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Issue Number 11
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The Dealmakers Issue Number 11 for the week of March 26, 1999 My Way by Ted Kraus I’ve decided that the larger the company, the dumber they must be or at least more incompetent. I recently had a 70,000 sq.ft. tenant request we assist ‘em in obtaining space in an enclosed mall owned by a REIT. After the request was given, I quickly called the mall’s headquarters with visions of a large commission dancing in my head. Since this was a major mall developer, my contacts with the developer were limited, most of the people I knew had either retired or move on to other companies. Therefore, I called, requested the real estate department and then explained to the secretary the mall I was interested in and the tenant we represent (I knew the tenant would protect me). I was told by the secretary that they prefer to deal directly with the retailer and not use a broker. I explained life was not fair and that they were stuck with me if they wanted to do the deal, and without getting into the merits of brokers, who do I speak to? I was told that it would be the head of real estate but he’s a busy person, so he may not be able to speak to me now, but she’d transfer me anyway (what a nice person); I next got the voice mail for their VP and I left a detailed message stating who I am, the tenant I represent and the square footage required, along with the name of the center we’re interested in. Well, I waited two days, didn’t hear from him, called again and got his personal secretary this time (I guess I’m making progress). I explained my situation and was told he’s a very busy man. I then asked if there’s someone who isn’t as busy that I can deal with. I was told no, "he’s the man." About two days later, I got a call from the retailer saying that "the man" had called him regarding the center and "could I return the call?" So I called again, got the same secretary, explained that she must have taken down the wrong number and I’m returning his call for the tenant. I finally got the "man" on the line and was told that they don’t like to work with brokers. I said I knew the feeling, I hate to work with developers, but money forces me to. Anyway, if they want the tenant, they have to deal with me. First there was silence, finally he said he’d get back to me. It’s been three days and no call back. I’ll give him another call once I’m done writing, but I have major problems understanding their stupidity. Maybe he doesn’t like brokers, but brokers (at least competent ones) can get the deal done; it seems he can’t. Now in fairness, it isn’t only the big guy that’s stupid, the small developer holds their own in this category. I’m trying to do a deal for an 8,000 sq.ft. tenant in a 16,000 sq.ft. building. When we started negotiations, they had a lease out for half the building and we were taking the remaining half. "Our" area was not as prime as the other tenant’s, but it was "acceptable." We spent a month negotiating price, but couldn’t come to terms and finally gave up. Well, last week I got a call from the owner saying the first tenant backed out and are we still interested in proceeding? I said yes and he replied, "I’ll get you a new proposal this week. Two days later I got faxed a new proposal for the secondary location (which is fine) at a higher rent than what he wanted before we bowed out last time. I called up and asked "what’s happening" and was told that was the amount of rent the other tenant was going to pay, and he doesn’t want to affect cash flow (what cash flow?). Therefore he wants the same rent from us. Huh??? I, with a great deal of restraint, explained we were not willing to pay that amount before, why would we now? There was no answer and I finally said "have a good life..." Dumb, dumb, dumb. Why do I have to deal with so many dummies? It must be me. On a different topic, there was an interesting article in the Wall Sweet Journal two weeks ago about how REITS are beginning to "chop heads" in their acquisition departments, since their expansion plans are now on hold. The acquisition people are no longer the stars of the company (a little like the syndication acquisition people losing the glitter in the ‘80's; if we’re not acquiring or syndicating who needs you?). The article goes on to say there’s consolidation going on with REITs (duh) and that private developers are in the driver’s seat. Overall, it was not a complimentary story, which is fine because I’m not a fan of REITs. Proof of what the WSJ said is correct is when the other day, I was talking to a VP of a REIT whom I’m friendly with and I mentioned the article. He totally dismissed it and said what they didn’t report is that the new & improved emphasis is now on operations which in the long run will improve cash flow and therefore the company’s stock price (which, in theory, is correct). I asked what they were doing with leasing and was asked "what do you mean?" I replied, "are you expanding your leasing department, improving the quality of your people? Expanding your marketing/advertising for your centers?" He said, "No, there’s no need to, there we’re fine" (but he has a 15% vacancy factor). "Wait a minute," I said, "I know most of your department and overall the people have two to four years experience who are not extremely strong (but are well paid). If all your property was "C" or better, three people could handle it properly, but most are "C-" or below, so you need more bodies. You have no strong "dealmakers" in leasing, so bite the bullet, hire some old farts who negotiate for dimes and can cut creative deals on the weak centers and promote more of the centers’ vacancies. Right now you think a full page ad for the Vegas convention is sufficient for the year." (They place two ads in different publications for a total cost of $3,000 to $4,000 but spend $45,000 on the booth and personnel at the show. Downplay the elaborateness at the booth, send more pre-show letters/faxes inviting people to your booth and have more bodies so you can set up more meetings.) What about other Dealmaking events and on-going marketing? (maybe even canvass). This is a company with nearly 10 million sq.ft. of retail and maybe they spend $100,000 a year marketing their properties, which is dumb, which ties into the other two stories. One last "dumb" story. This week I needed to buy some software and furniture. I started my quest by going to Staples and Best Buy. Both were out of stock on both items and had no idea when they would be in. I went to CompUSA who only stocked the Mac and Windows 3.1 versions. I left there for OfficeMax who was also out of stock on the furniture. After wasting three hours, I hit myself in the head, sat down by my computer; did a few searches and within 20 minutes had ordered all three items (the software I downloaded from the site. Three days later the furniture was delivered). The "real stores" lost nearly $500 in sales because they were out of stock of standard items. Next month I am giving a speech at a seminar on the impact of the Internet on real estate and retailing; this experience changed most of my speech. Before this event, I had the position the impact of the Net on retailing would be minimal; now I think that if the "virtual retailers" get their act together, conventional retailing is in trouble. Retailers Expanding in The Carolinas Belk Stores Services, Inc. trades as Belk Department Stores
at 225 locations in AL, AR, FL, KY, MD, MS, SC, TN, TX and WV. The department stores
occupy spaces of 40,000 sq.ft. to 200,000 sq.ft. in regional malls, power and strip
centers. Preferred co-anchors include Wal*Mart and department stores. Plans call
for the opening of as many as 12 units in the coming 18 months. Expansion will take place
in the existing markets. Preferred demographics include a population of 50,000 within 15
miles earning $35,000 as the average income. Leases running 10 to 15 years are typical. Tadros, Inc. trades as 4M Fashions at nine locations in NJ
and NY. The young men’s apparel stores occupy spaces of 2,800 sq.ft. to 3,000 sq.ft.
in downtown store fronts, regional malls and power centers. Preferred co-tenants include
department stores. Plans call for the opening of four units in the coming 18 months.
Expansion will take place in the Charlotte, NC and Atlanta, GA areas. Leases running three
to five years, with a five-year option, are typical. Ostrow Textile Company trades as Plej’s Linen Supermarket
at 47 locations in FL, GA, NC and SC. The bed, bath and linens stores occupy spaces of
6,000 sq.ft. to 14,000 sq.ft. in power centers. Preferred anchors include T.J. Maxx
and Best Buy and preferred co-tenants include Dollar General. Plans call for
the opening of three units in the coming 18 months. Expansion will take place in FL and
NC. Preferred demographics include a population of 50,000 within five miles. Leases
running seven years are typical. J.L. Hammett Co. trades as Hammetts Learning World at 62
locations in AZ, CA, CT, FL, IL, MA, ME, MN, NC, NH, NJ, NY, OK, SC, TX, and VA. The
stores, selling teaching resources and educational supplies, occupy spaces of 3,000 sq.ft.
to 5,000 sq.ft. in strip and power centers. Preferred anchors are supermarkets and
department stores. Plans call for as many as 14 openings in the coming 18 months.
Expansion will take place in AZ, MN, NC, NJ, SC, TX and VA. Preferred demographics include
a population of 300,000 within five miles earning $60,000 as the average income. Leases
running three to five years are typical. Monro Muffler/Brake trades as Monro Muffler at 520 locations
in CT, DE, GA, IN, MA, MD, ME, NC, NH, NJ, NY, OH, PA, RI, SC, VA, VT and WV. The
automotive service centers occupy spaces of 4,500 sq.ft. in freestanding facilities.
Preferred anchors include Wal*Mart and grocery stores. Plans call for 25 openings
in the coming 18 months. Expansion will take place nationwide. Preferred demographics
include a population of 25,000 within three miles earning $40,000 as the average income.
Leases running 10 to 15 years are typical. Sumarc Inc. trades as Audiovideo at five locations in NC and
TN. The electronics stores occupy spaces of 12,000 sq.ft. in freestanding facilities near
power centers. Plans call for as many as two openings in the coming 18 months. Expansion
will take place in the existing markets. Leases running five years, with options, are
typical and the company cites Circuit City and Best Buy as competition. Surreys of Florida, Inc. trades as Surreys Menswear at 21
locations in FL and TX. The menswear stores occupy spaces of 2,000 sq.ft. to 2,500 sq.ft.
in regional malls and outlet centers. Growth opportunities are sought in GA and NC. Bob Evans Farms, Inc. trades as Bob Evans Restaurants at 414
locations in the Mid-Atlantic and Midwestern regions. The family-style restaurants occupy
freestanding facilities on one to one-and-one-half-acre lots. Plans call for the opening
of at least 25 units in the coming 18 months. Expansion will take place in NC and MO
(Kansas City). Preferred demographics include a population of 30,000 within five miles
earning $25,000 as the average income. Leases running 20 years are typical and the company
lists other family-style restaurants as competition. D.L. Rogers Corporation trades as Sonic Drive-In at 60
locations in KS, MS, NC, OK, SC, and TX. The fast food restaurants occupy spaces of 1,500
sq.ft. to 1,600 sq.ft. in freestanding facilities. Preferred anchors include Wal*Mart
and supermarkets. Plans call for the opening of eight units in the coming 18 months.
Expansion will take place in NC and TX. Preferred demographics include a population of
8,000 to 12,000 in the surrounding municipality. Leases running ten years are typical and
the company is franchising. Marks and Morgan Jewelers Inc. trades as Marks and Morgan
Jewelers at 134 locations in AL, FL, GA, KY, LA, MS, NC, SC, TN, and VA. The stores
occupy spaces of 1,500 sq.ft. to 2,000 sq.ft. in regional malls. Plans call for 15
openings in the coming 18 months. Expansion will take place in the existing markets.
Leases running 10 years are typical and the company cites Zales and Sterling
as competition. Schewel Furniture operates 41 locations in NC, VA and WV. The
stores occupy spaces of 20,000 sq.ft. in freestanding facilities and strip centers.
Preferred anchors include grocery stores. Plans call for one opening in the coming 18
months. The company is looking for growth opportunities within the existing markets.
Preferred demographics include a population of 30,000 within five miles earning $25,000 as
the average income. Leases running ten years are typical and the company cites Helig-Meyers
as competition. CVS trades as CVS Pharmacy at more than 3,866 locations in
CT, GA, IL, IN, KY, MA, MD, ME, MI, NC, NH, NJ, NY, OH, PA, RI, SC, TN, VA, VT, and WV.
The pharmacies occupy spaces of 8,000 sq.ft. to 11,000 sq.ft. in freestanding facilities.
Plans call for 140 openings in the coming 18 months. Expansion will take place in the
existing markets. Dollar Discount of America, Inc. trades as Dollar Discount
at 101 locations in AL, CA, CT, DE, FL, GA, KY, MI, MD, MO, NC, NJ, NY, OH, PA, SC, SD,
WV, WI, WY, VA and VT. The general merchandise stores occupy spaces of 2,000 sq.ft. to
3,500 sq.ft. in freestanding facilities and strip centers. Preferred anchors include
supermarkets. Plans call for 35 openings in the coming 18 months. Expansion will take
place in the existing markets. Preferred demographics include a population of 50,000
within five miles. Leases running seven to ten years are typical and the company is
franchising. Gilmore Brothers, Inc. trades as Gilmore’s, The Acorn,
Redwood & Ross, and C.G. & Co. at 20 locations in IN, KY, MI, NC, OH,
and SC. The apparel stores occupy spaces of 2,000 sq.ft. to 3,000 sq.ft. in regional
malls, downtown storefronts and strip centers. Preferred co-tenants include Talbots,
upscale men’s and women’s apparel stores, bookstores, art and gift stores and
better restaurants. Plans call for 12 openings in the coming 18 months. Expansion will
take place in KY, NC, OH, SC and VA. Preferred demographics include a population of 50,000
within three miles earning $75,000 as the average income. Leases running five years are
typical and the company cites Talbots as competition. Quality Stores, Inc. trades as Quality Farm & Fleet and County
Post at 118 locations in GA, IN, KY, MI, NC, NY, OH, PA, SC, TN, WV and VA. The
general merchandise stores occupy spaces of 25,000 sq.ft. to 35,000 sq.ft. in freestanding
facilities and strip centers. Preferred anchors include Wal*Mart, department and
grocery stores. Plans call for as many as 25 openings in the coming 18 months. Expansion
will take place in the existing markets. Preferred demographics include a population of
30,000 within ten miles earning $35,000 as the average income. Leases running five years
are typical. New York Jewelry, Inc. trades as New York Jewelry at 20
locations in AL, FL, GA, IL, MS, NC, OH, SC, TX and VA. The stores, selling 10K and 14K
gold jewelry, precious stones and watches, occupy spaces of 1,000 sq.ft. to 1,800 sq.ft.
in regional malls and kiosks. Plans call for as many as eight openings in the coming 18
months. Expansion will take place in the existing markets. Simply Fashion Stores, Inc. trades as Simply Fashions at 206
locations in AL, AR, FL, GA, IL, IN, KY, LA, MD, MS, MO, NC, SC, TN, TX, VA and
Washington, D.C. The women’s apparel stores occupy spaces of 3,000 sq.ft. in regional
malls, freestanding facilities, downtown storefronts, power and strip centers. Preferred
anchors include Wal*Mart, Kmart and grocery stores. Plans call for 50
openings in the coming 18 months. Expansion will take place in the existing markets.
Preferred demographics include a population of 50,000 in the trade area. Leases running
five years are typical. Huddle House, Inc. trades as Huddle House Restaurants at 327
locations in AL, AR, IN, FL, GA, KY, LA, MO, MS, NC, OH, SC, TN, VA and WV. The 24-hour,
diner-style restaurants occupy spaces of 2,000 sq.ft. in freestanding facilities and strip
centers. Plans call for as many as 60 openings in the coming 18 months. Expansion will
take place in the Southeastern region. Preferred demographics include a population of
5,000 within three miles earning $32,000 as the average income. Leases running 15 years,
with three five-year options, are typical and the company is franchising. Waffle House
and IHOP are cited as competition. New Construction AIG Baker Shopping Center Properties, L.L.C. recently broke ground
on Cherrydale Point, located at the intersection of Poinsett Highway, North
Pleasantburg and Highway 253 in Greenville, SC. The 400,000 sq.ft. project will be
anchored by a 16-screen, 63,000 sq.ft. Regal Cinemas and will include as many as
nine additional anchor stores representing the apparel, books and junior department store
categories. Also, an additional 60,000 sq.ft. of small shop space will be developed.
Stores are expected to begin opening during Spring 2000. Quintard Mall, Ltd. is currently expanding Quintard Mall in
Oxford, AL from its present 325,000 sq.ft. to 620,000 sq.ft. Currently anchored by J.C.
Penney and Sears, the two will be joined by a 126,000 sq.ft. Dillard’s
Department Store and a 50,000 sq.ft., 12-screen Amstar Theater. Also being
added to the mall is 105,000 sq.ft. of specialty store space and a seven-unit food court.
In addition to new anchors, the project is also undergoing a remerchandising and recently
added a 4,825 sq.ft. Walden Books store, a 4,275 sq.ft. Athletic Attic, a
5,775 sq.ft. Dollar Tree store and a 1,700 sq.ft. GNC unit. Stores and
restaurants occupying the expansion area include Electronics Boutique, Reed’s
Jewelers, Shoe Department, American Eagle Outfitters, Claire’s Boutique, Regis, Sound
Shop, Mark’s & Morgan Jewelers, Kirkland’s, KB Toys, Garfield’s
Restaurant, Victoria’s Secret, Bath & Body Works, Great American Cookie,
Chick-Fil-A, Sbarro Italian Eatery, Magic Wok and Sweet & Salty Candies.
The mall, which has a sales history average of $300 psf for the past 10 years, is located
halfway between Birmingham, AL and Atlanta, GA, one-quarter of a mile off I-20 at the
intersection of US Highway 431 and US Highway 78. A grand opening is planned for August
2000. Ground was recently broken on the development of Old Nashville
Crossing, located at the intersection of Sam Ridley Parkway and Old Nashville Highway
in Smyrna, TN. The 85,000 sq.ft. project will be anchored by Kroger and spaces of
1,050 sq.ft., 1,400 sq.ft., 2,100 sq.ft., 2,800 sq.ft., 5,000 sq.ft. and three outparcels
are available for lease. Demographics include a three-mile population of 29,000 earning
$50,000 as the average income. A November opening is planned. Benderson Development Co. recently acquired 67 acres of land near
I-77 in Mooresville, NC for the development of Consumer Square. The 560,000 sq.ft.
project will be anchored by a Wal*Mart SuperCenter and a16-screen movie
theater. Mooresville’s population stands at 17,000, but is expected to double in the
coming 10 years. Benderson Development is also building a 250,000 sq.ft. shopping center
in Union County, NC. North American Properties recently obtain permits to break ground
on MarketPlace at Mill Creek located on GA 20, across from the Mall of Georgia
in Atlanta, GA. The 535,000 sq.ft. project will be anchored by Toys ‘R Us and
several other big-box retailers. The center is part of a small city of retailers, office
buildings and apartments being developed around The Mall of Georgia which is being
developed by Ben Carter Properties. Other developments underway include The Mall
of Georgia Crossing, a major strip center anchored by Target, a five-story Hampton
Inn, a four-story Best Western hotel and a 464-unit apartment complex. Buyers & Sellers Kimco Realty Corporation is aggressively looking to acquire
shopping centers nationwide. Preferred projects should have GLAs of at least
100,000 sq.ft., be institutional grade properties with long term leases, be well-located
in key growth markets or regional locations and be candidates for redevelopment. All cash
deals are possible. During 1998, the company closed on more than $700
million in acquisitions adding 9.8 million sq.ft. to its portfolio. Rosen Associates Management Corp. is in the market to acquire
neighborhood and community shopping centers nationwide. The company’s interests range
from complete redevelopments to stabilized investments. Ryan’s Family Steak Houses, Inc. is selling 19 undeveloped or
excess properties and six vacant buildings. These locations offer high visibility,
excellent access, convenience to local retail, utilities and DOT curb cits. Many of these
locations are either adjacent to or across from new Wal*Mart SuperCenters. The Covington Co. is in the market to acquire grocery store
anchored strip centers in the Mid-Atlantic region. Diversified Realty Services Co. has the listing to sell two shopping centers fronting US 1 in Fort Lauderdale, FL. The first, The Promenade, is a 58,000 sq.ft. shopping center anchored by TGI Friday’s, Visionworks, Wolf Camera and Carmine’s Gourmet Market. The asking price is $8.4 million. The second, The Prado, is a 26,000 sq.ft. project anchored by Outback Steakhouse. The asking price is $3.8 million. Each property is more than 95% leased and located in the No. 1 neighborhood in Fort Lauderdale. For more information, contact Alan Goldberg at (954-760-9966). Re/Max Around Atlanta Partners has the listing to sell a 4.375 acre
parcel of land located at the intersection of Beaver Ruin Road and Steve Reynolds
Boulevard in Gwinnett, GA. The asking price is $875,000. Equitable Management Corp. represents a client in the market to
acquire Publix or Kroger anchored shopping centers in the Southeastern region, preferably
in FL and GA. Projects located in NC, SC and major MSAs in AL, LA and TN will be
considered. Preferred projects should have specialty shop space no greater than 30,000
sq.ft. Properties in need of redevelopment or rehab will also be considered. McDade, Smith, Gould, Johnston and Co. has the listing to sell 48
acres of land in Houston, TX. The parcel is located on Lake Houston adjacent to Deerwood
Country Club and near King’s River Village. The Schreiber Company is in the market to acquire supermarket
anchored shopping centers having GLAs of at least 100,000 sq.ft. located East of the
Mississippi River. Thatcher & Associates, Partner Continental Equities, Ltd.
represents a client in the market to acquire parcels of land suitable for the development
of power centers and/or big box retail sites east of the Mississippi River. Divaris Real Estate, Inc. has the listing to sell a strip center
anchored by a national drug store chain in the Hampton Roads market of VA. The project has
upside potential through lease up of 10,254 sq.ft. of in-line space and has below market
rents. The center is located near a major regional mall. Rosamund Property Company has the listing to sell Greystone Village
Shopping Center located at the intersection of Leadmine Road and Sawmill Road in Raleigh,
NC. The 85,161 sq.ft. project is anchored by Food Lion and Eckerd Drug. CB Richard Ellis has the listing to sell Henderson Marketplace in
Henderson, NC. The 90,000 sq.ft. project is anchored Lowes Food, CVS, Sherman Williams and
Cato’s. The annual NOI is $607,000 and the asking price is $5.95 million. Financing
of $4.235 million is available. Meredith Suites Management has the listing to sell a 250,000 sq.ft.
mall in Lenoir, NC. The center’s projected NOI is $558,000 and upside potential
exists through lease up of 40,000 sq.ft. The asking price is $4.3 million. The Ainbinder Company recently sold Sharpstown Court in Houston, TX
to Kimco Realty Corporation. Ainbinder originally purchased the 85,000 sq.ft. project,
which is located near Sharpstown Mall, in 1997 and subsequently renovated and released the
center. The center is anchored by Office Depot, Just For Feet, Metropolitan Furniture,
Today’s Vision and Quizno’s. CAC Realty represented The Ainbinder Company in the
redevelopment and sale. Prudential GA Realty has the listing to sell 2.2 acres of land
located at the intersection of I-85 and I-985 in northern Atlanta, GA. The site is located
within four miles of five million sq.ft. of commercial development that is either
currently being developed or planned to be developed. The asking price is $700,000 per
acre. JP Properties, Inc. announces the acquisition and redevelopment of
Midtown Shopping Center in Prattville, AL by LJ Ventures, LLC. The 56,800 sq.ft. project,
which is located adjacent to a 60,000 sq.ft. Winn-Dixie Marketplace, is anchored by
Premiere Video, Renter’s Choice and TCBY. The center has two spaces available for
lease: a 30,625 sq.ft. former Winn-Dixie space, and a 8,450 sq.ft. space. The center is
managed and leased by JP Properties. Almona Holdings, LLC and KAFRE, LLC, entities organized in
connection with a tax free exchange by Jim Ross of InterCapital Realty Corp., have
acquired the CVS anchored shopping centers in Northport and Massapequa, NY. Tenants in the
shopping centers include CVS Pharmacy, Ground Round, Davis Optical and One Price
Cleansers. Tulsa Properties, Inc. brokered the sale of a 10,404 sq.ft.
building located on East 58th Street in Tulsa, OK. The buyer was Casual Furniture Company,
which is part of Jack Wills Patio & Fireplace Shoppe. Bankruptcy News Carpeteria Inc. (805-295-1000), which recently closed 27 carpet stores in AZ and CA, has filed for Chapter 11 bankruptcy protection. The company was founded in 1960 by brothers Harold and Ted Haserjian, also owns 11 other stores throughout CA. The company closed its five Orange County stores with its merchandise still inside as it attempts to fend off creditors through the bankruptcy filing. The filing only involves company-owned Carpeteria stores and not the 40+ franchised Carpeteria stores in CA, NV, OR and PA. Edison Brothers Stores, Inc. (314-331-6000) recently filed for Chapter 11 bankruptcy protection. Edison, a national retail discount chain selling apparel and footwear, said that since its Chapter 11 reorganization in September 1997, it has encountered severe competition and disappointing operating results that necessitated further relief under the bankruptcy law to facilitate a restructuring and/or sale of all or parts of the retail organization. To assist in pursuing those objectives, the company announced that, subject to approval of the bankruptcy court, it had engaged the investment banking firm of Houlihan Lokey Howard & Zukin to explore strategic alternatives to best serve the interests of all creditors and other parties. Also subject to court approval, the company said it is continuing the engagement of Gruppo, Levey, an investment banking firm retained earlier to sell the company’s Repp Ltd. Big & Tall menswear stores and its Repp By Mail catalog. Edison emerged from a previous Chapter 11 reorganization in September 1997, and a new management team took over in January. The company currently operates more than 1,500 stores trading as Bakers and Wild Pair footwear stores; 5-7-9, Riggings, JW, Coda and Repp Ltd. Big & Tall. Nevada Bob’s (702-451-3333), which has been struggling to survive, was recently acquired by Alien Sport Ltd., a manufacturer of golf clubs. Shortly after acquiring the chain, the company had to convert an involuntary Chapter 7 liquidation filed by creditors of the Nevada Bob’s stores into a voluntary Chapter 11 reorganization. Despite the financial upheaval, there are no plans to close any of the company’s stores, however, many company-owned stores may close temporarily before reopening as franchises. Struggling because of intense competition and thin profit margin, the company has been slow in paying its bills for months and the owner of the chain, Bob Elton, had been trying to sell all or part of the company to raise cash. Sales at the company dropped sharply last Fall to about $4 million a month, less than half the monthly average earlier in the year. The company operates 60 company-owned stores and franchises an additional 260 units nationwide. Lead Sheet Truck Options, Inc. Automotive The seven-unit chain operates locations in GA, MD and PA. The stores, selling aftermarket accessories geared to light trucks, vans and sport utility vehicles, occupy spaces of 3,000 sq.ft. to 7,200 sq.ft. in freestanding facilities, power and strip centers. Preferred anchors include Home Depot. Plans call for as many as 10 openings in the coming 18 months. Expansion will take place in the Southeastern region. Preferred demographics include a population of 60,000 within five miles earning $35,000 as the average income. Leases running three to five years are typical and the company is franchising. Thoughtfulness, Inc. Cards and Gifts The 18-unit chain operates locations in KY, OH, PA and WV. The stores, selling greeting cards and gifts, occupy spaces of 3,000 sq.ft. to 4,000 sq.ft. in power centers, regional malls and strip centers. Preferred anchors include Wal*Mart, T.J. Maxx, Kmart, department stores and grocery stores. Plans call for one opening in the coming 18 months. Expansion will take place in the existing markets. Preferred demographics include a population of 40,000 within five miles earning $25,000 as the average income. Leases running 10 years are typical. The company cites other card stores as major competitors. Petr-All Corp. Convenience Stores The 62-unit chain operates locations in CT, MA, NY and PA. The convenience stores occupy spaces of 800 sq.ft. to 5,000 sq.ft. in freestanding facilities. Plans call for eight openings in the coming 18 months. Expansion will take place nationwide. The company is franchising. Dollar Castle Dollar Store The 10-unit chain operates locations in MI. The stores, selling dollar store items, occupy spaces of 4,000 sq.ft. to 6,000 sq.ft. in urban and suburban markets and 10,000 sq.ft to 18,000 sq.ft. in superstores. The stores are located in freestanding facilities and strip centers. Plans call for five openings during the first two quarters of 1999. Expansion will take place in Southeastern MI and the Midwestern region. Happy Harry’s, Inc. Drug Store The 40-unit chain operates locations in DE, MD, NJ and PA. The stores, selling prescription drugs, health and beauty aids, snack foods, gifts and cards, occupy spaces of 10,000 sq.ft. to 12,000 sq.ft. in freestanding facilities and strip centers. Preferred co-tenants include grocery stores. Plans call for as many as 12 openings in the coming 18 months. Expansion will take place in DE, MD (Northern and Eastern Shore areas) and Southeastern PA (excluding Philadelphia). Preferred demographics include a population of 30,000 within three miles. The company cites Rite Aid and Eckerd as major competitors. Tandy Corporation Electronics The 7,000+-chain operates locations nationwide. The electronics stores occupy spaces of 2,000 sq.ft. to 2,500 sq.ft. in a variety of real estate settings. Plans call for 100 openings in the coming 18 months, with expansion taking place in the nationwide. Leases running five years are typical. La Madeleine French Bakery & Cafe Food The 66-unit chain operates locations in AZ, GA, IL, LA, MD, TX, VA and Washington, D.C. The French bakeries and cafes occupy spaces of 4,000 sq.ft. to 4,500 sq.ft. in freestanding facilities, power and entertainment centers. Preferred co-tenants include Barnes & Noble, GAP, Banana Republic, Pottery Barn and high-end grocers. Plans call for as many as 16 openings in the coming 18 months. Expansion will take place in the existing markets and in CA, CO, OR and WA. Preferred demographics include a population of 40,000 within three miles earning $75,000 as the average income. Leases running ten years are typical and the company cites Corner Bakery and AuBon Pantry as competitors. La Salsa Holding Company Food The 105-unit chain operates locations in AZ, CA, CO, CT, NV, TX, and UT. The stores occupy spaces of 1,800 sq.ft. in downtown storefronts, power centers, regional mall food courts and end caps of strip centers. Plans call for 25 openings in the coming 18 months. Expansion will take place in CA. Preferred demographics include a population of 50,000 within two miles earning $45,000 as the average income. Leases running five years are typical and the company is franchising. First Choice Haircutters, Ltd. Hair The 280-unit chain operates locations in FL, OH and Canada. The hair salons occupy spaces of 800 sq.ft. to 1,200 sq.ft. in strip centers. Plans call for as many as 50 openings in the coming 18 months. Expansion will take place in FL and OH. The company is franchising. Hobby Shack Hobbies The 11-unit chain operates locations in the Western region. The stores, selling hobby supplies, occupy spaces of 4,500 sq.ft. in regional malls and strip centers. Plans call for eight openings in the coming 18 months. Expansion will take place in the existing markets. Preferred demographics include a population of 300,000 within five miles earning $40,000 as the average income. Leases running ten years are typical. Daniel’s Jewelers Jewelry The 36-unit chain operates locations in CA. The stores, selling fine jewelry and watches, occupy spaces of 1,300 sq.ft. to 1,500 sq.ft. in power centers and regional malls. Preferred co-tenants include soft goods or shoe stores. Plans call for three openings in the coming 18 months. Expansion will take place in the existing market. Leases running five years are typical. Samsonite Corporation Luggage The 214-unit chain operates locations nationwide. The stores, selling luggage and travel equipment, occupy spaces of 3,500 sq.ft. in regional malls, entertainment and outlet centers. Plans call for 30 openings in the coming 18 months. Expansion will take place in the nationwide. Preferred demographics include a population of 600,000 within 30 miles earning $40,000 as the average income. Leases running five years are typical. Central South Music Sales Music The 83-unit chain operates locations nationwide. The music stores occupy spaces of 3,000 sq.ft. to 6,000 sq.ft. in regional malls and outlet centers. Preferred co-tenants include Bugle Boy, Corning, Levis, other outlet-type stores and department stores. Plans call for ten openings in the coming 18 months. Expansion will take place in the nationwide. Leases running five years plus five to seven years are typical and the company cites Camelot and MusicLand as competition. U.S. Factory Outlets, Inc. Outlet Store The 27-unit chain operates locations nationwide, exclusive of AK, HI, OR and WA. The stores, which are manufacturer outlet stores for more than 250 suppliers, occupy spaces of 36,000 sq.ft. to 52,000 sq.ft. in outlet, power and strip centers. Plans call for 10 openings in the coming 18 months. Expansion will take place nationwide, exclusive of OR and WA. Preferred demographics include a population of 50,000 within five miles earning $35,000 as the average income. Leases running ten years, with three options of five years each, are typical. Party City Corp Party Supplies The 377-unit chain operates locations nationwide. The stores occupy spaces of 11,000 sq.ft. to 12,000 sq.ft. in freestanding facilities, power and strip centers. Plans call for 80 openings in the coming 18 months. Expansion will take place in the existing markets. Leases running ten years are typical. Postnet International Franchise Service The 300-unit chain operates locations nationwide. The stores, which offer postal and business services, occupy spaces of 800 sq.ft. to 1,500 sq.ft. in strip centers. Preferred co-tenants include grocery stores. Plans call for 55 openings in the coming 18 months. Expansion will take place in the nationwide. Preferred demographics include a population of 15,000 within three miles earning $40,000 as the average income. Leases running five years, plus a five-year option, are typical and the company cites MBE as competition. Elder-Beerman Corp. Shoes The 50-unit chain operates locations in IL, IN, KY, MI, OH, PA and WV. The stores, which sell branded shoes for men, women and children, occupy spaces of 4,500 sq.ft. to 5,000 sq.ft. in strip centers. Preferred anchors include T.J. Maxx. Plans call for the opening of four units in the coming 18 months. Expansion will take place in the existing markets. Preferred demographics include a population of 25,000 within three miles earning $45,000 as the average income. Leases running five to ten years are typical and the company cites Rack Room, Shoe Sensation and Famous Footwear as competition. Marty Shoes, Inc. Shoes The 82-unit chain operates locations in CT, FL, NJ, NY, and PA. The stores, which sell branded footwear for the entire family, occupy spaces of at least 6,000 sq.ft. in freestanding facilities, outlet and strip centers. Preferred anchors include T.J. Maxx in power centers. Plans call for at least 20 openings in the coming 18 months. Expansion will take place in CT, NJ and NY. Leases running ten years, with a ten-year option, are typical and the company cites department stores as competition. Batteries Plus, LLC Specialty The 180-unit chain operates locations nationwide. The stores, selling specialty batteries occupy spaces of 2,000 sq.ft. in freestanding facilities and strip centers. Preferred anchors include Best Buy, Circuit City and Target. Plans call for 100 openings in the coming 18 months. Expansion will take place in the existing markets. Preferred demographics include a population of 100,000 within five miles earning $40,000 as the average income. Leases running five years are typical and the company is franchising. Mobility Center, Inc. Specialty The 27-unit chain operates locations in AZ, FL, GA, IL, IN, KS, MI, NC, NJ, OH, PA, TN and TX. The stores, selling medical equipment and mobility aids, occupy spaces of 1,500 sq.ft. to 2,000 sq.ft. in strip centers. Plans call for two openings in the coming 18 months. Expansion will take place in the Midwestern region. Leases running 24 months are typical and the company is franchising. Wegmans Food Markets, Inc. Supermarket The 58-unit chain operates locations in PA and NY. The supermarkets occupy spaces of 75,000 sq.ft. to 130,000 sq.ft. in power centers. Preferred co-tenants include Target, Home Depot and Lowe’s. Plans call for three openings in the coming 18 months, with an opening in NJ scheduled for summer 1999. Expansion will take place in CT, NJ, NY and PA. Preferred demographics include a population of 50,000 within three miles or 75,000 within five miles earning $75,000 as the average income. Leases running 20 years, with six five-year options, are typical and the company cites dominant supermarkets and club stores as competition. Video U.S.A. Entertainment, Inc. Video The 19-unit chain operates in locations in FL, GA, LA, MS, PA and WI. The video rental stores occupy spaces of 3,500 sq.ft. to 4,500 sq.ft. in freestanding facilities and strip centers. Preferred anchors include Wal*Mart, Kmart and grocery stores. Plans call for four openings in the coming 18 months. Expansion will take place in FL, LA and MS. Preferred demographics include a population of 25,000 within three miles earning $20,000 as the average income. Leases running ten years are typical and the company cites Blockbuster and Hollywood Video as competition. Vitamin Shoppe Industries, Inc. Vitamins The 50-unit chain operates locations in DE, MA, MD, NJ, NY, PA and VA. The stores, selling vitamins, minerals and nutritional supplements, occupy spaces of 4,000 sq.ft. in freestanding facilities. Preferred anchors include Barnes & Noble, Bed, Bath & Beyond and specialty supermarkets. Plans call for as many as 50 openings in the coming 18 months. Expansion will take place in the existing markets as well as in FL, GA, IL, NJ, and NY. Preferred demographics include a population of 200,000 within five miles earning $50,000 as the average income. Leases running ten years, with three five-year options, are typical and the company cites GNC and Vitamin World as competition. Mergers & Acquisitions Heilig-Meyers (804-784-7300) is looking to sell the Rhodes Furniture chain after it reported a loss of an estimated 30 cents a share during the first three quarters of its fiscal year. The company is looking to receive an acceptable offer for the whole division. However, if one is not found, it could either sell individual stores or convert some to its other formats. Last Spring, Rhodes made the largest overhaul in the chain’s 124-year history, changing its merchandise, store design, advertising campaigns and retraining all its employees. However, while comp store sales were up during the overhaul, they slumped nine percent in January. The company wants to focus on its core business which is selling furniture in small towns on credit. That means dumping the Rhodes chain which primarily operates in middle to large market areas. Currently, Heilig-Meyers operates 864 stores trading as Heilig-Meyers, Rhodes, RoomStore and Mattress Discounters. Family Christian Stores (616-554-8700) and Madison Dearborn Partners, Inc. recently announced an agreement that calls for Madison Dearborn Partners to purchase a majority equity stake in Family Christian Stores. Terms of the agreement, which is expected to close at the end of the month, were not disclosed. Family Christian Stores has been considering alternative financing options since suspending its initial public offering in October 1998 due to volatile market conditions. The chain currently operates 300 stores in 37 states. The agreement will allow Family Christian Stores to acquire new stores and expand into new markets. Food Lion Inc. (704-633-8250) recently acquired 30 former Farmer Jack supermarkets in VA. During Summer, the company plans to convert and open five of the stores in the Richmond and Hampton Roads areas. Four additional stores will be converted and reopened by early 2000. The company plans to evaluate its options with the remaining 21 locations. The purchase helps Food Lion improve its market share in both areas. Currently, the company holds the top market share position in the Hampton Roads area and is No. 2 in the Richmond market, behind the Ukrop’s Super Market chain. Closings Federated Department Stores (513-579-7000) recently closed its 177,000 sq.ft. Burdines department store and Montgomery Ward (312-467-2000) is planning to close its 147,000 sq.ft. store at Tampa Bay Center in Tampa, FL. Sears, a co-anchor, plans to remain open at the mall, at least through this year. Despite the loss of the two anchors, the otherwise 95% occupied mall is owned by the Rouse Co. Service Merchandise (615-660-6000) plans to close 134 of its 347 stores within the coming four months. The proceeds from the inventory sales at the 134 underperforming stores will be used to reduce bank debt. Last month, the company missed a $13.5 million interest payment on its bonds in December, then was rescued by a $750 million financing commitment by Citibank. The company also plans to refine its niche in jewelry, gifts and home products in its remaining stores. Star Buffet, Inc. (801-463-5500), after reporting lower than expected earnings, may close restaurants in its North Star division during the first quarter of fiscal 2000. The number and location of units to be closed is yet to be determined. Crowley, Milner & Co. (313-962-2400) plans to close its 16 Steinbach stores and nine Crowley’s department stores as part of its liquidation program. The stores are expected to be closed by mid-April. McDonald’s Corp. (630-623-3000) recently closed its downtown Lawrence, CO restaurant after operating the location for less than five years. The store, which occupied in a former Woolworth location, was closed because of poor sales due to a lack of a drive-thru lane. Chernin’s Shoes, Inc. (312-922-5900) plans to close its stores in Oak Park, Naperville, Schaumburg and Gurnee, IL this month. Two Detroit, MI stores were closed last month. The company has retreated to the Chicago, IL market in an attempt to stave off bankruptcy. The retrenchment is part of an out-of-court restructuring plan reached with large creditors such as Florsheim Group Inc. and Rockport Co. The company got in trouble in the mid-1990s with an aggressive expansion plan funded by millions of dollars in venture capital from Frontenac Co. In addition, the company’s expansion push came just as the footwear industry was heading into a downturn. Lease Signings Combined Properties, Inc. (202-293-4500) leased 61,000 sq.ft. to Shoppers Food Warehouse and 35,000 sq.ft. to The Room Store at Sugarland Plaza in Sterling, VA. Cohen Asset Advisory Company, LLC (212-679-1222) leased 30,000 sq.ft. to T.J. Maxx, 30,000 sq.ft. to Office Depot and 62,000 sq.ft. to Cinemark at Crossroads Center in Gulfport, MS. Kamid Realty Co. ( 717-292-2653) leaased 12,000 sq.ft. to Big Lots Furniture at Brynn Marr Shopping Center in Jacksonville, NC. Grimmer Realty Co., Inc. (205-290-2712) leased 23,500 sq.ft. to OfficeMax at Emerald Coast Centre in Destin, FL. The Triad Group (617-731-5599) leased 10,125 sq.ft. to CVS in Peabody, MA; 5,000 sq.ft. to West Coast Video in Newton Center, MA; 5,000 sq.ft. to The Men’s Wearhouse at Hanover Commons in Hanover, MA and 11,000 sq.ft. to Mattress Giant at a location across from Shoppers World in Framingham, MA. Space Place Alabama Mobile- A 37,000 sq.ft. space formerly occupied by Delchamps
is available for lease at a shopping center anchored by Pet Supplies South and Hudson.
The site fronts Airport and Hillcrest Boulevards, which have a combined daily traffic
count in excess of 56,000 vehicles. Georgia Atlanta- Singleton Square is anchored by Kroger,
Tutor Time, Dollar Tree, Hollywood Video and Kinko’s. The 103,025 sq.ft.
project has a space of 1,200 sq.ft. as well as a 5,000 sq.ft. pad site available for
lease. A future Phase III addition will offer space up to 30,000 sq.ft. Phase IV will be
built on approximately 8 acres. North Carolina Charlotte- City Marketplace, scheduled to open during
November, will be anchored by Winn Dixie. The site fronts W.T. Harri’s
Boulevard and Davis Lake Parkway, which have a combined daily traffic count of 35,000. The
160,000 sq.ft. project has spaces from 10,000 sq.ft. to 30,000 sq.ft. available for lease.
Demographics include a five-mile population of 85,000 earning $55,000 as the average
income. Retailers in the area include Wal*Mart, Sam’s Club, Best Buy and Rhodes. Jacksonville- Brynn Marr Shopping Center is anchored by Roses,
Winn Dixie and Big Lots Furniture. The 120,000 sq.ft. project has a space of
2,125 sq.ft. available for lease. Demographics include a five-mile population of 65,000
earning $25,000 as the average income. Retailers in the area include Belk, JC Penney
and Sears. Selma- Queens Square is anchored by It’s a Buck
Superstore, Carolina Apparel, JR Tobacco and Colore. The project has spaces
from 5,000 sq.ft. to 20,000 sq.ft. available for lease and the developer will
build-to-suit. The site is located near Factory Stores of America. South Carolina Hilton Head- Island Crossing is anchored by Publix,
Staples and Walgreens. The 96,615 sq.ft. project has spaces of 1,578 sq.ft.,
2,090 sq.ft. and 5,700 sq.ft. available for lease. Zone Changes by Howard D. Geneslaw, Esq. Suppose you have just identified the perfect location which meets all your operational and financial requirements. One problem: it is not zoned for retail use. There are typically two choices: apply for a use variance or seek a zone change. Because of stringent legal requirements for securing a use variance and the difficulties associated with future improvements and financing for nonpermitted uses, very often seeking a zone change is the only practical alternative. These are the basic steps involved in seeking a zone change: Background Investigation The first and perhaps most important step precedent to any acquisition or lease is to engage in a thorough review of the applicable zoning regulations and the comprehensive development plan. Statements regarding zoning requirements made by prospective sellers, lessors, brokers, and others with a vested interest in a transaction should never be relied upon unless and until they are independently confirmed. This independent confirmation should consist of more than mere conversations with municipal personnel. Enlisting the assistance of an attorney or planning consultant who is familiar with the zoning laws of the state in question can help identify issues that may not be readily apparent from a thorough reading of the local zoning ordinance — even to the municipal officials charged with administering that ordinance. For example, suppose the proposed use is a gas station which also includes a convenience store or fast-food restaurant. While the local ordinance may permit each of these uses, it may not address whether two principal uses can be located on the same lot. State zoning enabling laws, or case law decided under them, may establish a presumption as to whether a use variance is required to permit two principal uses on a single lot where the ordinance is silent. The zoning officer may not even think of this issue, but that provides no comfort if an objector materializes later and contests the zoning officer’s interpretation. Special attention should be given to the definitions section in the zoning ordinance because this may dictate whether or not a use is permitted. For example, suppose the zoning ordinance permits "retail stores" but defines them as "facilities for the sale of merchandise, displayed entirely within enclosed buildings, to consumers." If the proposed retail store will have an outdoor garden center, it may well not be permitted, even though a cursory reading of the permitted uses section of the zoning ordinance would not have disclosed this. Talk With Local Officials After reviewing the applicable regulations, you and your counsel should meet with the local planning and zoning officials who administer and enforce the zoning ordinance. Describe the proposal and why there may be an issue as to whether it falls within the uses permitted as-of-right. Sometimes, a minor change to the particular provision in question is enough to clarify that your proposed use is in fact permitted. If more than a minor revision is needed, identify as many public benefits as possible that would result from the proposed change, particularly those which are set forth in state enabling legislation as appropriate zoning purposes. By way of example, these may include consistency with other nearby land uses, development of an appropriate mix of land uses, economic benefits such as job creation or tax ratables, and a host of other criteria which vary by state. Try to show that the proposed zone change is incremental in nature rather than a major reversal. For example, if the property is bordered by an appropriate zoning designation, perhaps there are compelling reasons why the boundary should be extended. If the character of the area has changed since the present zoning was put in place, the planning staff may already be considering a zone change. Alternatively, perhaps another retailer made a similar request several years ago which was soundly rejected. In either event, these are things that you need to learn as early in the process as possible. Convincing those at the administrative level of the merits of your proposal can be critical since the decision makers often rely heavily on the technical advice and recommendations of their planning and zoning staff. Always be cognizant, however, that members of the administrative staff usually do not vote on the ultimate decision. Thus, no matter how rosy or bleak a picture they paint, be somewhat skeptical and independently investigate wherever possible. Try to arrange an informal meeting with one or two of the key decision makers — typically the elected leaders of the municipality — to sell the idea. Be careful not to push too hard for such a meeting since sometimes decision makers will think it inappropriate to discuss a matter which will be coming before them or are barred from doing so by law. The administrative staff can often be helpful in advising on this, as can an attorney or planner retained to assist with the rezoning process. Inquire about the local procedures to formally petition for a zone change. In some communities, there will be a formal procedure along with an application fee and an application form. In others, a simple letter to the appropriate municipal officials is preferred. In still others, finding a sympathetic elected official to sponsor an ordinance amendment will be the best approach. Observe Procedural Requirements State laws establish a specific set of procedures for adopting zone changes. Some jurisdictions require a referral to the planning board or commission for a determination of whether the zone change is consistent with the comprehensive development plan. Typically, a public hearing on the zoning amendment is required. In some jurisdictions, this simply requires publication of a notice in a newspaper of general circulation. In others, public notices by certified mail must be sent to the owner of every affected property and those within a specified radius of the affected properties. Check to make sure whether the municipality or the proponent of the zone change must serve the required notices. The content of the notice is often critical and should be drafted by someone who is familiar with the applicable laws and court decisions. In states which have environmental review laws, preparation of an environmental assessment and, in some cases, an environmental impact statement, may be required prior to action on a zone change. Failure to perform the required analyses, or failure to consider the potential impacts of the zone change, can be a basis for its reversal if challenged. Some jurisdictions provide for a statutory protest whereby citizens or property owners who oppose the zone change may submit a petition or otherwise document their opposition. If a requisite number of persons object, usually based on ownership of nearby land area, state law may require a supermajority vote in order for the zone change to be adopted. Finally, upon receiving the required vote, a notice of the zone change usually must be given, often by publication in a newspaper of general circulation, to commence an appeal period. Appeal periods typically are relatively short (30 days to several months). Provided the required procedures have been followed and the zone change does not conflict with state law, courts will generally defer to the municipality’s judgment in zoning decisions. Recognize the Political Nature of the Process As a legislative act, a zone change is an inherently political process. It is often difficult to predict how interest groups may see themselves as being affected by a zone change and preliminary support from municipal officials can quickly evaporate in the face of voter opposition. Finally, be cognizant of the fact that even if your proposed use is permitted as-of-right, opponents may seek to employ the rezoning process as a sword to modify the zoning regulations in a way that prohibits your use. In some jurisdictions, courts have interpreted the authority to zone as so strong that the municipality may amend its zoning ordinance in response to a particular pending development application for the express purpose of keeping out the proposed use. Even in these jurisdictions, however, there should still be at least some sound and comprehensive planning basis to support such an amendment. What to Remember When seeking to improve property, good developers make sure they know the zoning rules and how they can be best employed to benefit the project. The best developers realize that the "rules" can also be changed and proactively seek such changes to advance what might otherwise be a futile development proposal. Howard D. Geneslaw is with the law firm of Gibbons, Del Deo, Dolan, Griffinger & Vecchione with offices in Newark, New Jersey, and New York City. He is a licensed Professional Planner in New Jersey and has been admitted to the American Institute of Certified Planners. He holds a Juris Doctor from Columbia Law School, a Master of City and Regional Planning from Rutgers University, and a Bachelor of Arts from Washington University. He can be reached at One Riverfront Plaza, Newark, NJ 07102-5497; 973-596-4500, Fax 596-0545; e-mail firm@gibbonslaw.com; home page www.gibbonslaw.com.
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