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On 7-13 Morgan Stanley Downgraded KIM from Equal-weight to Underweight, Downgraded DDR from Equal-weight to Underweight, Downgraded REG from Overweight to Equal-weight and Upgraded FRT from Underweight to Equal-weight. On 7-19 UBS Initiated coverage of DDR at Buy and Initiated coveage of CBL at Buy. On 7-20 Goldman Sachs Downgraded NXL from Neutral to Sell. On 6-01 Credit Suisse Cuts Pan Pacific Retail Properties [PNP] To Neutral. On 6-29 J.P. Morgan raised its rating on real estate investment trusts, Taubman Centers [TCO] and Regency Centers [REG], to "overweight" from "neutral". The brokerage said in a research note that Taubman had good external growth prospects and 2007 consensus estimates for the company may be too low. In a separate note, it said in addition to having solid core growth, Regency's significant development pipeline should enable it to generate above average growth. On 6-29 JP Morgan Upgraded REG from Neutral to Overweight. On 6-30 Cantor Fitzgerald Initiated coverage of RPT at Buy. On 6-30 EQY said it expects Q2 results to come in lower than previously projected, due to the delayed closing of a land sale. The company now sees FFO for Q2 at 40 cents to 41 cents per share, down from an earlier forecast for 44 cents to 46 cents per share. Analysts surveyed by Thomson Financial looked for FFO of 45 cents a share. On 6-28 Friedman Billings Downgraded GGP from Outperform to Market Perform. On 6-29 JP Morgan Upgraded TCO from Neutral to Overweight. Heritage Property Investment Trust to be Acquired by Centro Properties PRNewswire 7-09 Heritage Property announced that it has entered into a definitive agreement to be acquired by affiliates of Melbourne, Australia-based Centro Properties Group. Under terms of the merger agreement, holders of Heritage's common stock will receive $36.15 per share in cash upon the closing of the merger. The per share purchase price represents a 5.7% premium to Heritage's average closing price over the past 10 days, and a 7.3% premium to the average closing price over the past 30 days. The total transaction value is approximately $3.2 billion, which includes indebtedness to be assumed or repaid. Equity One Trims Forecast AP 6-30 Real estate investment trust Equity One said Friday it expects second-quarter results to come in lower than previously projected, due to the delayed closing of a land sale. The company now sees FFO for the quarter at 40 cents to 41 cents per share, down from an earlier forecast for 44 cents to 46 cents per share. Kimco Realty to Acquire Pan Pacific WSJ 7-10 Kimco agreed to acquire Pan Pacific Retail Properties Inc. for $2.9 billion, plus the assumption of $1.1 billion in debt. The deal marks further expansion of Kimco's neighborhood and community shopping-mall properties. The portfolio of Pan Pacific, a San Diego real-estate investment trust focused on the West Coast, totals 138 properties, with about 22.6 million square feet. Kimco, of New Hyde Park, N.Y., has interests in more than 1,100 properties comprising about 143 million square feet of leasable space located in 45 states, Canada, Mexico and Puerto Rico. "This merger fits well with our strategy of owning the highest quality shopping center portfolio," said Kimco Chairman and Chief Executive Milton Cooper. Under the terms of the deal, Kimco will acquire all of the outstanding shares of Pan Pacific for $70 a share in cash. As the Big Stores Wilt, Malls Look to Food and Cinema Ylan Q. Mui, Washington Post 7-23 Fair Oaks Mall is tired. Even during weekends, traffic is often light. The five department stores anchoring the center -- Macy's, Hecht's, Sears, J.C. Penney and Lord & Taylor -- have lost some of their magnetic power, victims of industry-wide weakness and consolidations. Mastercraft Interiors, another major tenant, has filed for bankruptcy protection. Mall developer Taubman Centers hopes the two restaurants [the Cheesecake Factory, which boasts more than 200 menu items and, often, two-hour lines, and steakhouse Texas de Brazil] will act like a shot of Botox for the aging shopping center. It's counting on them to draw shoppers, boost sales and turn Fair Oaks once again into a destination. "The reality is that we understood that adding restaurants to a shopping center was bringing someone to a project more times than they were coming before that," said Rick Strauss, vice president of leasing for Taubman. "It creates a sense of place." Call them the new anchors. Like Fair Oaks, malls across the country have begun looking at restaurants -- along with movie theaters, big-box stores and even supermarkets -- as main attractions. In some places, they are even replacing the traditional mall anchor, the department store. "It's understandable as consumers change their shopping habits that the anchors, the draws, would change," said Michael P. Niemira, chief economist for the International Council of Shopping Centers, a trade group. "Where the consumer heads in terms of their spending is where the market heads in terms of development." The catalyst for these changes lies just a few miles down Route 50 from Fair Oaks. The Peterson Cos.' Fairfax Corner development offers a mix of retail, restaurants, offices and homes. The parking lots were packed on a recent afternoon, and the brick-paved streets were bustling with ID-wearing office workers, moms with strollers and teenagers just chilling. Such outdoor "town centers" have been stealing customers from traditional shopping malls. Some of the most prominent examples include Bethesda Row by Federal Realty Investment Trust, Bowie Town Center by Simon Property Group and Reston Town Center. The problem began when department stores started to lose customers to specialty retailers such as Abercrombie & Fitch and Pottery Barn, as well as discounters including Wal-Mart and Target. According to consumer research firm America's Research Group, 85.6% of shoppers visited a discounter in May, compared with 32.5% who visited national department stores and 21% who visited regional stores. That meant the layout of malls was no longer convenient for many shoppers, who must walk through a department store to reach other retailers. Open-air town centers allow customers to park directly in front of or near the stores they visit. Retailers get more visibility and generally pay lower rents and operating costs than in malls. Fairfax Corner has only a handful of retail stores -- and none of the same stores as Fair Oaks -- along with a a 14-screen cinema and several restaurants, but industry experts say projects like Fairfax Corner are the future of shopping centers. Restaurant-anchored developments may also attract wealthier shoppers. According to a survey by the National Retail Federation, people who ate at full-service restaurants four or more times per month were more likely than the average adult to shop at department and specialty stores and less likely to shop at discount stores. Their average income was $65,483, compared with an overall average of $52,300 for those surveyed. Traditional malls, meanwhile, are grappling with tepid department-store sales and closings. According to the International Council of Shopping Centers, same-store sales at department stores were up just 1% in February, the last month for which data were available. Federated Department Stores' acquisition of the former May Department Stores is also leaving malls with vacant anchor positions. Federated is divesting 80 stores across the country in connection with the merger, giving malls a rare opportunity to make major changes. "They have to look around and see what itch can be scratched. And they've got to be committed to spend the money necessary to scratch that itch," said real estate broker Peter Framson of Green Light Retail Real Estate Services LLC. "You either do that or you become irrelevant." Many shopping centers are using the opportunity to lure alternative anchors and mimic the look of town centers. Last week, for example, Target said it would take over four anchor locations in California, New Mexico and Pennsylvania from Federated. At Westfield Montgomery, owner Westfield Group is planning to remodel and expand by 500,000 square feet. Westfield spokeswoman Katy Dickey said final plans call for more restaurants with outdoor seating and a new fashion wing. The company is calling it a "high-style approach," she said. "It's essentially a hybrid," Dickey said. "We have an existing traditional regional mall, and it's incorporating some of these nontraditional elements." Another Westfield property, Westfield Wheaton mall, brought in Target as an anchor tenant four years ago after the space was left vacant when Montgomery Ward department stores went out of business. The mall also recently completed a $140 million renovation that included adding a Bally's Total Fitness and expanding a Giant Food on its grounds. Perhaps the biggest buzz in the Washington area has been around Tysons Corner Center, which last year completed a 362,000-square-foot expansion. It added a movie theater, a food court and a bevy of restaurants including Pauli Moto's, an Asian bistro from "Iron Chef" Masaharu Morimoto. A new ad campaign reads: "Blackened mahi-mahi with cajun remoulade. Hungry? Tysons, where the restaurants are." But alternative anchors are not without risks. Full-service casual dining restaurants such as Cheesecake Factory and P.F. Chang's are among the most sought-after tenants. But growth in the restaurant industry has been sluggish this year. Last week, Cheesecake Factory announced that second-quarter sales in restaurants open at least a year were down 0.8%. P.F. Chang's comparable sales were down 1% in the second quarter. Supermarkets also come with a set of challenges. Wegmans has been looking at several mall anchor positions, as well as other nontraditional sites, as it seeks to expand along the East Coast. Ralph Uttaro, Wegmans senior vice president for real estate development, said shopping malls are attractive because they usually are easily accessible and draw plenty of traffic. But those benefits could backfire during the holiday season, when malls are mobbed. Who wants to carry a bag full of groceries across the mall just to get to the car? Malls "are really a challenge, which makes conventional supermarkets not the most competitive use," Uttaro said. But "that doesn't mean it can't be done." General Growth Properties, for example, has added Whole Foods as an anchor for one of its malls in Hawaii, said Bob Michaels, the mall developer's president and chief operating officer. "I think the consumer has so many choices that anything you can do that's a little bit different is something that's appealing," he said. The company has revitalized the Mall in Columbia in Howard County by adding a movie theater and a Cheesecake Factory. Waits at the restaurant can hit two hours, and the parking lot is constantly full. And General Growth is considering adding three or four more restaurants to the center. Michaels declined to specify how other retailers in the mall have fared after the movie theater and Cheesecake Factory were built, saying it is still too early to tell. But he said the Woodlands Mall near Houston saw sales increase by $100 per square foot and traffic jump by double-digit percentages after the company added a wing of open-air retail and five restaurants surrounding a lake. That is the type of success that Fair Oaks is hoping for when its Cheesecake Factory opens in November. Q2 Rents & Abosorbtion Ryan Chittum, WSJ 7-26 Rents at shopping malls rose in the second quarter at their fastest clip in nearly three years, and strip malls posted solid increases as vacancies decreased in both sectors, a survey shows. But weakening second-quarter retail sales have damped growth and could slow it further in later quarters as economic pressures squeeze consumers. For the second straight quarter, absorption showed signs of weakness. Tenants absorbed 4.9 million square feet in the period, up from 3.3 million in the first quarter, but well below the two-year average of about seven million square feet per quarter. Strip malls benefited from a lull in new centers opening. While 4.8 million square feet of new space opened in the quarter, space of 10.8 million feet is set to come on line in the fourth quarter. "New construction this year particularly is back-loaded to the end of the year," said Lloyd Lynford, chief executive of Reis. "Investors would do well to be monitoring impact of that construction," particularly in markets like San Bernardino/Riverside, Calif., where 1.7 million square feet of new strip-mall space has opened so far this year -- a huge amount considering 8.6 million square feet has opened in the rest of the country during the same period. Still, strip-mall rents rose 0.9% to $18.65 a square foot from the first quarter. Shopping-mall rents rose 1% to $38.89 a square foot, the survey showed -- the biggest quarterly rise in nearly three years. Home Page Previous REIT Update Top Sites |