6. EDSR 10-13-2008 - Laserfiche WebLink

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CONTINUED: Retailers Say Developers Share Blame for PuIlBack in New Store Openings anything we can do, can you lower the rent? How much?' They usually didn't like that.. We had a call last week from somebody we told we wouldn't open the store until 3Q09 and needed $2.75psf lower in rent and they called back and asked if the deal was still open and we said yes. Just because everybody knows real estate should come down doesn't mean it comes down the next day -- there's some give and take and some time. From the big pipeline we had, we've cherry picked the list with the better returns and probably the bottom 25% of that list will never be built." Especially in downtimes like this, retailers are constantly evaluating the market for opportunities -- whether it's to take advantage of a competitor, or respond to the customer by developing a new format. Lombardi said that Barnes & Noble has evolved over the last few years into a mall anchor tenant, as opposed to the insignificant 3,000-square-foot in-line mall store it was many years ago. Now, said Lombardi, mall landlords and developers seek out Barnes & Noble, along with common co-tenants, Cheesecake Factory and AMC Theatres to anchor a lifestyle center or lifestyle wing of a mall. Landlords know "what that does to the traffic in a mall and that has given us opportunities for expansion in major projects at 50-yardline locations with terrific occupancy rates." He added that Barnes & Noble has "become the bookstore of choice for developers." Lombardi said Barnes & Noble has found a "sweet spot" in the mall/lifestyle center-anchor position and that such locations make up about one-third of its new stores opened in the past few years. These stores average about 28,0000 square feet or a little larger. One big reason for that is they serve as entrances to malls and the retailer is doing many two-level stores. Lombardi added that Barnes & Noble typically signs 10-year leases, which allows the company to move stores "where the market moves." Inferring possible regional chain buyouts, Montgomery said Kohl's is "keeping enough cash available to take advantage of what we think is going to be a fairly significant consolidation amongst our competitors over the next couple years, much like we did with Caldor and Bradlees and Clover and Main Street over the past several years." Kohl's acquired the 260-store MainStreet chain in 1988, leased six former Clover stores in 1996 from Kimco, acquired 32 NY Caldor stores in 1999, and bought the leases of 15 former Bradlees stores in 2001. Kohl's is on the lookout for opportunities from retailers falling out of the market -- like Mervyn's, Boscov's and small department store chains like Dawahares, etc. "We're starting to see that the consolidation of retailers over the next couple years, and probably over the next six months, is going to afford us a pretty significant opportunity to get into trade areas much quicker than we thought we'd be able to get into by taking an existing building. As these retailers go out of business, there's a lot up for grab in trade areas where we already have locations," said Montgomery. Kohl's said it is willing to shift its current off-mall real estate strategy to take advantage of acquisition or competitor fallout opportunities that arise. "We've identified over 1,400 trade areas that we can be in. Some of those trade areas involve a mall situation because there's just no other place for you to have a big box store. We've experimented -- we've got 60-70 mall locations today. We have confidence that we can get into some of the highly populated areas through regional or local mall situations and compete very favorably against the competition. I think that you'll see us in that scenario a few times. We prefer to be off-mall, but we definitely want to be in certain trade areas and will do what we need to get in there," said Montgomery. Walgreens sees opportunity in competitor acquisition, too. "The independents are wanting to get out of the business and we are aggressively pursuing that," said Rein. "We are open to acquisitions that make strategic sense and really started that 2-3 years ago with Happy Harry's and Option Care and so on. If it fills in a strategic need to our company, we are open to that acquisition," added Rein. Tiffany & Co. is banking on a smaller store format to maximize store productivity in the U.S. It currently operates 72 stores here. James Fernandez, EVP and CFO said at the conference that the luxury jewelry retailer sees a capacity for 170 U.S. stores -- up from a previous 100 -- and that's because of this new, smaller format. The company is currently testing the 2,000-square-foot edited assortment concept Copyright (c) 2008 Costar Realty Information, Inc. All rights reserved.