Interviews Jason Richter, Managing Principal, Capricorn Realty Advisors

0:00 Speaker 1 Good morning. This is Michael Stola for the Stolar real Estate Report on the Cats Around Table this morning. I’m fortunate to have Jason Richter, who is the managing principle of Capricorn Retail Advisors, a very active real estate advisory firm and leasing brokers for both tenants and owners. Jason has also been involved with Capricorn since twenty fourteen, and

0:23 prior to that has been involved with twenty five hundred deals and responsible for the north of a billion dollars in aggregate real estate transactions all over the world. Very happy to have Jason today.

0:32 Speaker 2 Thank you so much for having so Michel.

0:34 Speaker 1 You know what is really happening in the retail segment. You know, people look at it, they say retails did, but recently there have been some very positive articles out there.

0:46 Speaker 3 Rumors of retail’s death are greatly exaggerated. So the retail market, I think more broadly, has been pretty robust coming out of COVID obviously twenty twenty. Initially it seemed like it was pretty much dead before that. E commerce had major downward pressure on the markets, but I think we saw the resilience of retail and today in the better markets,

1:10 the quality markets. I think it’s as robust as it’s ever been. The demand definitely outweighs the supply.

1:17 Speaker 1 Speaking of quality markets, let’s talk about Madison Avenue since we discussed it the other day.

1:24 Speaker 3 Madison is and again, when we talk about Madison, we’re probably focusing mostly fifty seventh Street on up into the eighties, You’ve seen a lot of great movement, a ton of new deals Van Cleef, We’ve got Valentino taking five floors, the RMEZ. You’ve got a lot of great momentum. And again it’s probably a block by block situation. So in

1:46 the lower sixties, that’s where the majority of the gravitases with the luxury brands, and then as you go north, you’re dealing in a bit more of the contemporary and the aspirational luxury. There are a few blocks that maybe there are a bit of a lull, and I think that might be because of the side of the street,

2:04 or perhaps a few vacancies has stigmatized it a bit. But large in part, the demand on Madison has come back in a pretty significant way from what we saw in the mid twenty the mid twenty fifteen to twenty nineteen, when Madison Avenue rents went from eighteen hundred down to less than half and in certain cases they’ve they’ve kind

2:24 of restarted at about three hundred.

2:25 Speaker 2 Dollars a foot.

2:26 Speaker 1 Let’s talk about Soho.

2:28 Speaker 3 Soho one of the first to bounce back from the you know, whether it was the recession, whether it was the pandemic, Soho remained strong. It is probably the New York neighborhood. When retailers are looking at New York and they want to plant the flagship. A lot of the momentum has moved from uptown, whether it’s Fifth or Madison

2:49 to downtown. I think it’s just a cooler kind of environment, and you’ve got critical mass of retail and the streetscapes with the buildings and the cobblestone streets.

2:59 Speaker 2 It’s really a remarkable market.

3:01 Speaker 1 So with regard to both of these markets, the Madison Avenue and the SOO, what are the rents today as compared to prior to COVID.

3:10 Speaker 3 So Broadway and Soho, which is more of a mall like environment. I think you’re probably in the four hundreds. We’ve We’ve saw a few deals that were less and maybe a deal or two that might be creeping up higher, but that’s really where that’s stabilized. And then when you go to some of the side streets, whether you’re looking

3:27 at the Springs and the Princes, you know there are deals on Spring that are way north of six hundred, closer to eight hundred dollars a foot. And then of course each of the thoroughfares like Mercer and anything else for that matter, really has its own dynamic green that one may be more luxury one maybe working temporary, but

3:47 more or less you’re looking at it probably a two hundred dollars spread, and that would be West Broadway, which is the weaker part, or soho all the way up to one thousand dollars a foot. And Madison, I think you’re probably again starting in that two to three hundred dollars a foot and then going up to north of

4:05 one thousand dollars a foot.

4:06 Speaker 1 What about the suburban I know you’re rather knowledgeable the suburban market, coupled with fact certain of them have been repurposed.

4:15 Speaker 3 So we do a lot throughout the country, and the suburbs during the pandemic really really rebounded strong because people were obviously working from home and staying at home, so whether it was food and that could be grocery drive throughs.

4:33 All of the sales coming out of the suburban markets were gangbusters, and a lot of folks still have not returned to the major urban cores, even though we’re large in part beyond the pandemic. So the suburban markets have been quite robust. And whether you’re looking in and around the tri State, the Long Islands, the Westchesters, parts of

4:52 New Jersey, the retail there remains particularly strong and we see pretty low vacancy rates. Some of the mall redevelopments are are pretty interesting, and there’s a lot of interest in repurposing the boxes and where the retail may be antiquated, there’s there’s major demand for oddly or ironically, the family offices that might be coming in and taking boutique office space.

5:16 Medical is pretty significant as well, and you know health and wellness and and of course you know other retail uses.

5:24 Speaker 1 Okay, with three, I’m gonna I’m going to go completely out of the district. What about cannabis?

5:31 Speaker 3 So the cannabis space is interesting, and obviously the municipalities vary on their stance throughout the country. In New York in particular, we recently opened the first recreational dispensaries over the course of the last year, and there are many approved active groups making plays for real estate. So a few things to consider when you’re looking at cannabis deals is,

5:58 you know, obviously the restrictions by lenders have really hampered developers’ ability to move forward with certain cannabis deals. I’d say that’s probably been the biggest hindrance. So there’s been a bunch of deals out of landed An open, there’s a huge pipeline and there are going to be a few coming up. We’re working on one deal in particular.

6:21 I can’t speak to the address. It’s actually, at least as we speak, in an extremely high profile area. So cannabis is, it’s in its infancy, but obviously it’s a phenomenal business and we’re going to see a lot more of it.

6:36 Speaker 1 Are any of the major landlords interested in cannabis or is in the smaller landlord.

6:41 Speaker 3 So when you say major institutional landlords, obviously a lot of that.

6:45 Speaker 1 Urban edge you know, or Simon properties or people in that kind.

6:49 Speaker 3 So when you’re a public company, I think it comes with a little bit of a more difficult approach to cannabis deals. CBD was an easy one for a lot of the you know, the mall folks to take on.

7:00 There was a ton of CBD deals in some of those secondary and tertiary markets. But I think you’ll see it open up. But there are major restrictions when you are again certain public companies and you have certain lender profiles.

7:15 I think the cannabis space is large in part been capitalized on by smaller entrepreneurs.

7:22 Speaker 1 And I mean like you can go on First Avenue and every other block you have a convenience store with tobacco shop.

7:29 Speaker 2 Well, I mean as far as that goes.

7:31 Speaker 3 There are also a lot of there are a lot of vendors that are operating illegally. So you have to remember that as you walk around New York City and you see a tremendous amount of folks selling cannabis, know that ninety nine percent of that those are not approved licenses.

7:47 Speaker 2 So it’s a little bit of a different story.

7:48 Speaker 3 But I think over time this is obviously going to be much more ubiquitous, and the investment profile of these deals is phenomenal, and there’s a ton of runway and we haven’t even scratched the surface.

8:02 Speaker 1 On the application with like a minute left, Who are the new players coming into town, Fred Siegel, you had mentioned to me some of the grocery chains.

8:09 Speaker 3 So yeah, Aldi and Leedle have been making a big push into the city. You’ve got in the fashion space, folks like Viori. They opened up their first flagship here in Soho beautiful, beautiful store. You’ve got a ton of wellness users. You still see some of the more traditional players like TJ Max and all of their subsidiaries making

8:29 a big play, especially with the bed, bath and beyond boxes coming online. But there’s really what I think a bit of a unique time with digitally native brands, e commerce brands and newer concepts in general coming into the market to take great space, and there’s really no lack of demand in the better quality markets.

8:52 Speaker 1 With like thirty seconds, let’s talk about the Warby Parkers and the other you know who were online retailers who are not going on retail hell.

9:01 Speaker 3 Warby still remains the darling of the industry. They’re highly profitable, they continue their expansion, they’re on the streets, they’re in the malls. The the other players that you know, you might typically talk about whether it’s the Caspers, the Outdoor Voices, which is one of our clients. You know, newer entrance to the markets like Roan, You’ve got e commerce players

9:24 remain and will continue to remain just based on the barriers to entry to open up an online store, a major transition point and customer acquisition value online versus offline, you see a much higher bit of conversion in margin.

9:38 Speaker 1 So I’d like to thank my retail expert for being here. Jason Richter on the Stolar Report.

9:42 Speaker 2 Thank you once again for thank you, Thank you so much for having me. Mike