RadioShack opens concept stores, unveils ‘low touch’ format
Fort Worth, Texas – RadioShack has opened two new concept stores in the New York area, bringing the total number there to three. In addition, the retailer is unveiling a new “low touch” concept store format that it has opened in Manhattan Mall in New York and Plaza Las Americas in Hato Rey, Puerto Rico, last month, and will open in downtown Fort Worth in October of this year.
The two new remodeled concept stores are located in Southampton, N.Y., and the Newport Centre Mall Jersey City, N.J., joining a concept store opened last month on Broadway in Manhattan. The concept stores feature newly configured displays, as well as interactive store fixtures such as a speaker wall that lets customers play music from their mobile devices and various touch-screens and apps.
RadioShack’s new “low touch” concept stores reflect a cleaner, brighter environment; visually appealing open floor plans with low-profile fixtures; improved product placement with headphones, speakers and digital fitness greeting customers at the front and mobile phones displayed by manufacturer with accessories along the wall; a DIY section and a refined product assortment. The retailer began testing the new format with customers in May at a “living lab” in Fort Worth, Texas.
"In the short time since opening our initial concept stores and the living lab in Fort Worth, we’ve learned a tremendous amount about how to make our stores more shoppable,” said Joe Magnacca, CEO of RadioShack. “We’re creating a place to discover ways technology makes your life more fun with a selection just right for your lifestyle. Loyal customers who have been shopping us for years will have an easier, more satisfying experience in the store and new customers will be amazed at the innovation in exclusive product lines, hot destination brands and in-demand mobile options we offer to a new generation of shoppers."
The Fort Worth low touch store will be 2,357 sq. ft. and located at 426 Commerce Street at the Commerce Building in Sundance Square Plaza.
Best practices: Developing grocery-anchored centers
Over his 34-year commercial real estate career, Stephen L. Hittman has been developing supermarket-anchored shopping centers for 20 of those years. In 2001, he founded Crossroads Companies. As president and CEO of Crossroads, he has built a regional portfolio of supermarket-anchored centers valued at more than $200 million.
Last year, Hittman formed the Supermarket Consulting Group to provide development clients with market research, site location and project development services. The firm’s geographical expertise encompasses New Jersey, Philadelphia, Fairfield County, Conn., and the surrounding suburban communities; urban locations for New York City boroughs of Bronx, Brooklyn, and Queens; southern New York State, Rockland and Westchester counties up through the Hudson Valley Region of New York State, north to Albany.
Recently, Chain Store Age sat down with Hittman to discuss best practices for developing supermarket-anchored centers. Here’s what he had to say:
Let’s start at the beginning with best practices for site selection.
Developing a supermarket-anchored shopping center begins with market research. You need to understand the character of the trade area: population density, income levels, population mix, and the character of the urban or suburban location. Next, a competitive analysis is necessary to determine potential sales volume for the prospective food anchor. Sales volume will determine, in part, the rent the food anchor can pay.
From a tenant’s perspective, rent is a function of sales volume and the percentage of fixed costs to sales volume. Fixed costs include base rent, real estate taxes, common area maintenance and utilities. From the developer’s perspective, return on equity is commensurate with the underlying risk. Developers measure return on equity by dividing the net operating income generated by the investment over the total project expense, including the cost of land, building, leasehold improvements, approval and financing expenses.
How might brownfield cleanup expenses factor into site selection?
Brownfield problems include both perceived and actual expenses, as well as liabilities associated with soil and groundwater contamination. Typically an environmental engineer will evaluate the cost and liability that may be associated with a brownfield site. Assistance may be available from local, state, or federal agencies.
Soil contamination can be less complicated to solve than ground water contamination. Both will give pause to a developer. The least expensive alternative for brownfield cleanup is to encapsulate (pave over) the contaminated area, treat the contaminated area with a chemical solution, if possible, and hope that the chemical treatment dissolves the contaminant. This in combination with exposure to natural attenuation (air) will often address the problem over time. Monitoring wells are usually placed on the property after encapsulation. Quarterly testing ensues, often for several years, until such time as the state department of environmental conservation or protection agrees that the levels of contaminants have been reduced to acceptable levels.
Certain contaminants require removing the contaminated soil, which in large volume can be prohibitively expensive, as well as trucking contaminated soil to a licensed disposal facility.
Groundwater contamination is more problematic, as it takes longer to dissolve the contaminant and often becomes embedded in underlying bedrock. This is particularly problematic if the surrounding properties do not have a municipal water system (meaning that neighbors rely on private wells for drinking water). Either type of contamination can be part of an expensive and time-consuming cleanup process and often an impediment to closing a deal.
These issues are typically addressed as a contingency in the purchase contract. The developer needs adequate time (a due diligence period) to assess the underlying risks, including brownfield contamination. If the problems appear insurmountable (too expensive), the developer can terminate the purchase agreement during the due diligence period.
Is there a fast way to deal with entitlements?
Very funny! Short answer is no, as the municipality is charged with the responsibility to protect its constituents. Each municipality has zoning laws and a building code. The best solution is to work in tandem as a team. Both developer and municipality have legitimate concerns. Informal meetings with decision makers, such as the fire & police department, the town manager, engineer and planning departments will go a long way to making the process less adversarial. Work methodically through every issue.
Start with zoning. Is the use permitted by code? If not, the development approval process will take longer and will entail greater risk. It is also more vulnerable to an appeal (lawsuit overturning the decision). There are occasions where the municipality will elect the board of adjustment (zoning) or planning board to hear both zoning and planning applications. One entity reviewing both zoning and site plan approval is preferable.
It can cost upwards of $350,000-$450,000 for legal, architectural and civil engineering and other services to obtain site plan approval, sometimes more. The review process can take from 12-18 months or longer, as municipal, county, and state agencies such as the state department of transportation or environmental protection agency may have need to review and comment as well.
Finally, property owners — and sometimes competitors within a certain distance from the project — can institute a lawsuit (an appeal) of the use variance or planning board decision. Unfortunately this can add months and even years to the process!
A golden rule is: does the planning board and its constituents — voters — believe the project is in the best interests of the community? If the residents want the project, the planning board will often work with the developer to solve difficult issues. If its constituents oppose the project, the chance of obtaining a site plan approval is significantly diminished.
Obtaining unconditional site plan approval can take 15-18 months. Upon a vote by the planning board or board of adjustment, the town attorney will publish a public notice in the local papers announcing the decision. The public then has 45 days to appeal the decision. The appeal process can take anywhere from several months to years, even if the court eventually decides the appeal is without merit. Given the time, money and risks, it is reasonable to conclude that real estate development is not for the faint of heart.
How has the recession changed construction finance?
A recession results in less economic activity and declining demand. Vacancies rise, and rents fall. Lenders become more conservative. Loans are more difficult to obtain, terms and conditions of loan commitments become more onerous.
If a developer has a credit-worthy anchor tenant (strong balance sheet), particularly a supermarket anchor tenant, the lender may offer more favorable terms.
A speculative shopping center developer with no anchor tenant will have a much more difficult undertaking. Lenders may be more reluctant to make a loan; the lender may insist upon recourse debt and the loan-to-value (cash down as a percent of total loan) will be higher.
In conclusion, a good development site is a location that is zoned for the intended use, reasonably welcomed by the community and planning board and anchored by a credit-worthy tenant. These factors usually result in a positive outcome.
What kind of loan to value are lenders looking for today?
It’s always a question of underlying credit of borrower and tenant and the anticipated income of shopping center. If the developer has investment grade credit or a food anchor tenant with a good balance sheet, the lender may still require a 20%-25% downpayment in the current lending environment. For non-investment credit tenant, or non-anchored center, the downpayment can be as high as 50%. In a recessionary environment the downpayment requirement will be higher; in a booming economy, it will be lower.
After making it this far, what best practices do you apply to managing a property?
A property owner wants their tenants to be successful at their location. If they stay in business and prosper, so will your shopping center. The success of both tenant and developer begins with the old adage: location, location, and location!
Of course, tenants will sometimes have problems. A good landlord will often work with good tenants to help them through a rough patch. Sometimes, the shoe is on the other foot!
Mutual success also revolves around shopping center design. Are property ingress and egress, traffic circulation and curb cuts user friendly? Do shoppers feel safe in the shopping center environment? Is the center well lit, properly striped, and swept daily? Is snow removed promptly without impeding the availability of parking spaces or egress?
Today, more than ever, advances in technology have resulted in energy savings. Efficiencies in design and materials result in reduced operating expenses. As a portion of operating expenses is borne by tenants, low operating expenses can provide a competitive advantage in competition for tenants with neighboring centers.
Finally, there is the consideration of the day-to-day operation of the shopping center. Are potholes quickly repaired? Are sidewalks and curbs in need of repair? To both retailer and property owner, a well-managed shopping center is a sure formula for success and customer satisfaction!
RichRelevance appoints new CFO
San Francisco, Calif. — RichRelevance, a cloud-based platform and omnichannel personalization solutions provider, has appointed Zach Koekemoer as the company’s CFO.
Koekemoer has 20 years of experience working at high-growth technology companies, having held executive positions at technology innovators including iPlay, Industrial Origami, WageWorks and @Road. In his new role, he will oversee and lead all aspects of the company’s financial operations as RichRelevance positions itself to rapidly expand across all lines of business.
The company recently added datacenters in Stockholm, Sweden, and Miami, Fla., and has another data center planned in Singapore, bringing the company’s total number of datacenters worldwide to 11. The company has also integrated the recent acquisition of Malmo, Sweden-based Avail Technologies and continues to expand its business to serve a growing list of retailers and brands across the globe.
“Zach brings an outstanding pedigree in creating value through financial insight, executive leadership and strategic intelligence," said David Selinger, CEO of RichRelevance. "He stands out as an operations-focused leader who can drive the financial maturation process — and has led organizations at every stage from funding through successful exits. He will be a tremendous asset as we move into our next phase of growth as the undisputed leader in data-driven personalization.”
Prior to joining RichRelevance, Koekemoer was CFO at iPlay, which was acquired by iWin. In addition to its own iPlay-branded game sites, it also powered game sites for Yahoo! Games, MSN Games, Orange (France Telecom), AT&T and Virgin. While at iPlay, Koekemoer oversaw the raising and completion of $22 million in venture funding, as well as the integration of six acquisitions and the sale of the company’s Interactive/Connected TV business and its operations in China.
Prior to iPlay, Koekemoer was CFO at Industrial Origami where he oversaw the analysis and reporting of the company’s financial operations, working hand-in-hand with the other members of the executive team. He also managed the company’s patent portfolio, which included 400 issued and pending applications, and relocated the company from San Francisco, Calif., to Cleveland, Ohio.
He previously served as VP of finance at WageWorks, where the company’s revenue increased to $101 million from $48 million, during his tenure. He has also held senior financial positions at @Road (acquired by Trimble Navigation) and Artisan Components (acquired by ARM Holdings).
A CPA, Koekemoer began his career at PricewaterhouseCoopers. He is a graduate of Stellenbosch University in South Africa.
“RichRelevance has cemented its position as number one by offering an incredible data architecture, consistent product innovation and, most importantly, by providing ongoing, measurable value for their world-class customer base,” said Koekemoer. “The company’s team, technology and footprints are unmatched — and growing at a record pace. I am very excited to join David and RichRelevance as we expand the financial operations and structures necessary to continue to support the organization and its clients."
RichRelevance’s clients include Walmart, Marks & Spencer and Cdiscount. Recently, the company opened its cloud-based platform to allow clients to easily merge disparate data sources and build real-time applications tailored to their specific business needs.