CONTENTS

April 2008

• FEATURES
• Retailers and their real estate
• Retailers know they can't afford to take their eyes off merchandising, but as they grow, they're learning the same applies to their real estate.
• 1031 exchange slowdown
• These instruments offered a popular way to sell and buy properties without incurring capital gains taxes, but many seem unable to agree on prices lately
• Store-closing season
• The slowing economy has taken a particularly hard toll on retailers this year. But the closure of stores often opens up opportunities for landlords.
• Greener and greener
• Retail developers and their tenants are doing more than ever before to minimize their properties' impact on the natural environment.
• All quiet on the CMBS front
• CMBS transactions dropped sharply in the second half of last year, thanks to the credit crunch, and are not expected to rebound this year.
• Rise of the Korean deli
• The image of the Korean deli as a mom-and-pop operation on an inner-city street corner is fast changing as many turn themselves into chains.
• The capital of Europe
• Capital markets in the U.K. are as roiled as those in the U.S. and are likely to stay that way for some time to come, say observers.
• The challenges of Europe
• Europe is no vacation destination for international REITs. It's expensive and complicated, and only a few have taken the challenge.




• DEPARTMENTS
• Center Stage
• ECE Projektmanagement's Schloss-Arkaden center in northern Germany is equal parts shopping center, palace and museum.



• The Common Area
• Retailers are saving money with solar power while shoppers are economizing by relying more on discount retailers.



• Retailing Today - The section where landlords shop for stores


• Mystery shoppers
• A reporter goes undercover to learn how mystery shoppers keep retail staff on their toes.
• Eat your veggies
• Kidfresh, a concept dedicated to making vegetables irresistible to kids, plans to open 50 stores.
• Posh picture frames
• L'Eclat de Verre offers frames that often cost more than the pictures they surround.
• HMV's tactical retreat
• Since abandoning the U.S. and Japanese markets, the music retailer has pulled itself together.
• Israel exports its retailers
• Israel's retailers are outgrowing the domestic market and looking overseas to expand.
• Sweet smell of success
• The origins of O Boticário, the global perfume franchise, are as humble as its rise is meteoric.
• Remember Esprit?
• Esprit, which has opened a flagship on Fifth Avenue, is much changed from the chain Americans knew.
• Flying off the shelves
• HMSHost may not be a familiar name to many, but several of the airport stores it operates are.
• Nice shades
• Safilo Group, maker of luxury eyewear, will boost its retail presence to 800 stores by 2015.
• The new Cole Haan
• The venerable shoe store is wooing younger shoppers with a colorful merchandise assortment.
• Old Navy's new plan
• Old Navy is trying to turn its ship around with a new focus on 20-something females.




• On the Ground
• As Austin's population grows, much of its development is making the city denser rather than larger, with mixed-use projects.





• ICSC News
• ICSC's Foundation has expanded its mission.





• News Makers
• Vincent Corno brings skills honed at May Co. and Forest City to Saks, where he has been named senior VP of real estate.



• The Bottom Line
• Retail property changed hands at a fast clip in Europe last year, but Asia is where the action will be this year, observers report.

GLOBAL DEALS GREW IN '07

2007 was a busy year for retail property investors worldwide, with about $173 billion worth of retail real estate changing hands, according to Real Capital Analytics' annual Global Capital Trends report. While this year's investment climate will be significantly chillier, last year's numbers reveal some driving trends, most notably the use of complex financial engineering to structure deals, and increasing transparency.

Nearly 1.2 billion square feet changed hands last year, equivalent to all of London, Tokyo and Manhattan combined. After office properties, shopping centers were the second-most-active property type, with 17 percent of the total. About $69 billion of that activity involved U.S. properties. But Europe saw the most action, with eight of the top 10 most-active retail markets belonging to the EU. The U.K. was especially hot, with an average sale price per square foot of $755, more than double the global average of $283 per square foot. In the U.S., the average was $197 per square foot. The average cap rate for global retail properties was 6.2 percent in 2007, while in the U.S., it was 6.5 percent. Germany had the highest average cap rate, at 6.9 percent, while the U.K. had the lowest, at 4.8 percent.