Year-to-date Levin Activity Reflects Positive Signs for Retail

Top Quote Increased Leasing, Capital Spending and REO Demand Point toward Recovery. End Quote
  • Trenton-Ewing, NJ (1888PressRelease) September 29, 2010 - Year-to-date 2010 activity for retail real estate services firm Levin Management Corporation is up significantly over last year, presenting many positive signs regarding the state of the regional market, according to Matthew K. Harding, president and chief operating officer. The company has reported increased leasing activity, which had been predicted by Levin's end-of-2009 survey of some 1,000 of its tenants. Other signs of an upturn include property renovations at key retail centers and increased demand for REO services by institutions seeking to stabilize properties for resale.

    Harding said the activity is reminiscent of past industry patterns. "Real estate is and will always be cyclical," Harding stated. "Levin Management has witnessed this pattern several times since we were founded in 1952."

    Leasing Progress at Multiple Locations in the Region

    Through mid-year, the North Plainfield, N.J., firm completed 76 new retail leases, renewals and expansions totaling approximately 525,000 square feet. Levin serves as leasing and/or managing agent for a 12.5 million-square foot portfolio with 90 properties. Among the highlights:

    · Supermarkets continue to thrive: The Shop Rite at Hamilton Plaza, Hamilton Twp., N.J. has signed a new lease expanding its store from 53,220 to 80,675 SF, two other New Jersey ShopRites extended their leases, and Tropical Supermarket leased 12,800 square feet at Hamilton Street Center in Franklin Twp., N.J. In Hickory, N.C., Save-A-Lot leased 15,074 SF at Hickory Plaza.

    · Stew Leonard's Wines and Spirits committed to 12,680 square feet at Echo Plaza in Springfield, N.J., and Wine King at Wall Towne Center, Manasquan, N.J., expanded from 3,200 to 4,800 SF. At Post Road Plaza in Pelham Manor, N.Y., Fairway Wines and Liquors opened adjacent to the company's wildly successful new supermarket.

    · Restaurants remain an active segment: Levin signed 16 new leases and renewals during the period, including a Panchero's replacing a McDonald's at the Hills Village Center in Bedminster, N.J., Panera Bread renewing a 5,144 SF lease at North Village in North Brunswick, N.J., and several new leases and renewals with Subway.

    · Dollar stores, too, are still active. Dollar General renewed the lease on 7,500 SF at Capitol Plaza, Bangor, PA, and leased 9,628 SF in Union City, N.J., while Dollar Tree leased 9,000 SF at Fairlane Village Mall, Pottsville, Pa.

    · Local merchants, which were impacted as retail rents soared, have staged a comeback. Levin recently signed three leases totaling 7,310 SF for such stores at its Erie, Pa. Liberty Center: Werner Books, which sells both new and used books, Tightwad Tobacco, offering blends similar to name brands for people who roll their own, and Zoom Wireless, which sells pre-paid digital phone plans. Two of the three are the second store in their fledgling chains.

    · Retailers in the Do-it-yourself arena are also active: AutoZone signed on for 7,790 square feet at St. Georges Crossing in Woodbridge, N.J., and Ace Hardware expanded from 6,285 to 14,000 SF at Capitol Plaza, Bangor, Pa.

    · Other highlights around Levin's six-state portfolio include a Cost Plus renewal of 19,830 SF at Crossroads Place in Falls Church, Va., several leases and renewals with clothing retailers, including a new 12,310 SF Citi Trends at Hickory Plaza, Mandee (8,000 SF) and Joyce Leslie (7,283 SF) at Watchung, N.J.'s Blue Star center.

    "As recently as a year ago, retailers' sales were dropping, and we were asking which companies would survive," Harding noted. "That was the low point. But many retailers took measures to tighten operations and go into survival mode. Many - not all - did this successfully and now are beginning to reap the rewards of those adjustments."

    "Retailers' return to profitability has stimulated leasing interest across the board, most notably at grocery-anchored shopping centers," he added. "When we had asked our tenants, in the end-of-the year survey for 2009, nearly 40 percent indicated that they would be looking to add stores in 2010. The results of that survey have certainly been borne out by our year-to-date activity, and in the sectors that the survey predicted."

    "The market can not be labeled as robust just yet, but activity levels clearly are improving," he added. "We continue to sign deals, and the pace of new store openings seems to be picking up lately."

    Some of the big boxes that came onto the market last year are being absorbed, such as the former Linens 'n Things space that Christmas Tree Shops leased at Somerset Shopping Center in Bridgewater, N.J.. "In markets like New Jersey and Pennsylvania, which are not overbuilt, supply and demand are reaching equilibrium faster," Harding concluded.

    Renovations are Driving Construction Engine

    According to Harding, shopping centers need periodic updates to remain competitive. In the current economy, a number of factors are making renovations more affordable, such as the availability and costs of financing, materials and labor. "Right now, financing at historically low rates is available, particularly to strong companies. Both materials and labor, which frequently were in short supply as recently as 18 months ago, are now readily available," Harding explained. "While new development and ground-up redevelopment remain limited, we are finding that carefully selected renovation projects at well-located properties provide an opportunity to take advantage of these current conditions."

    In Hamilton Twp., N.J., the firm has launched an approximately $10 million renovation at Hamilton Plaza Shopping Center in conjunction with the expansion of the property's long-time anchor tenant, ShopRite. The project will reconfigure, expand and update the 184,272-square-foot property.

    At the heart of the plan, a portion of the front section of the current building will be removed, and additional square footage will be added to the rear, allowing the expanded ShopRite to reach nearly 86,000 square feet. The project will add a 10,000­square-foot end cap to the building, as well as two new pad sites, for a net gain of approximately 5,000 square feet of GLA. The plan also includes installing prominent new pylon signage and a modern building facade, reconfiguring the parking lot, and redesigning and adding to the center's landscaping.

    Earlier this year, Levin completed a $15 million repositioning/renovation at Post Road Plaza in Pelham Manor, N.Y. The project took the property's 200,000+ square-foot main structure down to its steel framework. Levin rebuilt the building to create a post­industrial feel; upgraded lighting, paving, and landscaping; and included an innovative signage program and interior reconfigurations. Fairway Market, the iconic New York grocery chain, signed on as a new anchor for Post Road Plaza, occupying approximately 75,000 square feet. Previous tenants opted to remain at the center, and many renovated or expanded. A number of new tenants already have leased space there as well.

    An additional renovation project is in the works for a Levin Management Corporation property in Clifton, N.J. This cumulative redevelopment activity positions the firm as one of the industry's most active retail leasing and management firms spearheading construction.

    "The fact that it is easier and more cost effective to renovate retail assets now has prompted owners and their advisors to evaluate their portfolios to identify shopping centers that will benefit from upgrades or reconfigurations and, most importantly, will bear the investment," he added. But it's clear that renovations like these, and not new development are driving the construction engine."

    REO Property Management Focuses on Stabilization of Retail

    In April, Levin Management Corporation was named court-appointed receiver for ITC Crossing North, a newer, well-located, 180,000-square-foot shopping center in Mount Olive Twp., N.J. Levin has managed properties for REO clients during market downturns throughout its near 60-year history.

    "The past year's growing number of property foreclosures and bankruptcy proceedings has left more properties in the hands of lenders, financial institutions and bankruptcy trustees," Harding said. "Their top priority is to achieve stabilization, physically and in terms of leasing, to return the properties to the market.

    "Yet few of these institutions have the internal resources and practical experience with distressed properties to quickly analyze a shopping center financially and operationally, and keep it from losing tenants or otherwise going downhill," he added. "As a result, third-party service firms like Levin that have past successes in this area are seeing increased demand."

    Levin is focusing on day-to-day operations and tenant relations at ITC Crossing North, which is anchored by Sam's Club and Staples. The firm also is working to lease up 20,000 square feet of vacant space there, according to Harding. In short, Levin Management is focused on making this distressed property healthy in as many respects as possible. "Centers that have strong occupancy and a loyal tenant base, and that are physically attractive draw the most consumers," he said. "In turn, the assets are best positioned to appeal to new potential investors."

    Looking Ahead

    According to Harding, the retail real estate industry - and retail in general - still remain a question mark. "We have made good progress to date in 2010, and we are cautiously optimistic that it will continue. Many retailers who were out of the market for new stores are coming back, and many landlords are feeling much more positive about the future. We're not completely out of the woods yet, but we're getting a lot closer."

    About Levin Management Corporation

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