On October 8-10, I attended the ICSC Western Conference event. ICSC is the world’s largest organization that governs the retail shopping industry. Each year, as a committed retail real estate professional, I attend the three local ICSC Events: Anaheim in February, Las Vegas in May, and Los Angeles in October.
My managing broker, Brad Umansky, wrote an excellent blog post about his thoughts about the conference, which I will include as a part of this newsletter. Rather than repeat his content, I will summarize my thoughts on a panel discussion that focused on “The Future of Retail.”
Have we peaked in the current market cycle?
It is my observation from reviewing transactions and discussing with other industry professionals that we are starting to see cap rates level off and creep upward (thus resulting in dropping prices). This can be the result of several factors:
Growing up in New Jersey, I ate a LOT of Dunkin Donuts as a kid. So I was very excited to attend the recent grand opening of Corona’s first Dunkin Donuts, at 924 E. Ontario Ave., Corona. This store’s model is called a next-generation concept and features an 8-tap coffee beverage system (looks like a bar!), and workstations where patrons can plug in a laptop, similar to Starbucks.
Leerink, a boutique investment firm that focuses on the healthcare industry, reported on October 6th that Amazon will “almost certainly” enter the prescription drug distribution business within the next two years. As a result of this news, shares of CVS and Walgreens both dropped 5% that day. The following Monday, shares of these stocks fell another 3%.
City of Montclair approves significant upgrades to Montclair Place Mall: On June 26th, the City of Montclair approved plans for the owner of the Montclair Place to demolish the former Broadway Department store at the east end of the mall, and to construct in its place a 144,000 square foot building which will accommodate a 12-screen movie theater, a bowling alley, and three new restaurants.
Tax reform is usually very boring, but listen up – this is important! There is currently a bill to reform the tax code, called the House Republican Blueprint for Tax Reform, which may result in the elimination or limitation of the 1031 tax-deferred exchange. No one is sure yet if the 1031 Exchange will survive the many financial changes being made by the Trump administration.
In late December, Fred’s, a chain with 647 locations in the Southeastern US, agreed to purchase 865 Rite Aid stores for $965 million. The sale of these Rite Aid stores was required by the US Federal Trade Commission to avoid antitrust issues from the upcoming merger between Walgreens and Rite Aid. The merger is expected to be completed in the first quarter of 2017.
Walgreens announced an extension to its proposed merger with Rite Aid. The merger was originally expected to take place at the end of 2016, but is now expected to close in early 2017. The delay is due to the companies determining which stores would be closed after the merger. Up to 1,000 Walgreens or Rite Aid stores are expected to be closed.
Sports Authority, which was once the country’s largest sporting goods chain (and the place where I worked my first job during high school), declared bankruptcy on March 2nd, and then on April 27th, it announced that it would be closing all 450 stores nationwide.
Progressive Real Estate Partners is a boutique retail brokerage firm with a unique approach to leasing and selling retail properties. Established in 2007, our emphasis on retail AND geographic focus on Southern California’s Inland Empire region has enabled us to become the most efficient and effective brokerage within the marketplace.