CPN - December 2008 - (Page 9)

RETAIL MARKET INTELLIGENCE them. Owners will face the challenge of holding on to both struggling tenants and stable retailers whose leases are expiring. As a result, tenants will maintain their spot in the driver’s seat throughout 2009 and will be able to negotiate free rent, increased tenant-improvement allowances and other concessions. In a bid to keep as much revenue flowing as possible, landlords will also be willing to offer existing tenants shortterm renewals. No less daunting for landlords is the hurdle of backfilling newly vacated space. Especially for 50,000-square-foot and larger blocks, curtailed retailer expansion plans are shrinking the pool of takers.“The pressure is going to be on to become extremely creative and flexible in terms of finding people to take those spaces,” Dee predicted, suggesting that owners could, for instance, convert some locations into call centers or even houses of worship. REELING REITS On a broader scale, the economic crisis will almost certainly shift the balance of power in the U.S. retail real estate sector. The only question seems to be how big that shift will be. Even highly regarded industry leaders are not immune. General Growth Properties Inc., the second-biggest retail REIT, may look considerably different by the end of 2009 as it works to get its financial house in order (see “Top Executives Take Fall for REITs” on page 6). Its acquisition of competitor Rouse Co. in 2004,among other things,has saddled General Growth with $27 billion in debt.This month alone, more than $1 billion worth of its loans are coming due. In a much-publicized effort to restore shareholder confidence and regain its financial footing, General Growth shook up its leadership early this fall. CFO Bernard Freibaum departed in October. Several weeks later, CEO John Bucksbaum and president Robert Michaels stepped aside. They relinquished those roles to a pair of independent directors, Adam Metz and Thomas Nolan, on what the company said was an interim basis. Bucksbaum retains his role as chairman of the family-owned company, and Nolan still serves as COO. Reports of General Growth’s demise may well be greatly exaggerated, though media outlets reported on Nov. 20 that the company hired Sidley Austin L.L.P., a law firm that offers bankruptcy services. “All they have to do is refinance the debt and they’ll be OK,” argued Ivan Friedman, president & CEO of RCS Real Estate Advisors, a New York City-based retail real estate consultant. Nevertheless, General Growth’s financial straits have fueled speculation that it might be a takeover target, perhaps by Simon Property Group Inc. David Simon, CEO of Simon Property, the largest retail REIT, ruled out such a move durVisit www.cpnonline.com/propertytypes for coverage of more sectors. Embarking on complex real estate transactions and need expert advice? Get the power of Duff & Phelps. From valuation and due diligence to cost segregation and corporate real estate management consulting, the Real Estate practice of Duff & Phelps provides trusted analysis and insight on critical issues. With more than 1,200 employees working together across North America, Europe and Asia, we have the depth and breadth of industry and technical expertise to meet your needs. Get the strength of one of the world’s leading independent financial advisory and investment banking firms. > Financial Reporting Valuation > Tax Services > Real Estate and Fixed Asset Services > Investment Banking > Corporate Finance Consulting > Restructuring Advisory Services > Dispute and Legal Management Consulting Investment banking services are provided by Duff & Phelps Securities, LLC. Duff & Phelps Securities, Ltd. is authorized and regulated by The Financial Services Authority. duffandphelps.com www.cpnonline.com • December 2008 • Commercial Property News 9 http://www.cpnonline.com/propertytypes http://www.duffandphelps.com http://www.duffandphelps.com http://www.cpnonline.com

Table of Contents Feed for the Digital Edition of CPN - December 2008

CPN - December 2008 Contents Starting Line Retail Data/Analysis Conferences Boston Market Profile Finance International Property Management

CPN - December 2008

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