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INDUSTRY NEWS

DDR puts 12 properties into Pru joint venture

To reduce its exposure, Developers Diversified Realty put 12 of its grocery-anchored properties into a joint venture with Prudential Real Estate Investors. The $128 million transaction represents a cap rate of 7.8 percent, according to Merrill Lynch estimates. Developers Diversified will maintain a 10 percent stake and will also earn property management, leasing and development fees. Most of the properties are located in New York and were part of the Benderson Development retail portfolio Developers Diversified acquired early this year. “The spinning off of these assets into the joint venture continues the company’s efforts to tighten its core portfolio’s focus on larger community centers,” said Merrill Lynch analyst Steve Sakwa.

Edens & Avant gets out of third-party business

Columbia, S.C.-based Edens & Avant sold a controlling interest in its third-party operations to Dan Avant, one of the company’s former partners, and his son, Todd. The third-party business, which manages 27 commercial properties in South Carolina and brokers about $200 million in property transactions each year, will be a separate enterprise. The deal allows Edens & Avant to focus on its core business of developing and managing its own retail properties, the company said.

Sears starts multicultural program

To better serve minority consumers, Sears is revamping 97 of its full-line stores in markets with heavy concentrations of Asians, blacks and Hispanics. The company says it will update in-store displays and signage and hire more bilingual sales associates. In addition, the retailer will introduce new clothing lines geared toward multicultural tastes. Among the targeted markets are Chicago, Los Angeles, Miami and New York City. If the pilot project is successful, Sears says it will roll the concept out to additional markets sometime next year.

Dollar stores look to food-stamp customers as revenue stream

Family Dollar and Dollar General are focusing on the acceptance of food stamps as a growth opportunity. Both chains have increased the volume of food items in their product mix in recent years, and over one-third of dollar-store customers earn less than $20,000 a year, which makes food stamps a logical revenue stream, says Jim Ohls, a senior fellow at Mathematica Policy Research, a food and nutrition think tank. Roughly 24 million U.S. consumers receive food stamps, to the tune of $24 billion a year. The federal program grew 10 percent in 2003, Ohls says, and currently, more than 80 percent of U.S. food-stamp benefits are used at supermarkets. Dollar stores want more of the action and are currently working to tweak checkout processes to alleviate the stigma associated with using food stamps, says JPMorgan analyst Shari Eberts.

Williams-Sonoma to revitalize Hold Everything brand

In 2000 home organization chain Hold Everything operated 32 stores. Today, only eight Hold Everything stores remain. The retailer’s parent company, Williams-Sonoma, is ready to roll the catalog-based brand back out, though, following a redesign and remerchandising effort. The first of two test stores opened recently at the Mall at Millenia, in Orlando, Fla. At 8,500 square feet, this Orlando store is about three times the size of existing stores. Williams-Sonoma could expand the chain to as many as 16 stores by the end of next year, observers say.

Gap courts women over 35

Gap Inc.’s decision to test an apparel store aimed at women over 35 years old is a wise one, analysts say, noting it will cater to a segment of the consumer market that is underserved. Gap, which operates about 3,000 stores worldwide, has not named the new concept yet. Executives say they expect to open about 10 test stores in the United States during the second half of 2005. The move is smart, because the Baby Boomer generation will be the fastest-growing consumer segment for the next decade, said Adrienne E. Tennant, an analyst for Wedbush Morgan Securities. “Gap needs a concept that has legs with multiple years of square footage growth behind it,” Tennant said. Putting the stores in malls would enable Gap to use its considerable real estate bargaining power in that venue, says Wendy Liebmann, president of WSL Strategic Retail. But Gap also puts many of its stores on streets, she noted, and might choose to catch their customer while she is out on errands.

Tenant credit improving, report says

Retail property owners are less exposed to distressed tenants than they were in March, according to Morgan Stanley’s retailer Watch List. Store closures by such troubled chains as Gadzooks, KBToys and Footstar made average tenant credit scores a bit healthier at mall REITs, especially Glimcher Realty Trust, says Matthew Ostrower, a Morgan Stanley analyst. And the closure of One Price stores and the improved credit of Kmart benefited the average credit risk for REITs that own neighborhood, power and community centers, especially New Plan Excel Realty Trust, he says. But at 5.7, retailers’ weighted average credit score is still significantly lower than the 7.5 it reached in 2001. A score below 2.4 is an indication of an imminent bankruptcy filing.

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