CPN - February 2009 - (Page 24)

DUE Diligence Investment Ready How to Identify Best Risks, Opportunities By Paul Rosta squeezed by the capital markets. “There are millions and millions of dollars worth of loans coming due, and it’s all coming due in the next 12 to 18 months,” noted Terry Munoz, vice president & industry practice leader of retail, restaurant and real estate for Nielsen Claritas, which is CPN’s partner on these quarterly special reports and like CPN is part of The Nielsen Co. General Growth Properties Inc. The opportunity quantities below represent the largest margins between actual consumer spending and potential is only the best-known retail owner sales activity in select retail segments among the markets listed on Nielsen Claritas’ Affluence Index. Where potential sales exceed actual spending, an underserved market and growth opportunity exist. scrambling to refinance looming debt or to unload prized DEPARTMENT STORES CLOTHING/ACCESSORIES assets in a bid to raise desper2008 Opportunity 2008 Opportunity ately need cash. Out of the Core Based Statistical Area Population (in millions) Core Based Statistical Area Population (in millions) public spotlight, plenty of New York City-NJ-PA 18.9M $6,529 Sacramento-Arden, CA 2.1M $204 other players are in the same Washington, DC-VA-MD-WVa 5.4M $963 Boulder, CO 287,642 $122 boat.“As time goes on and ownSan Francisco-Oakland, CA 4.3M $727 Torrington, CT 191,338 $119 ers feel more pressure on (net Seattle-Tacoma-Bellevue, WA 3.3M $682 Santa Cruz-Watsonville, CA 256,515 $100 Boston-Cambridge-Quincy MA/NH 4.5M $667 operating income), more rocks Lexington, MD 101,831 $77.9 Torrington, CT 191,338 $146 are going to be overturned,” Santa Rosa-Petaluma, CA 476,532 $75 Bridgeport-Stamford-Norwalk, CT 901,429 $95 Oak Harbor, WA 81,252 $53 said Dan Fasulo, managing Truckee-Grass Valley, CA 101,146 $74 Corvallis, OR 82,648 $51 director & head of research for Edwards, CO 59,428 $61 Ukiah, CA 89,895 $41 Real Capital Analytics. Corvallis, OR 82,648 $63 Carson City, NV 55,550 $32 According to a report published by the research firm in late January, 264 retail properBUILDING MATERIALS/GARDEN SUPPLIES ELECTRONICS/APPLIANCE STORES ties, valued at $5 billion, were 2008 Opportunity 2008 Opportunity in default, bankruptcy or foreCore Based Statistical Area Population (in millions) Core Based Statistical Area Population (in millions) closure. Still more worrisome, New York City-NJ-PA 18.9M $3,543 Torrington, CT 191,338 $70 San Francisco-Oakland, CA 4.2M $1,453 Hilo, HI 177,290 $50 another 1,220 retail properties, Los Angeles-Long Beach, CA 13.3M $1,229 Hilton Head Island/Beaufort, SC 169,612 $41 valued at $22.6 billion, were at Seattle-Tacoma-Bellevue, WA 3.3M $1,156 Vallejo-Fairfield, CA 421,678 $36 risk of delinquency or default. San Jose-Sunnyvale, CA 4.3M $266 Lexington Park, MD 101,831 $32 These conditions point to a Corvallis, OR 82,648 $125 Corvallis, OR 82,648 $28 rare opportunity for investors Boulder, CO 287,642 $67 Truckee-Grass Valley, CA 101,146 $26 as necessity forces reluctant Vallejo-Fairfield, CA 421,678 $47 Boulder, CO 287,642 $24 owners to sell.Yet Fasulo specTorrington, CT 191,338 $33M Oak Harbor, WA 81,252 $23 ulated that the opportunity Trenton-Ewing, NJ 370,641 $30 Kahului-Wailuku, HI 144,043 $21 will be brief. “I really think there’s only going to be a threeSource: Nielsen Claritas WAREHOUSE CLUBS/SUPERSTORES to six-month window for investors Nielsen Claritas’ Retail Market Power data is derived from the 2008 Opportunity Bureau of Labor Statistics’ Consumer Expenditure Survey and the to get the big bargains,” he said. Census Bureau’s Census of Retail Trade. Core Based Statistical Area Population (in millions) All things considered, today’s cliNew York City-NJ-PA 18.9M $12,695 mate presents some dilemmas for Los Angeles-Long Beach, CA 13.3M $5,123 investors that are attempting to evalabout the value of assets that Boston-Cambridge-Quincy, MA/NH 4.5M $3,220 uate properties placed on the marinclude these stores. Investment San Francisco-Oakland, CA 4.3M $2,114 sales volume for the fourth quarter ket. Still, conventional wisdom has Washington, DC- VA-MD-WVa 5.3M $2,200 of 2008 reached only $2.7 billion, a held for some time that the most Sacramento-Arden, CA 2.1M $829 decline from the $11.9 billion tal- prudent approach is targeting San Jose-Sunnyvale, CA 4.3M $621 lied during the same period a year demographically solid markets able Bridgeport—Stamford-Norwalk, CT 901,429 $586 Barnstable Town, MA 223,611 $237 earlier, according to Real Capital to retain value into the next cycle. Trenton-Ewing, NJ 370,641 $217 “If you have a very strong location, Analytics Inc. Retail landlords, too, are being you’ll continue to be successful as a F or retail real estate investors, today’s economy is serving up rich portions of both potential opportunity and vexing questions. At first glance, market conditions appear to have taken many bedrock demographic assumptions and knocked them into a cocked hat. Once-stalwart brands are vanishing, even from markets that until recently offered the population SPECIAL density, income and demand to support them. Occupancy and revenue are at risk nationwide, owing to liquidations or wide-scale store closings by CPN Nielsen Claritas such national brands as Circuit City and Linens-N-Things and regional mainstays like R E P O R T Mervyns, Gottschalks and Goody’s. These developments have helped slow retail investment volume to a crawl by deepening the uncertainty UNTAPPED POTENTIAL 24 COMMERCIAL PROPERTY NEWS • Februar y 2009 • www .cpnonline.com http://www.cpnonline.com

Table of Contents Feed for the Digital Edition of CPN - February 2009

CPN - February 2009 Contents Starting Line Buzzworthy Office Data/Analysis Washington, D.C., Market Profile Ranking: Mortgage Banks & Brokerage Firms Top Deals of 2008 Mortgage Banking Mexico Brokerage Sustainability CPN-Nielsen Claritas Special Report Resource Guide

CPN - February 2009

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