The Stoler Report with Jason Richter

0:00 Speaker 1 Good morning. This is Mike Stolar for the Stolar Real Estate Report on the Cat’s Roundtable. What’s happening in retail? Lots of things are happening in retail. People are buying retail businesses. May See’s closing stores, department stores are changing.

0:14 People are running around the world and paying outrageous prices for retail on Fifth Avenue and other locations. So today to discuss the retail business, I have my friend Jason Richter, who is the managing principle of Capricorn Retail Advisors. Thanks for being here, most appreciative to Okay, so tell me what’s going on, especially when you hear that Uniclow on

0:38 Fifth Avenue is being acquired.

0:41 Speaker 2 So the Uniclow acquisition three hundred and fifty million dollars for a portion of the retail condo, which I believe equates to approximately twenty thousand.

0:49 Speaker 1 A foot, is good price, very.

0:52 Speaker 2 Good numbers for our friends at Vernado. But it’s one of several acquisitions by retailers over the last few years, and Uniclo has done this in the past. I think more than anything, it’s a multi generational investment in their store.

1:10 Speaker 1 It shows what do you mean by a multigeneration investment.

1:14 Speaker 2 It means that they are committed to Fifth Avenue, They’re committed to New York and that operation for multi for generations to come. Ultimately, if you are going to acquire a piece of real estate like that, you either have an unbelievable amount of cash on your balance sheet and no better use to put it to, which I don’t

1:32 think is necessarily the case for Uniclow, but ultimately a hedge against rising rents inflation. And I know that their lease was coming up, I believe in about twelve months, so I’m sure during the discussions with the landlord about the mark to market rent on the extension since they signed that lease everly Fifth fifty years ago. Yeah, they

1:52 decided it would be something they would like to have in their control. And they also saw what Prada and and others had done last year.

2:01 Speaker 1 Okay, let’s talk about Prouder in the others.

2:05 Speaker 2 Prada, Gucci acquisitions at the tail end of last year. From Jeff Sutton, I think we’re the beginning of a handful of these kind of landmark acquisitions by retailers. Those businesses, in particular, Luxury has been on a run for the last few years. Coming out of COVID, very very strong fortress balance sheets. I think the last six to eight

2:28 months things have shifted a bit in the luxury business, especially for folks at Gucci and Louis, but at that time things were just as robust as can be, and again showing commitment to those stores that they’ve had for decades and they will have for decades to come.

2:47 Speaker 1 Okay, So Kia also board property.

2:51 Speaker 2 Ikea has an investment arm that is focused on ownership. A lot of it that they’ve done overseas is they’ve developed shopping centers, not just acquiring their one box. Ikeia did make an investment in New York recently, again as part of procuring a location, but this is something that they’ve been doing around for around the world. The investment

3:18 arm and the retailer arm have not been mutually exclusive and usually revolve around each other. So that was a surprise, but not a total surprise considering their business more globally.

3:28 Speaker 1 You know a number of people have been talking about American Dream talk to me about it.

3:33 Speaker 2 So the American Dream friends of ours there have gone through several iterations over the last twenty years, and I think they are finally kind of coming out if you will. The Luxury wing opened earlier this spring. Gucci has actually opened, I believe, over the last two weeks, which was a store they’ve had under construction for the last probably eighteen

3:55 months to two years. The entertainment component is thrive. I mean, if you go on any day, it really is a There’s a ton of energy going throughout the center, and they’ve done a really good job at procuring a pretty good merchandising mix, similar to some of the other assets that they’ve owned or do own throughout the country, like

4:15 Mall of America or West edd in Canada. So I feel like American Dream is finally hitting its stride. We’ve placed several tenants in there, recently signed a lease. I can’t say who, but we did last week with a very well known public company, national brand. And I would implore when you’re looking at kind of the whether it’s

4:35 Northern New Jersey landscape for enclosed regional malls, or if you’re looking at the Tri State more broadly, it very much is in a class all on its own, you know. I almost look at it as an analogous Disneyland in New York.

4:48 Speaker 1 People what about the famous Woodbury Commons. How are they doing?

4:53 Speaker 2 Woodberry’s crushing. It’s one of the best, most coveted outlet centers in the country. Sales well in the worth of one thousand dollars a foot, and it’s one of the few, certainly on the East Coast and northeast, the only, but they’re one of the few that is focused on a truly upscale, contemporary to luxury merch mix. And if you’re

5:15 any tenant, whether you’re moderate, contemporary, lux bridge, et cetera, that’s looking there. You you’re not just gonna snap your fingers and get a space.

5:22 Speaker 1 How is Tanger’s doing in Riverhead?

5:25 Speaker 2 Tanger Riverhead is a very different animal than Woodbury. I would say Tanger more broadly as a company that’s performed in a pretty material way over the last few years. We have some friends in the in the leadership roles over there. Tanger’s portfolio differs a bit from Simon’s, but Riverhead specifically, I think is is chump chugging along. They

5:47 also have Deer Park anchoring the island, and you know the east end, which you happen to know pretty well. You’ve got You’ve got a very interesting dichotomy of customer base coming from the more affluent South end and then uh, you know, call it the local river Head market and also of course the Norfolk. So I think that center

6:04 is doing quite well. It doesn’t have the same merchandising mixed North scale that Woodbury does. And then also just kind of anecdolally to that, you have a new center that’s being developed by value retail out of Europe, which you probably are familiar with Belmont, which is supposed to grand open soon.

6:24 Speaker 1 How many stores are for Belmont.

6:26 Speaker 2 So interestingly with this one particular development, they haven’t released a lease plan or a tene mix, so anything and everything that’s been reported are predominantly rumors. The center itself is built. Again, grand opening is supposed to be happening.

6:44 It was originally contemplated for the summer, now pushed to this fall, but everything is very much hush hush under wraps.

6:50 Speaker 1 What about department stores? Do you think they have a department store? They have smallest stores.

6:56 Speaker 2 Outlet centers typically will have at at what we’ll call it a department store level, either a sas Off, Fifth Nemens, but they’re fifteen to twenty five thousand square feet at best.

7:11 Speaker 1 Much Kay. With regard to names, what’s your thoughts about that takeover?

7:17 Speaker 2 I think those are two of, at least in North America, the greatest luxury department stores that there are, but they certainly have had a lot of iterations and change over the last few years. I have very different perspective on that, just because we’re so close with many of their wholesale vendors.

7:38 But more broadly, I’m hopeful that it will be a better, well capitalized company that will continue to innovate within the department store space, which, as you know and you indicated earlier, is a little bit of a fleeting model. And I hope that the leverage of that partnership, if you will, is not utilized against their you know, their brands.

8:01 Speaker 1 What about the tj X’s and the Burlingtints.

8:04 Speaker 2 Value is still going strong. Those are models that continue to endure during good times and bad times. They continue to expand. Those were those two in particular with the bed Bath and Beyond dispositions were when bankruptcy were ones to gobble up and absorb huge amounts of space. And I think, you know, again, whether it’s a recession or

8:27 whether times are going quite well, they are robust businesses that ultimately people love.

8:33 Speaker 1 The shop at. What about BJ’s and Costco.

8:36 Speaker 2 Admittedly, you know in my suburban life at Costco, probably more than I care to admit. I think they’re phenomenal, phenomenal merchants. They bring in hot, hot items and of course everyday staples there. They stand behind the as as retailers, they stand behind the customer. You have a problem with anything similar to like Nordstrom was and known for forever,

9:02 you can go and return something. You probably can go to Costco and BJ’s and return something you bought ten years ago.

9:07 Speaker 1 Unbelievable operations, no question about that. Let’s talk locally about King’s Plaza and the other you know, the other males or the retail athletes, you know, the one Herald Square neighborhood and so on.

9:21 Speaker 2 Yeah, Well, Kings Queens and Mala Bay Plaza all kind of in the same tranch. I think are all going well, thriving centers ranging and performance probably from seven hundred to foot all the way up into the low thousands of foot of Queens, very very stable merchandising in those urban markets, and realistically those are some of the only critical masses

9:48 of retail within those environments. I mean there’s an open air center right across from Queens and Regal Park, but it’s not the same level of fashion. So I think those centers cater to the masses and do quite well well.

10:00 Thirty fourth Street Herald Square is you know, another one that’s probably been through some evolution over the last you know, five years plus. We’re seeing an interesting amount of movement going closer to Penn. Vernado’s doing a phenomenal job and investing in their merchandising mix in and around Penn and Moynihan, and then that even bleeds all the way through to

10:22 Manhattan West.

10:23 Speaker 1 And how is Manhattan West and Hudson Yards doing.

10:26 Speaker 2 If you look at that corridor, that neighborhood. So starting from Hudson Yards leading into Manhattan West into Moynihan into Penn, they have definitely solidified themselves as retail destinations. You know, just talking about from an entertainment perspective, you would go to the garden, you’d go to sports, you’d go to concerts, you’d be searching for you know, there was a there

10:51 was nothing there to do or no place to eat. That that has been totally right.

10:56 Speaker 1 You can even play pickleball there.

10:58 Speaker 2 You can play pickleball right across from Penn Station. I was going to a dinner last night with a retail CEO cline of ours, and we’re passing that Lifetime Fitness.

11:08 Speaker 1 It’s fantastic. Speaking of pickleball, do you see that that and health clubs opening up more absolutely?

11:14 Speaker 2 I mean, if you look through Manhattan, Lifetime has signed a bunch of deals and they’re you know, best in class. We represent a brand called paddle House or padel which is a bit of a variation of pickleball. They’re expanding throughout the country best in class and there’s several operators just within that particular sport that are out there on

11:35 an expansion tear so that that clearly is is here to stay and fitness is top of mind for everybody.

11:40 Speaker 1 Right, Okay, with regard to my last question, who’s coming to the.

11:44 Speaker 2 Market, Well, there’s definitely a lot of folks that are either have recently signed leases or have opened in no particular order. You’ve got your viewery’s and your your on Runnings of the World. We just recently signed deals on that as soon and with Mandeli Lafayette, one j crew is out there both signing new deals in New York,

12:06 but across the country in various different prototypes. One of our our agencies just opened up with a wellness concept called other Ship, very very cool and flat iron, you know, cold plunges.

12:20 Speaker 1 What about one medical and the other medicals?

12:23 Speaker 2 One Medical has probably slowed down a bit, but still, you know, we we’re seeing ten and others in that you know, kind of newer innovative healthcare category out there, still expanding. A lot of them need to partner with kind of health health systems.

12:40 Speaker 1 That’s that’s right, right, I like AMYU and North Wales so on exactly. I’d like to thank Jason Richter for being here today and I’ll see you next week.

12:48 Speaker 2 Thank you so much, Mike, appreciate it.