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Category ArchiveRobin Abrams

Video: Pop Damn! How Pop-Ups Are a Year-Long Phenomenon

It’s not just for the holiday season. Love ’em or hate ’em, pop-ups are here to stay. Retail Details looks at why they’re advantageous for tenants and landlords. We check in with Los Angeles’ jewelry retailer Vrai & Oro as they build out a space that they got on Mott Street via Appear Here.


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

TheRealReal to Open First-Ever Brick-and-Mortar Consignment Store (With Cafe) in Soho


Source: commercial

State of the Market Report: A Q&A With Eastern Consolidated’s Peter Hauspurg

A full-service commercial real estate firm established in 1981, Eastern Consolidated offers real estate investors an integrated platform of investment sales, retail leasing, and capital advisory services. Among the company’s most recent transactions, Eastern Consolidated arranged the sale of a prime residential development assemblage for close to $100 million, and arranged the sale of four contiguous multifamily buildings on the Upper East Side for $52 million–demonstrating the firm’s knack for making impactful deals in one of the world’s most trend-setting cities. We spoke with Chairman and CEO Peter Hauspurg for a market overview of the current investment sales and retail leasing and financing environment.

Commercial Observer: Give us an overview of what you’re seeing in the investment sales marketplace.

Peter Hauspurg: Although year-over-year multifamily volume has declined citywide, the multifamily sector is still achieving strong pricing, cap rates are still historically low (around 3 percent), and financing is plentiful, with significant demand both from residents who want and need housing, and investors looking to capitalize on this demand. New York City’s economy grew at a 2.3 percent clip in the first quarter, resulting in 33,000 new jobs, an unemployment rate of 4.3 percent, and an influx of people looking for opportunities and housing. As a result, multifamily properties continue to be fantastic investments.

Manhattan office properties are continuing to attract foreign investors. Most recently in May, a Chinese conglomerate HNA Group closed on 245 Park Avenue for $2.21 billion. On the development side, large scale office projects–such as those in Lower Manhattan, the Hudson Yards District, and 1 Vanderbilt–are moving ahead and changing the landscape of the city.

What pricing are you seeing for land sales in Manhattan?

PH: Manhattan land prices have fallen 25 to 30 percent in the last year. As the market has shifted, we have had to be more creative to make deals. We just closed a 170,000-buildable-square-foot assemblage for a condo development on East 29th Street between Park Avenue South and Madison Avenue for close to $100 million, which averages to about $580 per buildable square foot. This deal started out as an assignment to sell one building with 50 feet of frontage and air rights that would allow a developer to build cantilevers over the neighboring buildings. Given the complexities of the parcel, market fluctuations, and location of the property, we saw the need—and an opportunity—to revise our strategy. We significantly expanded the original concept by engaging the two adjacent property owners on behalf of the buyer the Rockefeller Group. It required multiple rounds of negotiations—and renegotiations—but we were ultimately able to not just navigate but drive a complex, multi-party transaction that was contingent on the sale of all three buildings—including simultaneous contract signings and closings. This transaction was particularly complex, but it is indicative of the type of creative thinking, experience, patience, vision, institutional knowledge, and tenacity often required to transact land sales and development deals in the current environment.

Are developers still finding a market for condos?

Most definitely. Although land usually leads the rest of the market down, something unusual happened in the first quarter – the average condo unit price rose, year-over-year, citywide. Average condo prices increased by 19 percent to $1.9 million from $1.6 million, and the volume of sales increased 10 percent to 2,737 up from 2,488 the previous year.

What are you finding regarding deals in Brooklyn?

Land deals in Brooklyn have shown more strength than land deals in Manhattan. We just closed on condo development site with 40,000 buildable square feet in Bed Stuy for $285 per square foot. The borough has a resiliency we’ve never seen before.

What is your view of the new Affordable New York Housing Program?

At the end of 2015, when 421a expired, land sales for new rental developments in the city pretty much ground to a halt, because no one can afford to build when the city takes 30 percent of the taxes off the top – it just doesn’t pencil out. We hope that the Affordable New York Housing Program, which was approved in April to replace 421a, restores the creation of new affordable rental stock to its previous strong pace.

What about retail trends?

PH: Retail has been a tale of two markets. You have the high street retail – meaning Madison Avenue, 5th Avenue, and SoHo on Lower Broadway between Houston and Canal – where rents have ranged from $500 to over $2,000 per square foot, suddenly starting to show a tremendous softness in the last year. The softening rents can be explained for a few reasons. First, major retailers historically didn’t mind having a loss leader store on one of those key corridors because the high traffic visibility enhanced their brand around the world. That feeling is mostly gone. More importantly, you now have a number of retailers who, due to the challenge from e-retailing, might have had a 5,000-square-foot clothing store in SoHo, but have now downsized to 2,000 square feet, while keeping a 10,000- or 15,000-square-foot warehouse in Long Island City for $25 per square foot.

On the other hand, you have the neighborhood retail market, with a high volume of restaurants, coffee bars, and boutique concept offerings. New Yorkers have demonstrated an insatiable appetite for these kinds of dining and shopping experiences. Focusing on this niche, our retail leasing brokers arranged around 150 leases totaling 300,000 square feet of space in the last 12 months alone, at an average of under $200 per square foot, consistent with what you’re seeing in neighborhood stores.

What is the financing environment like today?

PH: Surprisingly, lending rates actually came down in the last quarter in spite of the Fed rate hikes. Spreads have narrowed, which means the banks are willing to take a lower amount over the LIBOR or Treasury rate. We recently arranged one multifamily financing deal with a life insurance company that was a 5-year interest-only loan at 3.3 percent.

What are you looking forward to in the next half of 2017?

PH: We continue to attract strong and talented brokers including Robin Abrams and her team who joined our Retail Leasing Division, bringing with them decades of experience representing international retailers such as The White Company of Britain, which just opened its first U.S. store in a space Robin arranged on 5th Avenue in the Flatiron District. We’re now uniquely positioned to execute retail leases on behalf of the complete range of landlords and tenants. Our Investment Sales brokers have continued to expand their reach beyond New York City and are scheduled to close on a 74,500-square-foot retail and office property in the heart of Boston, a market that has been attracting significant institutional investment in recent years. And our Capital Advisory Division is extremely active, having brokered in the last several months close to $600 million in financing for the acquisition, construction, and refinancing of multifamily properties, condo developments, and hotels.

 

 

 


Source: commercial

Robin Abrams Departing Lansco for Eastern Consolidated

Top retail broker Robin Abrams is leaving Lansco Corporation, where she’s a principal and vice chairman, to join Eastern Consolidated as a principal and vice chairman of retail, Commercial Observer can first report. 

She’s bringing her team of Lansco retail brokers—Lisa Rosenthal, Herman Glaswand and Rebecca Olshan—with her to Eastern when she starts after Memorial Day. 

The seasoned dealmaker will run her own team while collaborating with James Famularo, who began building Eastern’s retail platform in 2014 after leaving New York Commercial Real Estate Services. “What they’ve developed in four years with James is tremendous,” Abrams said. “They basically had no retail component and over four years they’ve become a retail player.”

In her 38 years at Lansco, she’s secured locations for a slew of national retailers, including Donna Karan, Agent Provocateur, and Citibank. Last year, she brought Starbucks, Dylan’s Candy Bar and Lush into Turnstyle, a year-old underground mall developed by OasesRE in the Columbus Circle subway station.

She looks forward to continuing that kind of work, as well as helping online retailers lease brick-and-mortar stores.

“There are really exciting e-commerce retailers who are going to be doing standalone, brick- and-mortar locations,” she said. “I think we’re really well-equipped to work with these kinds of retailers to open stores and grow their brands.”

Eastern appealed to her because she felt like she would get to keep the independence she had at Lansco. “There’s tremendous value in being able to have the freedom to build the platform and have the flexibility to grow the business,” she explained. “[At Eastern] I was impressed by their operation. Everybody I met had a lot of integrity.”

Abrams and her crew are only the most recent crop of brokers to decamp from Lansco. Three of the brokerage’s five vice chairs stepped down, and two top brokers quit, The Real Deal reported in November 2016. Lansco Chief Executive Officer Stuart Lilien told the publication, “A few of the partners have not been active recently and felt it was time to cash out.”

“There were things in the press over the last couple months about Lansco transitioning and winding down,” Abrams said, explaining that the firm was downsizing and taking a smaller office. 

The last remaining vice chair at Lansco, Howard Dolch, commented, “We’re smaller than we were but the company is continuing. It’s not shutting down.”

Abrams serves on the Real Estate Board of New York’s Retail Leasing Committee and on the board of directors of REBNY’s Commercial Division. In 2013, she received REBNY’s Louis Smadbeck Memorial Broker Recognition Award, and in 2010 she won the organization’s Most Creative Deal of the Year Award.

“Robin’s industry knowledge, diverse skill set, strategic approach and global expertise make her one of the most successful retail leasing brokers in the city,” Eastern President Daun Paris said in prepared remarks. “She will be a great addition to our team of real estate professionals.


Source: commercial