Developers: New centers warrant new co-tenancy clauses
With department stores being replaced by gyms and office space, retail tenants who signed on for the traffic generated by traditional anchors are of the opinion that the co-tenancy clauses in their leases need restructuring. At a forum staged by Jones Lang LaSalle at its New York office yesterday, two noted mall developers agreed.
“We need to get together with all of our retailers and revisit co-tenancy. The way it stands now doesn’t make sense at all,” said Stephen Lebovitz, president and CEO of CBL Properties. “We will work with the retailers, but it all depends on how their sales go as new anchors establish themselves.”
Retail leasing managers worry that anchor back-fills like medical clinics and restaurants won’t bring shoppers to the mall like department stores did, but panelist Joseph Coradino, chairman and CEO of PREIT, begged to differ.
“I’m not sure I agree that restaurants don’t bring in shoppers. It’s early in the game,” he said, though he added that current co-tenancy clauses were "archaic.”
Coradino was sure of one thing: The move of malls toward more dining and entertainment options is an abiding reality. “Not too long ago all our centers were 50% apparel. Now it’s closer to 30 to 40%,” he said.
Lebovitz suggested that a different metric be created for the traffic-building contribution of non-department store anchors. “It’s hard to say that the Whole Foods shopper is not shopping the mall. What we see is the creation of customer shopping patterns of [grocery shoppers] coming to the mall and cross-shopping on other days,” he said.
Mall owners do have a responsibility to pick the restaurants that will deliver the most shoppers, Lebovitz said, noting that local, chef-driven restaurant concepts draw more rave reviews than customers.
“National chains like Olive Garden know what they’re doing in our environment and will do seven to eight million dollars in sales, whereas the local restaurant will only do two million,” he said.
Analysis: How acquisition of TaskRabbit will benefit Ikea
The acquisition of TaskRabbit allows Ikea to efficiently remove one key barrier (the dislike of furniture assembly) for a segment of customers that have until this point avoided Ikea.
Ikea' core customer is very online savvy. Magid's Retail Pulse study finds that younger customers with family (Ikea's core customers) will research purchases online prior to buying at a higher rate than typical furniture customers and engage in digital tools like Amazon Prime at a much higher rate. Fortunately, the physical nature of furniture and the desire to touch and feel has kept Ikea somewhat insulated from the "Amazon Effect." Ikea knows that this insulation is only temporary as digital tools advance and thus Ikea is embracing the digital needs of its core customers through this new capability.
This (acquisition of TaskRabbit) will have the effect of opening up Ikea to customers who may not have considered them in the past due to assembly avoidance. How big this "assembly avoider" segment is I’m not sure, but I think Ikea's move speaks to the fact that it is not insignificant.
TaskRabbit and Ikea both gain from this partnership due to the fact that TaskRabbit finds itself at the center of thousands of Ikea customers who have a very specific need that TaskRabbit can address. Ikea gains from the fact that customers searching for help with upcoming tasks (and who are thus at a key point in their purchase journey where Ikea wants to interact with them) will see Ikea offerings.
Ikea is addressing one of the key desires of the on-demand culture, which is to provide a service WHEN and HOW customers need it. Millennials desire not to be marketed to, but rather to be provided with a service offering that removes friction, and this partnership holds the potential to do just that.
Gymboree emerges from bankruptcy
Gymboree has emerged from bankruptcy with a reduced footprint — and with new owners.
The children's apparel retailer announced Friday that it has successfully completed its financial restructuring and emerged from Chapter 11 as a new corporation under the name Gymboree Group. The company exited bankruptcy with a reorganization plan that includes a comprehensive recapitalization that will eliminate more than $900 billion in debt and a reduced store footprint.
Gymboree filed for Chapter 11 bankruptcy in June 2017. According to court filings, the company plans to close some 350 underperforming stores.
"Today marks a new beginning for Gymboree Group as we emerge as a stronger and more agile competitor in the children's apparel market," said Daniel Griesemer, president and CEO of Gymboree Group. "With the support of our new equity owners, this process has allowed us to secure the company's long-term financial health, and we are excited about the opportunities ahead as we turn our full focus toward executing our strategic product, brand and omnichannel initiatives.
The company has received an $85 million new term loan from Goldman Sachs and access to a $200 million revolving credit facility from Bank of America Merrill Lynch and Citizens. Gymboree Group's pre-petition term loan lenders – including Searchlight, Apollo Global Management, Oppenheimerfunds, Brigade Capital Management, LP, Marblegate, Nomura Securities International and Tricadia Capital Management, LLC – are the company's new owners.