of brokerage Rosewood Realty Group, offered to Commercial Observer last week when asked about the state of the New York City investment sales market.

Yet one could be forgiven for considering that a rather optimistic assessment, given how the numbers depict a commercial property market that has experienced a significant downturn since the halcyon days of 2015.

Two years after eclipsing an all-time high of $80 billion, total commercial real estate investment sales in the city fell just shy of $35 billion in 2017, according to a recent Cushman & Wakefield report on the state of the New York City real estate market. Transaction volume (the total number of property sales across the city) fell more than 30 percent in that time, and perhaps most damningly—after nearly a decade of unrepentant property value appreciation in the wake of the Great Recession—the average price per square foot for Manhattan commercial real estate sales (excluding the blighted retail market) fell for the first time since 2010, to the tune of 5 percent.

Even the outer boroughs—which have emerged to an unprecedented extent as viable markets in their own right—saw a 17 percent decline in the number of properties sold and a 27 percent dip in dollar volume (albeit from a record high of $18.2 billion in 2016) to $13.3 billion, per the C&W report. And while property values in the boroughs continued to climb last year, Robert Knakal, C&W’s chairman of New York investment sales, warned of “contagion” from the slipping Manhattan market leaking into the property markets of Brooklyn, Queens and the Bronx.

Numbers aside, talk to the commercial real estate brokers who are taking the calls and making the deals, and they’ll virtually all agree that the market for New York City real estate simply isn’t anywhere near the frothy peak of a few years ago, when one could procure buyers galore for virtually any parcel or property that hit the market. But despite this slowdown, most investment sales brokers are trying to paint a more positive picture of a market in a state of correction—with property values and transactions still at relatively high levels historically and signs of strengthening conditions heading into, and during the early part of, 2018.

“It’s still a good market,” Jungreis said. “The fundamentals are still strong, and people still want to come to New York. I just think we’re so spoiled with the market having gone up and up. I’m really not that concerned.”

Jungreis and other brokers who are active in the multifamily investment sales market attributed lower deal and dollar volumes to headwinds that have hindered investor appetite for both rent-regulated and market-rate residential buildings, as well as development sites that would have proven attractive for ground-up residential projects in years past.

Rent-stabilized properties have long been considered among the safest investments in New York City real estate due to their high occupancy rates and embedded upside once units become deregulated and landlords are able to charge higher, market-rate rents. But thanks to the de Blasio administration, multiple sources said, a more stringent regulatory environment has made it increasingly difficult for landlords to realize that upside and has consequently dampened investor enthusiasm for the asset class.

“De Blasio has won; the perceived upside is locked, and [property] taxes are going up every year,” Marcus & Millichap’s Shaun Riney, one of the brokerage’s leading Brooklyn-focused investment sales brokers, said of the market for rent-stabilized multifamily properties. “To keep up with the Joneses, you have to vacate units. That’s the dilemma [investors] have—you have to believe people are going to leave [their units] unless you’re a long-term investor, and long-term investors aren’t the ones paying 20 times the rent roll [for buildings].”

Chad Sinsheimer, a senior director at Eastern Consolidated, echoed the sentiment—noting that prospective buyers have become “a lot more passive and cautious in buying stabilized properties” due to regulations that have made it harder for landlords to approach tenants about buyouts and “unlock that upside” at rent-stabilized properties. “With all these tenant harassment lawsuits and headlines, there’s a little bit of fear on behalf of these landlords now,” he said. “They don’t know how long they’re going to be stuck with these tenants.”

While describing rent-stabilized assets as “still the darling of the market,” Bestreich Realty Group Founder and President Derek Bestreich cited the “administrative burden” of landlords having to deal with “layers and layers of government bureaucracy overseeing everything you do.”

“For owners, it’s like you’re guilty until you’re proven innocent—it’s evolved into a ‘gotcha’ type of environment where owners are on the defense, even if they’re operating their buildings admirably. It puts a bad taste in investors’ mouths,” the investment sales broker said. “People want to be able to grow the value and make a return, and I think there’s less confidence in their ability to do that nowadays.”

Beyond heightened regulatory scrutiny, Bestreich pointed to shifting fundamentals that have meant “cap rates have gone up, prices have dropped and there’s less demand [from buyers] than there was in the past” for multifamily assets. “Five or six years ago, I’d have 100 buyers wanting to buy a rent-stabilized building, while today I’d have 20,” he said. “There’s far less demand, but still enough that prices haven’t come down a whole lot.”

But like other brokers, Bestreich stressed that the market is still performing well overall despite having lost some steam. “We’re coming off a period where rents grew for so many years and interest rates dropped, and that combination led to really high property values,” he said. “Today, property values are still high; rents have dipped in a lot of areas from their peak, but there’s been such tremendous rent growth over the last seven years that, for rents to pull back 10 percent, I don’t find that to be an earth-shattering thing.”

Flat to falling rents are arguably the biggest issue facing the city’s market-rate rental properties—a condition exacerbated by the sheer number of free-market units that have arrived across the city in recent years, through developments like the swaths of luxury high-rise buildings that have cropped up in neighborhoods like Williamsburg and Downtown Brooklyn, in Brooklyn, and Long Island City, Queens.

As Jeffrey Levine, the chairman of Douglaston Development, told CO, the city is now experiencing a market-rate rental supply glut that was partially exacerbated by developers rushing to take advantage of the 421a tax abatement prior to its expiry in 2016.

“You had an abundance of product going into the ground, primarily in Downtown Brooklyn and Long Island City, and that product is now being delivered to the market and creating a real distortion in the marketplace,” Levine said. That dynamic, coupled with high construction costs and land prices that “have not yet fallen sufficiently,” has made it “very hard to pencil new [rental] development in the five boroughs,” he added—even with the new Affordable New York housing plan designed to replace 421a.

Landlords are now resorting to handing out tenant concessions, such as months’ worth of free rent periods, to attract renters to their buildings, further affecting investor appetite for market-rate properties as well as development sites that would house ground-up rental projects.

“There are a lot of amenitized buildings [on the market], and there are only so many young people who can pay $6,000 a month to split up a three-bedroom [apartment]. That’s why you’re seeing these concessions spike,” Sinsheimer said of the luxury rental space, noting that it’s not uncommon to see landlords dole out two to four months of free rent at some buildings, depending on the length of lease.

As such, developers are now targeting certain asset classes that are perhaps underserved in certain areas of the city. While the ultra-luxury residential condominium market’s recent travails have been well documented, brokers are finding strong demand for condo projects in outer-borough neighborhoods like Williamsburg and Long Island City—traditionally rental market strongholds with relatively low for-sale inventories, and areas where condos would sell at a price point more reasonable than that of, say, Billionaires’ Row in Midtown Manhattan.

Marcus & Millichap broker Jakub Nowak said that his team has seen an increase in land sales in Queens driven by “a surprising uptick in activity” from condo developers. “Any residential development site that my team is selling in Long Island City at the top level, the bidders are all condo developers,” Nowak added.

Bestreich, meanwhile, cited a similar trend in areas of Brooklyn: “Well-located development sites in Williamsburg, we can’t keep that stuff off the market,” he said, pointing to “seven to nine” parcels sold by his firm in the north Brooklyn neighborhood in the last several months that he said will virtually all become condo projects. “There’s so much concern over the L train shutting down, but condo developers are saying, ‘Let me buy something now, and when I’ve built it in two years, the L train won’t be an issue anymore.’ ”

Across other asset classes, the retail apocalypse has been highlighted ad nauseam, while the market for trophy office properties has also taken a hit in the wake of the record-breaking deals for Class A Manhattan properties seen in 2015 and 2016. On a recent conference call discussing Cushman & Wakefield’s 2017 real estate market statistics, Knakal noted that declining retail property values have made it difficult to find buyers for mixed-use properties with a retail component. His colleague Douglas Harmon—co-chair of C&W’s capital markets division and one of the city’s top brokers in the market for major trophy properties—pointed to a lack of such major deals in 2017 as a key contributing factor to the investment sales market’s declining dollar volumes.

But other asset classes, such as industrial properties, are booming to an unprecedented extent. Industrial assets are in enormous demand given the rise of the increasingly influential e-commerce sector and the relative scarcity of warehouse and manufacturing properties remaining in the five boroughs (particularly in more central, well-located areas with access to bridges and highways).

“Industrial has probably been the most exciting asset class in the past year and a half,” Eastern Consolidated Senior Director Andrew Sasson said. “There’s not a ton of industrial buildings in the city that have 25-foot-high ceilings and that are being kept for that use, or can be repositioned as distribution centers.”

Likewise, Marcus & Millichap’s Nowak noted that as “so much of the legacy industrial space in New York City has been repurposed in recent years”—usually either redeveloped as loft-like office and light manufacturing buildings targeting creatively minded tenants or razed to make way for new residential projects—the supply-constrained industrial market has “benefited tremendously.”

All things considered, investment sales market participants are now dealing with an altogether spottier market than they have in recent years. But overall sentiment is the market remains in a position of strength, with many noting a pickup in activity toward the end of 2017 and macroeconomic developments—particularly the passage of the Trump administration’s business-friendly tax reform bill—as reasons for optimism.

“In December of 2016, I was not enthusiastic about 2017,” said David Schechtman, a senior executive managing director at Meridian Investment Sales. “In December of 2017, I felt excited to get back to my desk on the 2nd or 3rd of January, and I haven’t been proven wrong.”

As Schechtman pointed out, the market may very well be getting its legs back as property owners come to terms with the correction that has taken place, and as the discrepancy between the prices that sellers seek and prospective buyers are willing to pay—commonly cited as another reason for the drop-off in investment sales—is reconciled.

“It’s a very difficult environment when, each day for several years, you’re reading as an owner that your property is worth more,” he said. “It takes time for an owner to recognize that they may be selling below the zenith. Not every deal is going to set a new benchmark—for many assets, the high-water mark has been hit—and as long as the seller is willing to receive below that, there will be a buyer.”

Source: commercial

Achieve Your Dream with a Vision and Plan. (There’s a Difference.)

Successful people think big, set challenging goals and develop clear plans to achieve them. With 2018 less than a month old, now is an opportune time to plan for the future.

Thinking, setting goals and planning for the future necessarily requires change, and as we all know from experience, change is not easy.

A great way to approach change is through a “Force Field Analysis” developed by Kurt Lewin, the father of social psychology. In Force Field Analysis you assess your current state (where you are) with your future state (where you want to be). For example, your current state can be having one client meeting a week, and your future state can be having three client meetings a week.

The next step is to identify the forces that are driving change (e.g., you want to make more money and increase client retention) and the forces that are restraining change (e.g., I am too busy to leave the office). During this phase you need to think intentionally and with immense focus about how to reduce the restraining forces.

In the example above, you can delegate to a peer any issues that come up while you are out of the office or choose to do work during your commute. Additionally, it is critical to drill down into the driving forces to increase their motivation. You can specifically define why you want to make more money and how achieving that goal positively impacts the people on your team. The more they buy into your plan, the more activated they will be as well.

Next, lay out all of the specific steps necessary to ensure you meet your dream. Why did I call it a dream? Because any concept that takes longer than a month to achieve is not a goal. Goals are tactical. To be achieved, goals need to be short term and backed up by action steps. (Dreams are the desired vision we have of our future.)

This is the area where most people fail. They are well intentioned but don’t have the necessary action steps. The lack of persistence is often rooted in the reality that the plan was impulsive, rather than inspired by a long-term vision. But when the vision is there, the little steps along the way help bring us closer to achieving our dreams.

So let’s go back to the example of wanting three client meetings a week. What are the specific actions required?

First, identify and list the clients you want to meet. Next, prepare for the call by choosing two to three dates and times within a two-week window to actualize the meeting, a restaurant or other appropriate location for the meeting, and crafting the conversation. Keep the call short and direct. Create a simple script. For example: “Jane, it has been a while since we spoke and would love to catch up and see how your business is going. Can you do lunch on Tuesday or is the following Monday better?” 

Action is the driver of achievement, so give yourself a short-range, achievable deadline to begin reaching out to schedule the meetings. When you schedule a lunch meeting, immediately send either an email or calendar invite confirmation and place it on your calendar, along with a reminder to confirm the day before. Finally, make a reservation at the restaurant under your name.

Since the action steps are the most important part of the plan, it is important to lay them out with the granularity you see above. Dreams and goals rarely fail for reasons other than lack of following through on an action plan.

By turning your dreams and goals into action, you can make 2018 your most successful year ever!

Source: commercial

Eastern Consolidated Retail Pros Jeff Geoghegan and Ravi Idnani Move to RKF

Eastern Consolidated food and hospitality retail experts Jeff Geoghegan and Ravi Idnani have joined RKF’s New York office as directors, Commercial Observer has learned. They commenced on Jan. 17

At RKF, they both will continue to focus on tenant and landlord representation in the New York metro area.

“I chose RKF because of the company’s successful track record and leading position in the industry,” Idnani said in a statement emailed to CO. “I’m incredibly excited to be joining the team.” (Geoghegan declined to provide a comment.)

Geoghegan, a broker, and Idnani, a salesperson, worked on James Famularo’s retail leasing team at Eastern Consolidated since the company launched the division several years ago, as CO reported in January 2014.

“People come and go in this industry,” Famularo said of the duo’s departure. “I enjoyed working with them and wish them luck at their new company.”

Geoghegan, who specializes in the Hell’s Kitchen, Chelsea and Upper West Side neighborhoods, has represented owners and developers. Within an 18-month period, he helped find the PokéSpot’s first location at 120 Fourth Avenue, which opened in August 2016. Then he negotiated a second lease for the tenant at 25 Cleveland Place (it opened in April 2017) followed by a space for an affiliated retail concept, Project Cozy, on the ground floor of New York University’s dorm at 398 Broome Street. That opened in summer 2017. Last year, he helped arrange a lease for celebrity chef David Chang‘s Momofuku Nishi at 232 Eighth Avenue.

Idnani is a pro in the restaurant and fashion industries. His recent deals include leases for Eat Club at 109 West 27th Street in NoMad and YokeyPokey, a virtual reality arcade, café and bar at 537 Atlantic Avenue in Boerum Hill, Brooklyn. He also represented celebrity fitness trainer Tony Molina in leasing a 1,550-square- foot fitness center on the top floor of 56 West 45th Street and arranged a 9,000-square-foot lease for Kiddie Academy at 282 South 5th Street in Williamsburg, Brooklyn, in July 2016.

“We are thrilled to add Jeff and Ravi to our New York team,” Robert Futterman, the chairman and CEO of RKF, said in prepared remarks. “Both have a track record of driving growth and strengthening relationships between landlords and tenants, especially in the restaurant space.”

RKF is bolstering its ranks. Earlier this month, long-time Winick Realty Group broker Darrell Rubens joined the firm, as CO previously reported.

Source: commercial

Rabbis Org and Reform Pension Board Separate Midtown East Offices

The Central Conference of American Rabbis (CCAR) has signed a 7,600-square-foot deal at the Rudin Family’s 355 Lexington Avenue to relocate its offices within the tower from joint offices with the Reform Pension Board, Commercial Observer has learned.

CCAR, an organization that supports reformed rabbis with education and published works, will be moving to a section of the eighth floor in the 22-story building between East 40th and East 41st Streets. Asking rents in the Midtown East building range between $55 per square foot and $62 per square foot.

The group is relocating in the second quarter of 2018 from the 18th floor of the building, where it shares the entire 8,790-square-foot floor with the Reform Pension Board.

The Reform Pension Board, a separate organization that provides professionals in the Reform Movement with pension plans, has signed a 4,000-square-foot lease for new offices on a portion of the fifth floor of the building. It also plans to relocate in the second quarter next year.

It was not immediately clear why the organizations were splitting their offices apart, but the tenants both wanted “renovated space elsewhere in the building,” according to Rudin Management Company’s Robert Steinman, who handled the deals in-house, via a spokeswoman.

“These new leases are a testament to our relationships with CCAR and RPB, two organizations that we have housed for nearly two decades,” William Rudin, the co-vice chairman and chief executive officer of Rudin Management Company (which manages the Rudin Family’s assets), said in prepared remarks.

The groups did not have brokers in the transactions, and representatives for the CCAR and the Reform Pension Board did not immediately respond to requests for comment.

Other tenants in the 250,000-square-foot building include brokerage Eastern Consolidated, law firm Gordon & Silber and research agency TNS Custom Research.


Source: commercial

Retail Details: Live From MAPIC

What’s the problem with retail? What are retailers doing to help themselves in this cruddy climate? Are international retailers interested in the U.S.?

Those were the questions on our mind when Commercial Observer traveled to the south of France, last month, to attend the MAPIC conference on retail.

We sat with some of the best brokers in the business and asked their thoughts — here’s what they had to say.


Source: commercial

Street Retail Looks to Malls in Figuring Out Ways to Cope With Big Rents

While malls and shopping centers are looking for ways to save themselves from crushing retail headwinds, at least one group thinks they’ve got something to learn from them: street retail.

The guys with the shops on the sidewalk are taking a page out of their playbook when it comes to structuring deals.

Young retail companies, e-commerce brands and even some legacy retailers looking for a brick-and-mortar presence are asking for terms long found in shopping centers—low base plus a percentage rent (meaning the retailer pays the landlord a certain percent of every dollar in sales over a certain threshold).

“That shopping center formula has morphed onto certain streets—not all streets—around the country. [It] sometimes bridges a gap between what a landlord is looking to achieve with his overall rent and what the tenant feels they can pay with respect to what their sales projections are,” said tenant representative Virginia Pittarelli, a principal of Crown Retail Services (an affiliate of Crown Acquisitions).

These percentage-rent-plus-base deals allow retailers to test out the market with minimal risk by not being locked into a guaranteed rent and give landlords an activated space along with some income. Such deals are being done across the retail spectrum and around New York City for leases as long as 10 years.

Typically in base-plus-percentage-rent deals, the landlord gives a 20 to 50 percent discount to market gross rent, plus a percentage of sales between 8 and 12 percent, according to Christopher Conlon, the executive vice president and chief operating officer of real estate investment trust Acadia Realty Trust.

Robin Abrams, a vice chairman of retail at Eastern Consolidated, explained the percentage-rent formula as follows: If the rent is $500,000 per year and the tenant agrees to a percentage rent of 8 percent above a natural breakpoint (where the base rent equals the percentage rent), the calculation is $500,000 divided by 8 percent with that 8 percent equaling the natural breakpoint above which the tenant pays. So a tenant would pay 8 percent of sales in excess of $6.3 million annually. As the rent increases over the term, the natural breakpoint increases.

“Sometimes the landlord requires an unnatural breakpoint,” she added, “and might say to the tenant that he wanted a million [dollars] in rent, and he won’t wait till sales are $6.3 million but wants the percentage rent over sales of $5 million, or whatever minimum sales figure landlord and tenant agree.”

Abrams and her team are submitting an offer for a restaurant space in an “unchartered neighborhood” where the asking rent is $1.4 million per year. The offer includes a base rent of less than half of the asking rent along with a percentage rent at lower than the natural breakpoint.

These deal structures aren’t confined to less trafficked and less high-profile areas of the city.

Lee Block, an executive vice president at Winick Realty Group, said that while he hasn’t closed any deals that incorporate a percentage-rent component, “we’re considering it on a handful of spaces that we represent.” That was the message conveyed by many brokers and landlords with whom Commercial Observer spoke.

The reason? A surplus of space and a changing retail climate.

Jared Epstein, a vice president and principal at real estate developer Aurora Capital Associates, said his company is negotiating a few deals in Soho with a “slightly reduced base rent and feature a percentage rent above a natural breakpoint, which we believe will enable the landlord, our entity, to attain market rent and likely exceed market rent so long as the store does the volume that we believe it will.”

And that is because of the high vacancy rate in Soho, Epstein said.

“In general,” Epstein said, “in any deal that features a percent rent in lieu of an amount of fixed rent, the landlord hopes to set a low break point and a large enough percent above that, which will make it probable that the landlord will achieve the total base rent it hoped to achieve. The landlord has to believe the retailer will do the business to get the landlord back to its base rent. Sophisticated landlords will offer the downside protection of a discounted base rent in this market but will also want to participate with the tenant on the upside as their business outperforms.”

For most deals to get done, then, landlords need to be flexible.

“In the last 12 to 24 months I think owners that can be more creative with percentage deals are doing it,” said Jeffrey Roseman, a founding partner of Newmark Knight Frank’s retail division. “Not every owner has the ability to do it because they may have certain restrictions from their bank or they may have paid too much for the property. [But] it’s a new creative way to get deals done.”

True, landlords need to be open to different deal structures, Conlon said. While Acadia hasn’t done deals for a low base plus percentage rent, it is “considering them now,” he said, adding that Acadia would only do them for short-term deals, or those less than three years.

Not all landlords, though, are biting.

gettyimages 520141660 Street Retail Looks to Malls in Figuring Out Ways to Cope With Big Rents
SOHO STRUCTURES: In today’s market, landlords across the city, including in Soho (above) are considering retail leases with a small base plus a percentage rent rather than just a gross rent. Photo: Getty

Triangle Assets doesn’t plan to do any percentage-rent-involved deals, according to Benjamin Stavrach, the director of leasing and property management at the company.

“New tenants have talked to us about percentage-rent deals, and we have held back,” Stavrach said. “It’s a different business model. It’s not something we want to get our hands dirty with. [And] as a landlord I don’t have to give it.”

With percentage-rent deals, he noted, a landlord has to “trust” the tenant will be successful and is honest with its sales records. “You are almost investing in the tenant,” he said.

Instead, to get deals done, Triangle Assets—with its 83,000 square feet of street retail space—may lower the rent in a gross-rent deal.

Michael Brais, a food-and-beverage retail broker with Douglas Elliman Commercial, who is leasing up the F&B component at the BFC Partners-led Empire Outlets outdoor shopping center on Staten Island, said he is working a lot with the percentage-rent structure.

Indeed, at Empire Outlets, the F&B component totals 50,000 square feet, of which 5,000 square feet remains available. Almost all the deals were negotiated with a combination of base plus a percentage rent, and the same goes for the majority of Brookfield Property Partners’ retail agreements.

That structure can be a win-win for both sides of a deal, some brokers said.

“It is fairly established, particularly in shopping centers with base and percentage rent,” Brais said. “Lower base helps the operator hedge against lower sales and helps the landlord participate in the upside.”

Malls and shopping centers historically have implemented the percentage-rent formula as a “hedge against inflation,” Conlon said. Without such clauses, rent increases are typically a “modest 1 to 2 percent annually or 10 percent every five years.”

Thomas Dobrowski, an executive managing director with Newmark Knight Frank based in New York City, handles regional mall investment sales nationally. He said the formula started to become more popular after the 2009 recession, “when dozens of malls were foreclosed on by lenders and special servicers. To placate tenants and keep them at these properties that were distressed and transitioning, percent-rent deals, along with short-term leases, became more common and enabled new owners of these malls to keep many national tenants that would have closed open and operating. The trend continues today and is becoming more common at stabilized properties as well.”   

This model is good for tenants in a market where rents are outrageously high, but it’s good for landlords when the tenant does gangbusters business. In this market, it is more beneficial for the tenant. 

“The tenants have the upper hand these days,” Dobrowski said. “These national retailers have a lot more leverage than they did in the past, and they are exercising whatever rights they have or proposing structures that are benefitting them.”

One of the things holding landlords back from doing too many percentage-only deals, which are very common in enclosed malls, is they can make the real estate difficult for lenders to underwrite. The underwriters “don’t like to see zeros anywhere,” Brais said.

While Conlon doesn’t think inclusion of percentage-rent will become the new “norm for deal-making,” Brais said he expects percentage-rent deals to “become more prevalent” because of the difficulty of getting spaces rented.

For now at least, deal terms are changing.

“Across the board, all streets, all landlords are being creative because we have an abundance of available space in the market,” Pittarelli said. “And the best for any type of market like this is to fill those spaces and if you can fill those spaces by being creative and working with a credit-worthy, great-image-quality retailer, why wouldn’t you?”


Source: commercial

MAPIC 2017: Retail Headwinds Can’t Cloud the Vibe in Sunny Cannes

At this year’s MAPIC in Cannes, France, there was a mix of concern as well as optimism.

Fred Posniak of Empire State Realty Trust told Commercial Observer that there was “no doom-and-gloom” vibe at the international retail property trade show—and if attendance at MAPIC was any indication, things aren’t so bad. This year’s attendance was up 100 people to roughly 8,500 participants from 2016, according to MAPIC Director Nathalie Depetro. Like last year, attendees hailed from 260 countries around the world.

In New York City specifically, deals are starting up again after a dry spell, as evidenced by the recent transactions involving Levi’s, which is moving its Times Square store to a new 17,250-square-foot location at 1535 Broadway, and Vans, which agreed to take 8,573 square feet for its second Manhattan location at 530 Fifth Avenue.

“I think there is momentum,” said Lee Block of Winick Realty Group.

Still, in order to get deals done, tenant rep Virginia Pittarelli of Crown Retail Services said that “for the right kinds of tenants across the board, all landlords are being creative because of the abundance of space.” That means more tenant improvement allowances and less traditionally structured terms, such as lower base rents plus percentage rents (as in percentage of retailers’ sales).

And landlords have also been more open to doing pop-up deals, according to Cushman & Wakefield‘s David Gorelick.

But there is no arguing that there are issues facing retailers in the U.S., with department stores cited as a serious case in point.

“I see department stores going in a downward spiral,” said Salvatore Ferrigno of Newmark Knight Frank. As many have noted, “the writing is on the wall” for department stores and they “have to evolve,” said C&W’s Gene Spieglman.

The same applies to individual retail brands. Brookfield Property PartnersMark Kostic said it is “important for each store to be relevant,” while Robin Abrams of Eastern Consolidated advised that retailers need to key in on their vibe and brand, among other things.

But the retail situation isn’t as grim internationally, according to one market watchdog. While the U.S. is experiencing a “collapse [in] retail activity,” the downturn is “less dramatic” in other countries,  said Mohamed Haouache, the founder of online short-term retail leasing platform Storefront.


Source: commercial

High-End Home Fixture Company Pirch Shutters Soho Outpost [Updated]

Pirch, a luxury appliance showroom that epitomizes “experiential” by allowing customers to “try before you buy,” has closed its massive Soho store, according to signage in the door.

“Pirch has decided to restructure and operate out of their Southern California base and therefore a decision has been made to exit all non-[California] markets with immediate effect,” the sign at 200 Lafayette Street between Broome and Spring Streets reads.

A Pirch spokeswoman told Commercial Observer: “Pirch Soho closed officially a couple of weeks ago, although there is still a team handling follow through on existing orders out of the distribution center in New Jersey. Pirch California is fully operative and doing well. It has been determined by management that the path forward for Pirch is based in California.”

The news comes a month after Bloomberg reported that the company was “planning to shutter most of its locations as it overhauls operations.” That included the Soho flagship.

The 32,000-square-foot, three-story store at General Growth Properties’ 200 Lafayette Street opened in May 2016, marking the California chain’s foray into the New York City market. The asking rent was about $400 per square foot on the ground floor, The Real Deal reported. The upscale store was home to “working kitchens where a curated selection of the world’s best appliances can be tested, and special events are held,” according to a Pirch press release. “Vignettes throughout feature working showers, sinks and bathtubs.”

Retailers have been struggling as of late, with experts saying that for brick-and-mortar shops to survive, they need to be experiential. So where did Pirch—which was named one of Fast Company’s most innovative companies in retail last year, and the year prior, one of the most promising companies by Forbes—go wrong?

“I think the Pirch concept was a great idea and a fun experience but unfortunately not too many New Yorkers were in the market for a $48,000 stove,” commented Eastern Consolidated broker James Famularo.

Retail consultant Kate Newlin offered: “Elegant concept, but as one Italian furniture brand told me, ‘This town is filled with dot.com, Wall Street and hedge fund money in the hands of 20-something guys who buy the loft and then have their mothers come in and decorate from Ikea for them.’ Pretty much a recipe for disaster for high-end kitchen redesign, right?”

screen shot 2017 10 25 at 11 41 13 pm High End Home Fixture Company Pirch Shutters Soho Outpost [Updated]
The signage posted in the door of Pirch’s store at 200 Lafayette Street. Photo: James Famularo

According to Peter Braus, the managing partner of Lee & Associates‘ New York office, “It shows that even having a really well-conceived, extremely exciting and original retail concept like Pirch is is not enough to fight the tides created by today’s trends. Perhaps they found that people were doing to them what so many other retailers have experienced—customers using their store as nothing more than a showroom to try out the latest products, and then making the purchase on line for a much lower price. It demonstrates vividly that a retailer really does need to  be ‘Amazon-proof’ in order to make it.”

A spokesman for GGP, which acquired the 130,000-square-foot, seven-story building in October 2013 for $148.8 million, said the company is “just beginning to market the space [which spans the basement and the first and second floors] so stay tuned.” No one from Pirch  immediately responded to a request for comment.

Update: This story has been edited to include a comment from a Pirch, the landlord and a retail consultant.


Source: commercial