Vanished! $864 Million in Property Value!

Yesterday ( 9-14-09) it was announced that Blockbuster is closing 960 stores in the US. What does this mean for commercial and shopping center property owners? What does this mean to banks and financial institutions?

For property owners, it means that overnight, their prime, or maybe not-so-prime, real estate just lost considerable "value."

If each Blockbuster store contained 3,000 SF and was leased at $15.00 psf nnnn would indicate an annual nnnn annual income of $45,000. per year. Using a Cap rate of .05% woulds indicate a cap value of the lease to be $900,000 per building, or per shopping center!

$900,000 x 960 stores = $864,000,000.00

Who, or what firm,or retail companies, will now occupy these 960 vacant retail stores?

This gives many shopping center owners, investors, bankers and financial institutions more than indigestion. They are seeing the collateral value securing their mortgage loans disappear.

To begin to understand the serious financial pressure that retail property owners, shopping-and-strip center owners, developers, investors and bankers are now facing add to this one retail chain the following retail stores and shops that have closed or gone-out-of business in the past 2 years:

Ann Taylor, 117 stores closing nationwide
Eddie Bauer, 121 shops
Lane Bryant, Fashion Bug,
Catherine's, 150 store nationwide
Talbots, 78 stores
GAP, 85 stores
Foot Locker. 240 STORES
Wickers, Out of Business
Levtiz, 100 stores Out of Biz
Zales and Piercing Pagoda closing 83 stores
COMP USA Gone; Out of BIZ
Sharper Image, 90stores closed
Bombay Company 484 stores closed; out of business.
KB toys; 356 stores closed. Out of business.
Linen's n' Things
Circut City,
Payless shoes, 102
J. Jill 75
Game Stop, 77
Signet Jewelers, 75
and so on. This is NOT a complete list.

It indicates that many over-leveraged and prime retail shipping malls, centers and store block owners & investors are in for a long, tough haul and will need to adjust their future expectations.

In my opinion, this class of retail property owners will need now to break lose of the former 'herd mentality,' become much more creative, realistic and focus on the key to retail success; the forgotten retail customer.

Bill McInerney
Commercial REALTOR
617 816 3933