Retailers Seize on Pandemic Fallout to Become Property Owners
December 01 2020 - 8:29AM
Dow Jones News
By Esther Fung
Struggling shopping malls are finding an unexpected boost from
bargain-hunting retail operators.
Such was the case in Stamford, Conn., where the Stamford Town
Center mall lost popular tenants like H&M, Apple Inc. and
Talbots to a competing shopping center that opened last year only 8
miles away.
In October, home-furnishing company Safavieh purchased Town
Center mall.
Safavieh plans to open a home-design center and relocate its
nearby home furnishings store to the mall, said Arash Yaraghi,
whose family runs the Port Washington, N.Y.-based company.
But, he added, "price is always the deciding factor." Safavieh
paid $20 million for a property that was appraised at $64 million
last year, according to a Stamford government website.
The coronavirus pandemic and its debilitating effect on shopping
centers are providing growing retail operators with an opportunity
to achieve something many have hoped to do for a while -- become
owners.
"We have seen retailers zeroing in on buying opportunities,"
said Ariel Schuster, vice chairman at real-estate firm Newmark.
"Historically, the most active buyers have been in the luxury
sector."
In a recent example, Swiss high-end clothing retailer Akris
purchased three buildings on New York City's Madison Ave. for $45
million -- a decade-low price for the ritzy neighborhood on a per
square foot basis -- including the building that accommodates its
Manhattan store.
Other retailers are taking advantage of the times to upgrade
their rental space. Home Depot Inc. is planning to relocate its
basement store in Manhattan's Upper East Side a few blocks away to
a four-story store currently occupied by Bed Bath & Beyond Inc.
The home-furnishings retailer, which has struggled with falling
sales for years, is not renewing its lease as it works to close 63
stores by the end of its current fiscal year.
"We chose this location because it'll be convenient for
residents on the Upper East Side and offered the space we need just
as our existing lease expired," said Margaret Smith, a spokeswoman
from Home Depot.
The landlord, Gazit Horizons Inc., said it was able to finalize
a 20-year lease amid Covid-19 by offering Home Depot high ceilings
and an ample loading area.
Gazit also plans to invest $15 million to $18 million to
retrofit the space, according to filings by its Israeli-based
parent with the Tel Aviv Stock Exchange. Home Depot's total gross
rent will be $9.5 million, up from the $5.8 million that Bed Bath
& Beyond is paying, the filing added.
Tenants looking for new real estate have consisted primarily of
big sellers of groceries, furniture, discount goods and pet
supplies that have benefited from people staying at home, brokers
say.
But some specialty retailers have seized on opportunities, too.
Sever Garcia, who relocated his accessories and travel items store
from downtown Brooklyn to Manhattan's upscale Tribeca neighborhood,
said his new landlord offered three months free rent and other
incentives. This has helped him remain open, with foot traffic
remaining weak as office workers and tourists haven't returned to
the city.
These days, he is getting unsolicited offers from property
owners in SoHo and Long Island with generous terms such as six
months of rent based on a percentage of sales. But rather than
tempt fate again during the pandemic, he is staying put for now.
"It's not the best time to test new businesses," Mr. Garcia
said.
Write to Esther Fung at esther.fung@wsj.com
(END) Dow Jones Newswires
December 01, 2020 08:14 ET (13:14 GMT)
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