The Future Of American Malls: Recreation Over Retail

One of the most promising strategies that mall operators are developing to bring back shoppers calls for replacing anchor retail spaces with recreation. The digital age has presented mall operators with their greatest challenge in a generation. Major retail centers that once dominated the local market are now rethinking their long-term plans as so many consumers choose internet shopping over a trip to Macy’s, Sears or Kohl’s.

 

This is a nationwide issue that spans well beyond individual regions and represents a sea change across the industry. As e-commerce takes more customers away from traditional retail, malls face the prospect of losing the foot traffic they need to remain financially viable. Operators are already developing new strategies for capturing consumer interest with attractions that bring people back to the mall and keep them inside.

 

One of the most promising strategies calls for replacing anchor retail spaces with recreation, entertainment, and educational centers that give consumers unique, family-friendly experiences they simply can’t find or replicate on the internet. Data have shown that this approach is already emerging as a nationwide trend.

 

While overall shopping center space in America grew by 0.8% over the past four years, space filled by apparel stores fell by around 3%, according to an analysis by the CoStar Group. Over that same period, there has been a robust 6% increase in the amount of large shopping center spaces filled by recreation and entertainment tenants. Mall operators are starting to recognize that they can create a crucial opportunity for themselves and their investors by repurposing a vacant department store into something fresh and new for consumers.

 

For example, as part of pursuing a recreation-oriented strategy, General Growth Properties became the first American mall operator to sign a deal with KidZania, an experiential learning center for children that builds real-world skills in an engaging environment. This concept, which has 24 locations overseas, is a prime example of a business model poised to transform struggling anchor spaces into thriving hubs of activity that give millions of families a new and compelling reason to visit their local mall.

 

Where once stood racks of unsold merchandise, KidZania creates a mini-city—complete with its own roads, buildings and currency— where children can role-play more than 100 occupations. Corporate sponsorships create a more authentic experience for participants—with name brands on every mini-city establishment—while also generating a sustainable revenue stream that keeps the space profitable over the long term.

 

Less than two months after launching into the US market, KidZania has already signed two anchor space leases and is actively exploring deals with other mall operators across the nation. Other recreation and entertainment venues are generating similar results because experts know this trend will only continue to gain steam. The bottom line is that the new challenges facing retail do not need to mean the end of major malls nationwide. Like any other shift in the market, it is just an opportunity to find a new and better strategy for success.

 

Rural Towns Are Replacing Inner Cities As The Most Troubled Areas In America

When it comes to poverty, education and death rates from cancer and heart disease, rural America has replaced the inner city. A Wall Street Journal analysis found that rural counties rank the lowest among all four major U.S. population groupings when it comes to critical socioeconomic measures, putting them behind big cities, suburbs and medium or small metro areas, the Wall Street Journal reports.

 

Manufacturing and agriculture jobs have steadily disappeared in recent decades, and census figures show urban residents are nearly twice as likely to hold a college degree than rural residents. At the same time real estate appreciation in rural areas has lagged behind city growth, further impoverishing rural families.

 

Lending in Puerto Rico

We will be aligning our funding efforts with SCC the only licensed Claims Group working in Puerto Rico. We need other Lenders (Credit, Bridge, Short-Term, etc.)  to come alongside our efforts. If interested, please email contact person information.

 

We orchestrate to fit the “Box”

Real Estate Equity & Lending PlatformsBridgge

 

As a direct lender, we have the ability to analyze and fund loan requests very quickly in order to meet time-sensitive transactions. We finance commercial, industrial, and multi-family properties as well as entitled land, with a primary emphasis on Institutional quality properties. We do lend in all 50 states, but with a particular focus on California, Texas and Florida in addition to targeting experienced local investors and operators in their perspective markets.

 

We have interest in being available to provide Joint Venture Capital or any part of the Capital Stack. We are a Nationwide Direct Commercial Mortgage Correspondent Lender for all of the Freddie, Fannie, HUD, USDA and 15 Institutional Insurance Company programs.

 

We look to begin new partnerships for co-investment on a single project initially, but with a business plan set for more opportunities to work together on in the near future. Further, We can recapitalize equity in existing assets, portfolios, and developments. CFO Capital Partners can bring LP or GP equity.  Generally we look to bring 70-90% of required equity though this can be negotiable.  In addition, our terms bring favorable debt options which can be recourse or non-recourse.

 

We can also provide acquisition, refinancing, and bridge financing.  Mezzanine financing and preferred equity capital options are also available. Please email (contact & project information) to Paul Sheldon: PSheldon@CFOCapitalPartners.com.

 

Currently equity investments are constrained to the US Virgin Islands, Puerto Rico and the USA

Keep it simple and start with a strong EXE Summary that will allow us to understand quickly and give a quick yes or no.

www.CFOCapitalPartners.com * Carl@CFOCapitalPartners.com * 646.719.9246 x102

 

We consider the total picture of the transaction and offer a diverse array of loan products and terms along with an efficient process with quick closings.

 

CFO Capital Partners also has a real estate development division which provides Investor Equity, which focuses on Joint Venture and Capital Raises for building multifamily and commercial properties. CFOCP deploys numerous strategies to capitalize on off-market opportunities, including through joint-ventures, trust sales, bankruptcy sales, tax defaults, and purchasing distressed properties and defaulted notes.

 

BALANCE SHEET FINANCING SOLUTIONS FOR COLLEGES AND UNIVERSITIES

Focused exclusively on opportunities to invest $10+ million

100% of the required capital to purchase, renovate or build-to-suit

 

GOVERNMENT SPONSORED ENTITIES – We are licensed

Fannie Mae Delegated Underwriting & Servicing (DUS®)

Fannie Mae Multifamily Affordable Housing Lender

Fannie Mae Small Balance Lender

Freddie Mac Multifamily Licensed Seller/Servicer for Conventional Loans

Freddie Mac Multifamily Licensed Seller/Servicer for Targeted Affordable Housing Loans

Freddie Mac Multifamily Designated Seller/Servicer for Manufactured Housing Loans

 

GOVERNMENT AGENCIES – We are licensed

FHA / GNMA (HUD) Multifamily & Healthcare

USDA Section 538 Rural Development Lender

 

LIFE COMPANIES

 

AEGON, AIG Global Investment Corp., Allstate Investments, American Equity, American Fidelity, American National, AUL/OneAmerica, Cuna Mutual Group, Eagle Realty Group, Equitrust, Farm Bureau Life Insurance Company of Michigan, FBL Financial Group (Farm Bureau of Iowa), Genworth Financial, Great-West Life, John Hancock, Innovative Capital, Lincoln Financial Group, MetLife, ​Morgan Stanley, Mutual of Omaha, National Life of Vermont (Sentinel Asset Management), Nationwide Life Insurance Company, New York Life Insurance Company, Northwestern Mutual, Ohio National, PPM Finance, Inc., Principal Real Estate Investments, Protective Life Insurance Company, Prudential, RGA (Reinsurance Group of America), Royal Neighbors of America, StanCorp Mortgage Investors, LLC, State Farm Insurance Companies, Sun Life Assurance Company of Canada

Symetra Financial, Thrivent Financial for Lutherans, TIAA-CREF, Ullico, Unum, Voya Investment Management

 

 

CMBS

 

Bank of America, Barclays, CCRE, CIBC, CitiGroup, Credit Suisse, Deutsche Bank, Goldman Sachs

​Guggenheim Real Estate, JP Morgan, Ladder Capital, Morgan Stanley, Rialto, UBS, Wells Fargo

 

 

 

NON-PROFIT PROGRAMS INCLUDE

A wide range of transactions, from traditional deals to specialized capital solutions. Together with our corporate partner, we are making a difference.  We are the country’s largest LIHTC syndicators and one of the largest New Markets Tax Credit allocates and own in excess of 300,000 affordable rental units.

  • Low-Income Housing Tax Credits
  • New Markets Tax Credits
  • Community Loan Funds
  • Development & Consulting
  • Grants
  • Equity
  • Bridge Loans

 

 

 

Bellwether Closes Over $430 Million in Affordable Housing Loans in Q4, 2017

(Bellwether Enterprise), the commercial and multifamily mortgage banking subsidiary announced the projected closing of over $430 million in loans for over 24 affordable housing properties across the country in Q4, 2017. In the month of October alone, the Affordable Housing team closed more than $160 million of this total number. Building on Bellwether Enterprise’s long-standing expertise in the affordable lending space, this high volume of deals further demonstrates the company’s deep commitment to preserving and rehabilitating affordable housing properties for families in need across the nation.

 

Highlights include:

  • Aeon Towers Portfolio, a fixed-rate preservation acquisition loan for 10 affordable housing properties located in the Minneapolis–Saint Paul metropolitan region in Minnesota. Combined, the properties feature 768 units and are located across four cities—Bloomington, New Hope, St. Paul, and Brooklyn Center.
  • Appling Lakes at Cordova Club, a Fannie Mae MBS acquisition loan for a workforce housing property in Cordova, Tennessee. Located outside Memphis, the 312-unit property is situated across 26 acres and includes 17 two- and three-story residential buildings and a clubhouse. The property also features top-notch amenities including a fitness center, lighted tennis court, sand volleyball court, pool, business center, and clubhouse with a full kitchen.
  • Building 9 South (Mercy Magnuson Place), a Freddie Mac Forward Tax Exempt Loan (TEL) for the gut renovation of an affordable housing property in Seattle, Washington. The project entails the adaptive re-use and rehabilitation of a historically-significant naval barracks into a 148-unit affordable apartment building. The project will include amenities such as a health center, daycare center, and computer lab. The building’s exterior and key historic interior elements will be preserved, and energy efficiency will be prioritized during reconstruction.
  • The Savannah at Gateway, a Fannie Mae MBS 15-year fixed-rate loan for an affordable housing property in Plano, Texas. The senior community is a LIHTC property that features 292 units reserved for tenants aged 55 or older. Located near the intersection of Shiloh and Renner roads, the property includes a clubhouse, fitness center, community kitchen, and recreation room. Individual apartments also feature balconies, high ceilings, and efficient appliances.

 

 

4 Straightforward Steps to Success By: Jim Rohn

Success is nothing more than a few simple disciplines practiced every day. Success is neither magical nor mysterious. Success is the natural consequence of consistently applying basic fundamentals.

 

I’ve said it before, that success is the study of the obvious—but sometimes we need someone to remind us and show us the simplest way to get there.

Here are four simple steps to find your way to more success than you could ever imagine:

 

  1. Collect good ideas.

My mentor taught me to keep a journal when I was 25 years old. It’s the best collecting place for all of the ideas and information that comes your way. And that inspiration will be passed on to my children and my grandchildren.

If you hear a good health idea, capture it, write it down. Then on a cold wintry evening or a balmy summer night, go back through your journal. Dive back into the ideas that changed your life, the ideas that saved your marriage, the ideas that bailed you out of hard times, the ideas that helped you become successful. That’s valuable, going back over the pages of ideas you gathered over the years, reminiscing, reminding yourself. So be a collector of good ideas, of experiences, for your business, for your relationships, for your future.

It is challenging to be a student of your own life, your own future, your own destiny. Don’t trust your memory. When you listen to something valuable, write it down. When you come across something important, write it down. Take the time to keep notes and to keep a journal.

 

  1. Have good plans.

Building a life, building anything, is like building a house; you need to have a plan. What if you just started laying bricks and somebody asks, “What are you building?” You put down the brick you’re holding and say, “I have no idea.”

So, here’s the question: When should you start building the house? Answer: As soon as you have it finished. It’s simple time management.

Don’t start the day until it is pretty well finished—at least the outline of it. Leave some room to improvise, leave some room for extra strategies, but finish it before you start it. Don’t start the week until you have it finished. Lay it out, structure it, put it to work. The same goes for the month ahead—don’t start it until you have a plan in place.

And, the big one, don’t start the year until it is finished on paper. It’s not a bad idea, toward the end of the year, to sit down with your family for the personal plans, to sit down in your business for the professional plans, to sit down with your financial advisor to map out money plans. Plan out your calendar, your game plan, for all of life’s moving parts.

The reason why most people face the future with apprehension instead of anticipation is because they don’t have it well designed.

 

  1. Give yourself time.

It takes time to build a career. It takes time to make changes. It takes time to learn, grow, change, develop and produce. It takes time to refine philosophy and activity. So give yourself time to learn, time to start some momentum, time to finally achieve.

I remember when Mama was teaching me a little bit about the piano. “Here is the left hand scale,” she said. I got that; it was easy. “Here is the right hand scale.” I got that, too. Then she said, “Now we are going to play both hands at the same time.” “Well, how can you do that?” I asked. Because one at a time was easy… but two the same time? But I got to where I could play the scales with both hands. “Now we are going to read the music and play with both hands,” she said. You can’t do all that, I thought. But you know, sure enough I looked at the music, looked at each hand, a little confused at first, but finally I grasped it. Then I remember the day when Mama said, “Now we are going to watch the audience, read the music and play with both hands. Now that is going too far! I thought. How could one person possibly do all that? By giving myself time to master one skill before we went to the next, I got to where I could watch the audience, read the music and play with both hands.

Life is not just the passing of time. Life is the collection of experiences and their intensity.

 

  1. Change yourself.

Learn to solve problems—business problems, family problems, financial problems, emotional problems. The best way to treat a challenge? As an opportunity to grow. Change if you have to, modify if you must, discard an old philosophy that wasn’t working well for a new one. The best phrase my mentor ever gave me: “Mr. Rohn, if you will change, everything will change for you.” I took that to heart, and sure enough, the more I improved, the more everything improved for me.

You cannot change your destination overnight, but you can change your direction overnight.

 

Affordability Dips Year-Over-Year

Housing affordability saw steep declines across the nation over the past year, with real house prices jumping 8.2 percent since January 2016, according to the Real House Price Index released by First American Financial Corporation on Monday.

 

According to Mark Fleming, Chief Economist at First American, though housing prices decreased slightly from December 2016 to January 2017—0.1 percent—over the year, they’ve significantly increased, lowering buying consumer buying power and affordability. “Real purchasing-power adjusted house prices declined 0.1 percent in January, as mortgage rates did not meaningfully change and income growth continued,” Fleming said. “Despite the monthly increase in affordability and continued strong wage growth, homes are less affordable across the country compared to a year ago.” Total consumer house-buying power dropped 2.3 percent year-over-year, while real house prices fell to 33.3 percent below their housing-boom peak from July 2006. Unadjusted, house prices rose by 5.7 percent over the year.

 

According to Fleming, “on a year-over-year basis, real house prices increase in all the metropolitan areas tracked by First American.” Jacksonville, Florida, in particular saw a serious decrease in affordability, with a dip of 19.3 percent over the year. Other metro areas to see large increases in real home prices were Charlotte, North Carolina (14 percent); Milwaukee (14 percent); Denver (12.6 percent); and Tampa (12.4 percent). The cities with the smallest increases were Baltimore; Virginia Beach, Virginia; San Francisco; and Hartford Connecticut.

 

On a state level, the biggest annual jumps were seen in New York, which saw a 13.4 percent increase in real home prices, Colorado (13.2 percent), Vermont (12.7 percent), Illinois (11.8 percent), and Maine (11.6 percent). The only two states to see a year-over-year decline were Mississippi and Connecticut. “Almost half of the markets we track saw double-digit affordability declines in January, compared with a year ago. The low inventory of homes for sale across much of the country is creating increased competition and setting the stage for a very robust sellers’ market this spring,” Fleming said. “While affordability is lower compared to a year ago, the level of affordability in most markets is still high by historical standards, which is why demand is expected to remain strong this spring.”

 

Tougher Times ahead – for Apartment Development?

According to multifamily experts speaking at the IPA Multifamily Forum Chicago, it’s currently difficult to get new developments off the ground. It’s harder now to get a successful multifamily development out of the ground, but not so tough that the most experienced players are coming up short.

 

Land costs are up somewhat, and construction costs are as well, though not enough to keep strong deals from going forward. Thus experience matters very much in the current market. Projects that aren’t going well often have unanticipated problems that more experienced developers could have anticipated, such as issues with the city or unions or the neighbors. Experience also matters more now because relationships are huge in lending, in both directions. Lenders are more cautious on multifamily deals, but borrowers and lenders who have strong relationships are able to work together to get deals done, the panelists explained.

 

As for equity partners, they still want what they’ve always wanted: strong returns. The speakers said they’re seeing a lot more equity investors now, including local family offices, who perceive that the equities markets are overheated, and who are therefore looking for a safer place to put their money. Real estate is a natural alternative. So there’s plenty of equity out there for stabilize properties, but again, experience matters. Developers with a strong track record are naturally going to have the advantage as much on the equity side of funding as the debt site.

 

The speakers also discussed rentals vs. condos, and how the trend of condo de-conversion to apartments has been strong in recent years, but which is slowing down now. One reason is the influx of new rental properties, which have the edge in attracting residents, even against rentals that feature condo finishes. That’s because condo finishes aren’t so different now than high-end rentals.

 

The conversion of apartments to condos—so popular even for smaller properties in the ’90s and ’00s—is even less likely in the current climate, because the gap in size and finishes and amenities is so wide, that it would be expensive to do. On the other hand, if the economics make sense, developers will do it. If a gut rehab apartment-to-condo deal is worth it, the conversion will be done.

 

Hoteliers Squeeze Expenses, Eke Out Profit

Over the next few years, says R. Mark Woodworth of CBRE Hotels, “Owners and operators should spend just as much time thinking about expenses as they do RevPAR.” Although modest, hoteliers’ 2016 profit growth was “a commendable accomplishment given the upward pressures on labor and distribution costs,” says Woodworth.

 

In an era of slowing revenue growth, US hoteliers managed to eke out another year of profit increases by wringing expenses out of their operations. It’s an approach that R. Mark Woodworth, senior managing director of CBRE Hotels’ Americas Research, advises operators to continue in the near term.

 

CBRE Research is projecting yearly RevPAR growth ranging from 1.7% to 3.0% between now and 2021. Against this backdrop, Owners and operators should spend just as much time thinking about expenses as they do RevPAR over the next few years. Effectively managing those two metrics will dictate the profitability of their operations. Ultimately, it is bottom-line profits that influence values, stimulate transaction activity, pay the debt and provide returns for owners and investors.

 

A newly issued Hotel Industry report, based on a survey of operating statements from thousands of domestic hotels, finds that total operating revenue rose just 2.4% last year, driven by a 0.2% increase in occupancy and a 2.5% rise in average daily rate. Yet operators managed to achieve a 3.7% increase in gross operating profits by holding expense increases to an average of 1.6%. The competitive market conditions faced by US hotels in 2016 have been well documented, with the results having provided an understanding of the impact that the modest revenue gains had on the bottom line.

 

It’s clear, that US hotel operators perceived the threat of stagnant or declining occupancy and slow ADR growth and reacted by controlling expenses. The 3.7% increase in profits is the lowest have observed since the Great Recession, but was a commendable accomplishment given the upward pressures on labor and distribution costs.

 

Hoteliers kept cost increases to a minimum, by controlling variable expenses and cutting costs that tend to be more fixed. Given that the typical hotel in the sample experienced an increase in occupancy, it bears mentioning that operated departmental expenses—which are more variable—grew by just 1.7% during the past year.

 

Undistributed expenses increased by just 1.3%. Hourly compensation for hospitality industry employees increased by more than 4.0%, making it somewhat surprising that total labor costs grew by just 2.8 percent for the year implies that managers controlled staffing levels and/or increased productivity. In spite of the noble efforts, for a second year in a row, it was the salary and wages component of labor costs that drove the increase in total labor costs, not employee benefits.

 

Labor costs account for about half of a hotel’s operating expenses. Hotel operators benefited from low inflation, as well as a reduction in the costs for items such as food and utilities, however, as revenues continue to rise, so do the costs for related expenses like credit card commissions, management and franchise fees.

 

The one expense line item that stood apart from the crowd was the 6.8% increase in commission payments made to travel agents, OTAs and other intermediaries, he adds.

Amazon’s Online Gain comes With a Lot of Pain in Brick and Mortar Retail

Is 2017 the year of the great retail apocalypse?  Reading the headlines, it would seem so.
There’s truth to it in the data. So far, there have been nine major retail bankruptcies in 2017—as many as all of 2016. Retailers are closing stores faster than ever, even faster than the 2008 meltdown, on pace for roughly 8,640 store closings this year according to some projections. The 1,200 malls still operating in the U.S. are coming under extreme pressure, and analysts are predicting between 300-400 will close in the next decade.
J.C. Penney, RadioShack, Gamestop, Macy’s, Sears, the Limited and American Apparel have all announced closing 100+ stores. Sports Authority and hhgreg liquidated. Payless, Gordman’s and Rue21 filed for bankruptcy. Recently Bebe announced it was closing all of its 175 stores and several apparel companies’ stocks hit new multi-year lows, including hot brands like Lululemon and Urban Outfitters. Ralph Lauren announced he is closing his flagship Polo store on Fifth Avenue—joining a growing list of brands abandoning the iconic retail Mecca.
What explains this carnage? Is the consumer dead? Is this a temporary cyclical retail recession? No. Retail sales are hitting new all-time highs. Each of the last five holiday shopping seasons were door busters. Consumer confidence is high, gas prices are low, unemployment is under 5% and unemployment claims hover at 50-year lows. Even wages have started rising meaningfully—now even for middle-and lower-income Americans. And, in spite of the retail apocalypse, some mall owners with class A properties are actually having no trouble raising rents.