GLG News by Mr. Kenneth Leonard, Principal
GLG News is now G+ Insights
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June 24, 2009
National Retailer Risk Tracking | blog.retailtrafficmag.com
I just wanted to share this work with my GLG News readers. Although it is not perfect, my friends at Madison Marquette went to a lot of trouble to gather all the recent public comments about many of the leading mall retailers and present a list of those they think are most at risk of going under.
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An ugly secret the REITs don't want you to know about
June 12, 2009
Retail landlords need a "reality check" | www.reuters.com
This is the first article I have seen by an industry insider, that blows the whistle on the pending crisis in REIT profits. The implications are significant in that the reporter only talks about the smaller and/or independent retailers that are struggling to survive in shopping centers across America. The reporter pains a bleak picture of what is happening on a daily basis and what is likely to happen by next January after a deluge of retailers call it quits after lasting through the Christmas season and then closing their doors. If the reporter were to investigate the even more dangerous pending crisis brought on by the rapid departure of anchors, REIT stocks would be revealed to all be in serious danger.
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June 4, 2009
Shopping Centers Anchored by Groceries Hold Drawing Power | online.wsj.com
This package of three "urban" strip centers is rather unique in that these centers are very old but successful and well insulated from nearby competition from the Target and Wal Mart super stores. However they can still provide a good indication of value of high quality grocery anchored strips to guide the GLG reader trying to stay current on the market value of strip center REIT's portfolios.
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A Perfect "Comparable" for Determining Value
June 3, 2009
Filene's Warns of Store Closings, Job Losses | www.chicagorealestatedaily.com
Since I was responsible for the selection of locations and the negotiation of leases for the first five Filene's Basement stores, I have naturally followed the fortunes of this troubled retailer very closely. Therefore I feel qualified to opine on the underlying message contained in this recent announcement about the future value of Filene's real estate portfolio. This value is of critical importance to the creditors and bankruptcy judge to help determine the total asset value of the company. I think I can safely assume that because of the previously announced pending sale of the two downtown Chicago stores, a substantial value has been allocated to the leasehold value of their other leased stores. Now that the prospective buyers have walked away from this sale, whatever value has been given to the rest of their leases is in serious doubt and the intelligent investor in Filene's bonds or creditor's paper, needs to immediately downgrade the prevailing asset value numbers.
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I'll Bet Mr. Welsh Would Not Have Approved
June 2, 2009
G.E. Capital Makes Big Loan to Sears | www.chicagobusiness.com
Although $400 million is rather small in the scheme of things, the last time GE got involved with a major retailer, it proved to be one of the most costly mistakes of Mr. Welsh's career. When Mr. Welsh approved GE's purchase of Montgomery Ward there was a move afoot in financial circles to diversify and a belief that GE was so smart and so rich that they could easily fix the ailing retailer. It turned out that after a few years and several cash infusions, GE and Mr. Welsh quietly shut down the entire company at a reported loss of approximately $3 billion.
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June 1, 2009
Sears' MyGofer Lies Low For Now | www.chicagotribune.com
Having spent several hours analyzing Mr. Lampert's newest attempt to demonstrate his retailing acumen in Joliet, Illinois, I can safely say that the Tribune's retail analyst very negative review was far too complementary. The Trib and TheStreet.com characterized Mr. Lampert's feeble effort to "revolutionize retailing" as a poorly conceived attempt to marry Amazon.com with Dairy Barn. TheStreet.com also awarded Eddie's new store concept with its' "Five Dumbest Things On Wall Street" award. In my humble opinion I think both the Trib and TheStreet were being far too complementary. Although I realize that Mr. Lampert may not have familiarized himself with very many of the prior bad retailing ideas in history, but even the barest minimum of research would have revealed the terrible flaws that caused the demise of such well conceived and well accepted earlier "catalog showroom concepts" as Service Merchandize, Best Products, Ellman's, Sterling Jewelry or Brendel's!
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Target Shareholders Are Not Fooled By Slick and Swarmy Presentation
June 1, 2009
Target Shareholders Reject Ackman's Bid | www.chicagotribune.com
Although it costs target over $11 million and diverted thousands of hours of executive's time, Target can still be proud of the overwhelming vote of confidence they received from their stockholders in the battle with Mr. Ackman's efforts to transfer the value of Target's real estate portfolio to the stockholders of his Pershing Square Capital fund.
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Comp Stores Down $1 Billion But 1Q Profits Up $26 Million!
May 25, 2009
Sears Swings to a Profit and Secures New Credit | online.wsj.com
Sears Holdings announced an unexpected profit for the 1Q 2009 of $26 million or 21 cents a share compared to a loss of $56 million or 43 cents a share for 1Q 2008. What an amazing performance, made even more amazing by the fact that its' sales were down by over $1 billion or 7.4% for Sears and 2.1% for Kmart. In fact since Mr. Lampert took over the reigns he has yet to show a single quarter where he has not lost market share to the likes of Wal-Mart and Target. In light of the above, how should the GLG reader interpret this sudden emergence of profits?
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Big News! Survival Of The Fittest Works In Business Too!
May 22, 2009
Recession Turns Malls Into Ghost Towns | online.wsj.com
The average GLG client who follows the shopping center REITs will find nothing new in this oddly placed (first page of the WSJ) article. In fact a close reading of the article reveals that the authors themselves recognize that there is no "new" news to report but expand the article to almost a full page by the time they finish acknowledging that the increase in "dead malls" is simply the result of excessive competition and the reality of too many malls being built, in too many marginal locations, with too many marginal anchor stores, during the periods of cheap money. However, there is something to be gained from this article in that it serves as a reminder that "all malls are not created equal" and "all mall REITs are not created equal".
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An Insult To GGP's Intelligence
May 12, 2009
Creditors hit Ackman's new plan to finance General Growth | www.chicagobusiness.com
By attempting to "fine tune" his earlier offer for GGP's debtor-in-possession (DIP) financing, Mr. William Ackman and his Pershing Square Capital Management firm is once again demonstrating just how much smarter he thinks he is than the GGP Board and the 11 member unsecured creditors committee. By ignoring the obvious conflict of interest problems and the fact that such a move would give him improper control over GGP, Mr. Ackman once again demonstrates his disdain for the intelligence and experience of the management of successful retail oriented companies such as SHLD, Target and GGP.
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Eddie: Your Ignorance Is Showing
May 7, 2009
Sears focused on its real estate | www.chicagotribune.com
At the recent SHLD board meeting Mr. Lampert announced his latest "original" thoughts about how he was going to extract value from what he has called his "$12 billion hidden asset value in Sears owned stores". His plan is simple, he increases the size of his real estate department so he can start leasing the under utilized space in Sears stores to other retailers. He plans to become a landlord by creating "mini-malls" inside his stores. Will it work? Of course not! Why not? Read below.
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An Excellent Leading Indicator For Values Of Troubled Malls
May 7, 2009
Glimcher Sells Mall For $9.5 million Less Than Mortgage | blog.retailtrafficmag.com
This article provides an excellent current "comp sales" figure for all the GLG clients who are grappling with the problem of attempting to place a value on the portfolios of troubled mall REITs such as GGP.
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May 7, 2009
Ackman Out as General Growth Interim Lender | www.chicagorealestatedaily.com
William Ackman, fresh from being shown the door by Sears and Target for his greedy over reaching attempt to enrich himself at the expense of both companies long term health, has now been shown the door by GGP for the same reasons.
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May 6, 2009
When Good Assets Go Bad | retailtrafficmag.com
Although this article was written ostensibly as a promotional piece for the virtues of auctioning off defunct shopping centers, it can serve as an object lesson for GLG readers interested in how seemingly solid assets can turn into dust within less than a year.
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Mall REITs Are A Lagging Indicator
May 6, 2009
Helped By Lower Expectations, Mall REITs Outperform In First Quarter | retailtrafficmag.com
The six mall REITs that have reported their first quarter results have all surprised the financial community by performing better than expected. This GLG "Leader" says "so what"? When reporters report about financial expectations being exceeded, they are merely demonstrating their lack of industry understanding. Historically the mall REIT industry has been a lagging indicator and especially under this recessionary climate with so many store closings are being announced, it is very easy to make naive assumptions without understanding how mall lease commitments actually work. To those of us in the industry, this is a nonevent. However, to the GLG News reader/Client who is interested in this business sector, there are some important "hidden" messages contained in this article.
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April 28, 2009
Tesco Sees Signs of Life In Global Retail | online.wsj.com
As previously indicated by this writer, Tesco is making a huge bet on its' entry into the U.S. market. They have been very open in their prediction of immediate success and frequently have defended their efforts in spite of industry expert's comments on their lackluster performance. The significance of this article for GLG clients interested in Tesco is that this is the first admission by the company that their U.S. invasion is "stalled on the beaches"!
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Fitch Doesn't Know The Half Of It
April 23, 2009
Fitch Lowers Outlook On General Growth CMBS | www.chicagobusiness.com
Fitch obviously does not have shopping center specialists on its staff as witnessed by the belated yet mild change to their rating of GGP. If they had asked an industry specialist, they would have realized that the entire debt burden of GGP is so far underwater that by the time CMBS problem is addressed, there may be little, if anything left.
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Overpriced + Overleveraged = Overcome
April 16, 2009
General Growth Files For Bankruptcy Protection | www.chicagorealestatedaily.com
To the surprise of no one, it was finally announced that GGP was unable to refinance its' debt and accepted the inevitable. The major implication for GLG News readers will come in the months ahead when the first few properties are sold at auction and the hedge fund analysts will finally have a specific indicator of the current value of the portfolio of the major Mall REITs.
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April 14, 2009
Pressure Mounts On General Growth | online.wsj.com
After a quick review of all the recent articles in the trade publications as well as the major business papers, I have yet to see a proper explanation and focused examination of the real reasons for GGP's current difficulty. GLG readers can now say "they heard it here first".
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If They Are Really Out To Get You, Are You Paranoid?
April 13, 2009
Rumors about retailers can be very bad news for their health | www.usatoday.com
In the face of complaints from numerous legitimate retailers, pundits such as Howard Davidowitz and Britt Beemer continue to get the lion's share of media time and attention with their prophesy of gloom and doom directed at retailers such as Zales, Ann Taylor and PacSun. Even after admitting he "makes all his money by short sales of retail stocks" the media treats him as a star and the market seems to respond to his negative comments
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