Gallelli Gazette_September 6th, 2023

THE GALLELLI GAZETTE Retail Roundup

QUOTE OF THE WEEK:

BEHIND RITE AID’S LONG BOUNCE ALONG THE BOTTOM

It must have been around 15 years ago that I first started doing deeper dives on retailer credit as part of my tracking the marketplace. Obviously, if you’re a landlord and you have two potential tenants looking at your space, knowing that one of them has exceptional AAA credit and the other is on a bankruptcy watch list is a factor you might want to take into consideration before you lease your space. Of course, beyond that—as an analyst—tracking retailer credit is a pretty good indicator of who is most likely to be in growth or contraction mode ahead and which kind of opportunities they may offer a commercial brokerage, whether it may be assisting in expansion or in rightsizing a store fleet.

Rite Aid has continuously been on the bankruptcy watch lists of all the major ratings agencies for roughly 20 years. If there is a record for longest time spent on agency watch lists without filing bankruptcy, I am pretty sure that the Camp Hill, Pennsylvania-based chain owns it. But it appears that this 20-year streak of just scraping by is coming to an end.

Last week reports surfaced that the chain had hired Guggenheim Securities and Allvarez & Marsal as financial advisors, while Kirkland & Ellis was retained as its restructuring counsel. The bankruptcy team is in place. The only question is the matter of when they will actually file.

Before I get into the long, sad story of how it has come to this for the nation’s third largest drug store chain, let’s review a few basics about Rite Aid and what their bankruptcy might mean for the commercial real estate marketplace.

Rite Aid currently has about 2,215 stores across the United States, as well as about 65 units in the Pacific Northwest they operate under the Bartell Drugs banner. Their average store size is about 14,000 square feet (SF), though some of their older units are well upwards of 30,000 SF in size and some urban ones below 10,000 SF. That equates to roughly 31.9 million square feet (MSF) of space. They are most heavily concentrated on the coasts; about 22% of their stores are in California—same for Pennsylvania. New York accounts for about 12% of their stores, followed by Michigan at 11%. The chain also has locations in the Washington, Oregon, Idaho, Virginia, District of Columbia, Maryland, Delaware, New Jersey, Connecticut, Massachusetts, New Hampshire and Vermont markets. They do not have a presence in the Southeast below Virginia, nor in Texas— currently one of the stronger growth regions of the country. Outside of Idaho, they do not have a significant presence in the also quickly growing Mountain States of Arizona, Nevada, Utah or Colorado.

Their systemwide average sales per square foot (PSF) are about $500. By comparison, Walgreen’s chainwide sales come in at about $835 PSF

while CVS’ are roughly $1,330 PSF. For the past two decades, Rite Aid has been the third horse in what increasingly has become a two-horse race. Walgreens has about 8,560 stores across the US. CVS has about 7,785 units. It wasn’t always this way. In fact, in the early 2000s there was much greater parity between the three chains—CVS and Walgreen’s were still adding units both through organic growth and via acquisitions, while Rite Aid had already gone on its acquisition spree and growth spurt. That, unfortunately, was the problem.

Rite Aid was founded in Scranton, PA by Alex Grass in 1962. The chain was initially known as Thrift D Discount Center. The discount store did not open a pharmacy until 1966—at which point the concept began to shift from a five-and-dime model to what we know today as the modern drug store.

Thrift D Discount Centers grew to five neighboring states in the Northeast by 1965. In 1968 they changed their name to Rite Aid and went public.

When I am advising small to medium chains that are contemplating going public that it is a potential deal with the devil whenever a solidly run retailer gets in bed with either Wall Street or private equity to fuel growth. It’s not just an issue of loss of control—though founders being run off from the chains they launched is nothing new. It’s that when you own and operate a business, you have skin in the game. It is the means and the end. Once you become someone else’s investment you are now just a means to an end. And if there is one thing that Wall Street and private equity is good at, it is figuring out the easiest way to make money off a business—whether that is growing it or dismantling it.

Of the roughly 400+ retail and restaurant chain bankruptcies that occurred between 2000 and 2019, 60% included chains that had been purchased by private equity owners via leveraged buyouts where the money to buy them was borrowed and then put on their own balance sheets to pay back. Meanwhile, Wall Street pressure for returns is one of the factors that kept retailers’ hands tied behind their backs in the 2000s and 2010s in terms of the kinds of investments in eCommerce and shifts they needed to make to stay relevant. Amazon gets all the blame for the retail carnage of those years, but I would argue any day of the week that private equity and Wall Street have put more chains in the retail graveyard than Jeff Bezos could have ever fantasized about at his peak.

But, back to Rite Aid…

The drugstore landscape of the time was quickly evolving from local independents to emerging regional and semi-national chains like Rexall. Rite Aid quickly became one of those emerging players; almost immediately after going public they bought the 31-store South Carolina unit of Fays Drug.

In 1970 they bought the 16-unit Fountain Chain in Virginia. In 1976 they bought the 52-unit Keystone Centers. More acquisitions followed in 1979 and by 1981 they were the third largest drug store chain in the US. They entered the Michigan market in 1984 with a slew of independent and small regional chain acquisitions. In 1987, they bought the Cleveland, Ohio based chain Gray Drug. In 1988, they landed in Kentucky with the purchase of 39 drug stores and 20 dry cleaning stores from the Begley Company. Then, they bought the 356 store Gray Drug Fair chain from its owner at the time, Sherwin Williams. The next year they purchased the 114-unit Lane

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TOP TEN RETAIL STORIES OF THE WEEK

1 The Incredible American Consumer Financial Times 9/4

2 Real Estate Investing is Down But Not Out Kiplinger 9/3

3

Divide Between Retail’s Winners and Lowers Will be Stark This Back to School Season

CNBC 9/1

4 Employers Added 187,000 Jobs in August but Unemployment Climbs to 3.8% CBS News 9/1

5

Neiman Marcus & Saks Reportedly in Merger Talks Costar 8/28

6

WSJ: Rite Aid Prepping for Bankruptcy That Could Limit Opioid Lawsuit Impact Retail Touchpoints 8/28

7 Rite Aid Reportedly Preparing Chapter 11 Filing Retail Dive 8/28

8

The QSR 50: Fast Food’s Leading Annual Report QSR Magazine 8/28

9

Retailers Bet Wrong on America’s Feelings About Stores The Atlantic 8/26

“What we call the future is the shadow that our past projects in front of us.”

–Marcel Proust

THE GALLELLI GAZETTE Retail Roundup

TOP ECONOMIC STORIES

Why a September Unemployment Rate of 4.0% Will Signal a Recession

Seeking Alpha 9/3

Why the Unemployment Rate Went Up in August Even as 187K Jobs Were Created

CNN 9/1

How Inflation is Expected to Affect Holiday Shopping Chain Store Age 9/1

There’s a New Looming Pressure on Consumers: Student Loan Repayments

Winsight Grocery Business 8/31

Biden Administration Wants to Raise Threshold for Overtime Pay

Winsight Grocery Business 8/30

Yelp: US Businesses Opening at a Record Pace

QSR Magazine 8/29

Consumer Confidence Edges Lower…

Costar 8/29

Gloomy US Retail Outlook Dulls Hopes of Strong Holiday Season Spending

Reuters 8/23

Record Levels of Household Debt: ‘Not to Worry’

Globe Street 8/22

TOP RETAIL REAL ESTATE TREND NEWS

Net Lease Makes a Reset

Globe Street 9/5

If Retail is Flourishing, Why Are There No Large Deals? Globe Street 8/31

Maybe Secret Distress is Behind CRE Market Performance

Globe Street 8/29

This Firm Suggests Property Sellers May be Gaining More Bargaining Power Globe Street 8/29

Restaurants Have Become Attractive Acquisition Targets

Globe Street 8/28

Retail Demand Keeps Rising But at Much Slower Pace

Costar 8/25

Owners Need Creativity, Adaptation and Capital to Keep Malls Alive in 2023

REBusiness Online 8/25

Why You Should Add Net Lease Cannabis to Your Real Estate Portfolio

Globe Street 8/24

Retail Sector on its Way to Becoming Darling of Commercial Real Estate Market

REBusiness Online 8/24

Discount Grocers Bag Increased Share of Foot Traffic

Costar 8/23

BUYERS AND SELLERS

Phillips Edison Acquires New Center in Texas

Retail & Leisure International 9/5

Terra Sells Pembroke Pines (FL) Center for $65M

REBusiness Online 9/5

Unibail-Rodamco-Westfield Sells Westfield Valencia Town Center for $199M to Centennial

Fashion Network 9/5

London Firm Looks to Sell Magnificent Mile Property

Costar 9/1

Jewel Capital Sells SanTan Gateway North Shopping Center in Chandler AZ for $26.6M

REBusiness Online 9/1

Private Investment Group Buys Former Sears in Happy Valley (OR) for $6M

Costar 8/31

Big Lots Completes Store Leasebacks, Takes Decisive Actions to Lower Costs

Retail Dive 8/29

Kimco Realty to Boost Grocery-Anchored Portfolio w/RPT Realty Acquisition

Winsight Grocery Business 8/28

Venture w/$1B+ Buying Power Nabs Grocery-Anchored Center in Georgia for $178 PSF Costar 8/28

Kimco Buys Stonebridge at Potomac Town Center in DC’s Largest Retail Deal of the Year (So Far)

Costar 8/25

RETAIL DEVELOPMENT HIGHLIGHTS

How Mixed-Use Development is Shaping the Future of Real Estate & Community Living Off Plan Property Exchange 9/3

Brookfield Properties Offers Manhattan West Update Retail & Leisure International 8/31

Demolition Begins at Springfield’s (MA) Eastfield Mall, Clearing Way for Retail Rebirth Mass Live 8/31

Surfing Anchored Mixed-Use Development Could be in Works for Land-Bound Nashville, TN Nashville Business Journal 8/30

Northbrook Court Development’s Approval on Track for Brookfield’s Re-Imagined Mall Chicago Daily Herald 8/30

Simon Ready to Begin Mixed-Use Brea Mall Revamp Connect CRE

Golden Bear Center Trades in Columbus, Clears Way for Mixed-Use Redevelopment Costar 8/28

San Francisco Aims to Score With Plans to Convert Downtown Mall Into Soccer Stadium Costar 8/25

Developer Breaks Ground on Mixed-Use Center Near Phoenix’s New Semiconductor Plant Costar 8/22

RETAIL AND CONSUMER TRENDS

Goldman Sachs Chief Economist: US Consumer Won’t Break in 2024 Yahoo! Finance 9/5

Pavement Patterns: Checking in on US Mall Foot Traffic Trends from Q2 Blooloop 9/4

Why Consumer Confidence is Dropping When the Economy Looks so Strong Barron’s 9/3

Affordable Luxury Sales Gets Caught in Middle-Tier Crunch PYMNTS 9/3

Are Americans Better Off Shopping Luxury Retail in Europe? Retail Wire 8/31

Christmas Creep Has Retailers Seeing Signs & Shoppers Feeling Anxious CBS 8/30

THE GALLELLI GAZETTE Retail Roundup

Mixed Picture for Retailers as Bargain Hunting Shoppers Pick Their Spots

Reuters 8/29

Stolen Profit: Retailers Step Up Efforts to Thwart Theft Costar 8/29

Retail’s Two-Track Approach to the Holiday Shopping Season Business of Fashion 8/27

Top Retail Trends in 2023 TWICE 8/22

SUPPLY CHAIN/ECOMMERCE/OMNICHANNEL/TECH

Luxury Shoppers Area Slow to Convert but Demand Digital Innovation PYMNTS 9/5

Tech Challenges and Innovations in Luxury Retail CityLife CapeTown 9/5

SpartanNash Leveraging AI Technology to Predict Shopper Demand and Decrease Waste Cision PR Newswire 9/5

August’s Coolest Retail Technology Plays Retail Tech Innovation Hub 9/4

Tech Investments Key to JCPenney’s $1B Reinvestment Plan Retail Leader 9/1

Crate & Barrel Unveils AI and Customer Focused Growth Plan Chain Store Age 8/31

Grocers Prioritize Pickup to Meet eCom Demand While Protecting Margins PYMNTS 8/30

Walmart’s Drone Deliveries Aim to Fly Groceries to Shoppers’ Homes at 65 MPH Costar 8/25

The End of D2C As We Know It: Enter Direct-to-Retail Retail Touchpoints 8/25

NORTH OF THE BORDER

Magic Mushrooms Are Still Illegal in Canada. How Can Stores Be Opening? Global News Canada 9/4

Marche Tradition Familie Groleau Opens in Quebec Global News Canada 9/4

80-Unit Mr. Pretzels Chain Expands Beyond Malls (Adding 10) in Canada Global News Canada 9/4

Metro Workers Approve New Contract—Toronto Grocery Strike Over Supermarket News 9/1

London ONT. Rona Location to Close This Fall CTV News 8/31

Choices Market Opens New Store in Parksville BC Parksville Qualicum Beach News 8/31

LL Bean Makes Quebec Debut CTV News 8/25

Signs of Consumer Weakness Emerge in Canada Despite Retail Gains

Bloomberg 8/23

Indigo Opens New Store in Toronto That Offers Shoppers Booze While They Shop CTV News 8/23

Statistics Canada Reports Retail Sales Up 0.1% in June at $65.9B

CTV News 8/23

EXPERIENTIAL RETAIL REVIEW

Podcast: M&M’s Builds its Experiential Retail Strategy WARC 9/2

Chanel’s Diner: Where Customers Don’t Go For Food PYMNTS 9/2

Summer is Prime Time for Experiential Retail Globe Street 9/1

Tesla-Themed Diner Gets Approval to go Forward in Hollywood Retail & Leisure International 8/31

World’s First Sports Illustrated-Themed Restaurant Opens in Vancouver BC Retail & Leisure International 8/30

Museum of Ice Cream Coming to Boston’s Seaport Costar 8/30

Retail Roundup

(article continued from page 1)

Drug chain of Ohio, the 99-store People’s Drug Stores followed. In 1992, following the Savings and Loan recession, the chain attempted to purchase the 2,000+ store Revco Drug Store chain out of bankruptcy— though their bid didn’t succeed. They would next acquire the Hook’s Drug Store and Perry’s Drug Store chains in 1995.

But 1995 is probably more notable because that is when founder Alex Grass stepped down and was succeeded by his son, Martin Grass. Martin was born in 1964 and, after graduating from the University of Pennsylvania and earning an MBA from Cornell, he went to work for his father. In 1989, at the age of 25, he was arrested for attempting to bribe a member of the Ohio state pharmacy board to step down in exchange for $33,000. He was ultimately acquitted when a judge ruled that the evidence was circumstantial. Despite this scandal, he ascended to the role of CEO in 1995 at the age of just 31.

BEHIND RITE AID’S LONG BOUNCE ALONG THE BOTTOM

By this time, the chain was already 15 years into a growth cycle that had been fueled by acquisitions more than organic growth. The younger Grass wanted to keep it going. With each acquisition announcement, the stock price kept growing. Did it matter to shareholders that most of this growth was fueled by borrowing? Did it matter to investors that the company’s debt-load had already been growing exponentially? Or that growth via acquisition meant the challenges of endless corporate integration, as well as lots of locational redundancies? Not really. Not when organic growth via new store development—though usually cheaper and almost always far more strategic, simply takes too long. Anyway. does anything matter to Wall Street if they’re making a buck right this second? And this was a chain on the come up. After all, this new vibrant, young CEO had his father’s touch merged with the Wall Street mindset of the 1980s. He even flew to work each morning in his own company helicopter!

In 1996, Rite Aid makes its largest purchase yet… the 1,000 + Thrifty Payless chain on the West Coast (incidentally, this is where many of Rite Aid’s larger format units came from—Thrifty stores were often 40,000 SF or more—featuring their trademark ice cream counters. In 1999, the chain allied itself with GNC, with the vitamin and supplements company opening pop-ups within Rite Aid stores. This $1.5 billion deal was financed through short-term borrowing to fuel growth to prop up stock prices and shareholder wealth… but all that borrowing was about to catch up with Rite Aid.

The bills on past acquisitions were already substantial. Martin Grass’ moves to continue growth via acquisition spree only added more debt to the fire. Suddenly the chain was struggling to make payments on its debt service. So, Grass started manipulating the books to make revenue and profits look higher than they were. He booked income prematurely and extended the period over which assets were depreciated. He incorrectly recorded payments for medicine ordered but never collected. He even came up with fake contracts including his brother-in-law’s firm to create bogus revenues that did not exist. All had the intended impact of keeping the stock price growing… temporarily.

But eventually the gap between reality and the company’s bogus financial grew so big that in October 1999 the FTC intervened—forcing the company to restate its earnings between 1997 and 1999. This also meant that guidance for future profits had to be restated. Rite Aid’s stock prices plummeted by over 75%. Grass was forced to resign. Later it would be found that even after he quit, he colluded to forge backdated documents giving several Rite Aid execs generous severance payments on their way out. Later on, at least one civil lawsuit against Grass would also accuse him of an embezzlement scheme in which he had planned to sell off numerous non-retail assets of the company and divert the funds to a slush fund he personally controlled. Investigators would eventually reveal that Grass inflated the chain’s profits by $1.6 billion between 1997 and 1999. Their share price of $54 in early 1999 fell to less than $10 by the end of the year, wiping out more than $40 billion of the company’s value. At one point in 1999 as news of the scandal roiled markets, Rite Aid stock was selling for a quarter. Yeah, just $0.25 a share.

In 2002, the Justice Department would file fraud charges against Grass. In 2004, he was convicted and sentenced to eight years in prison. He would eventually serve about five years of his sentence and was released in January 2010.

The fact the chain survived that scandal without declaring bankruptcy is amazing. The repercussions of those days have hung like an albatross around Rite Aid’s neck for the past 25 years—though somehow the chain has survived to this day. Yet, what is likely going to drive it into bankruptcy now? Opioid lawsuits.

Issue No. 11 | September 6th, 2023

Now don’t even get me started on this one. According to the CDC, 645,000 people died from opioid overdoses between 1999 and 2021. There have been no jail sentences for any of the pharmaceutical manufacturers that were involved in bringing Oxycontin to the marketplace—though the evidence is overwhelming that the FDA approval process was manipulated by Purdue Pharma to make sure no one bothered to investigate their false claims that the drug was non-addictive. In fact, the only people who have gone to jail for the opioid crisis have either been the addicted, and a handful of doctors and pharmacists. No one from Purdue Pharma went to prison—they instead reached a settlement of their opioid claims of more than $6 billion. Incidentally, Purdue has made more than $35 billion from OxyContin—most of which has not been paid as the settlement continues to face ongoing legal challenges—including an ongoing Supreme Court review.

But back to Rite Aid…

Assuming the chain does file bankruptcy—and that is a safe assumption—it will be to follow the Purdue lead. A filing will delay the opioid lawsuits first, then it will make it easier for the chain to consolidate the claims and resolve them all at once likely with a far lower price tag.

The irony of Rite Aid’s precarious finances of the past 25 years is that they were literally borne of fraud. Then, for the next 20+ years, under the burden of all that debt, the chain did walk away from its obligations. Ethically, they did the right thing, and they did not declare bankruptcy. Business-wise, they probably should have. They would have likely emerged with a better balance sheet and capital they could have used to reinvigorate their concept. But now that they are almost assuredly going to file, it’s to mitigate the looming impact of opioid settlements. It’s to lessen the damage of another fraud. This one a deadly one perpetrated by a pharmaceutical company that has—to date—only received a modest wrist slap while lesser players in the opioid crisis have consistently been held to greater account.

Back to Rite Aid—will this be lights out for them? Probably not. But it is nearly a given that in the Chapter 11 process, the chain will review their store portfolio and use the bankruptcy to get out of leases for underperforming or possibly even just modestly performing stores. They have not made any announcements yet, but I could easily see that the number of store closures coming our way as being up to one third of the chain—or as many as 700 stores. If that happens, the market is looking at nearly 10 MSF of space on both coasts to backfill. With both Walgreens and CVS are in contraction mode (each are looking to close about 300 units each this year), that means that other drug stores are not likely to take this space. Geographically, the hardest hit states for space givebacks will likely be California and Pennsylvania. If there is good news here it is that retail availability and vacancy rates are currently at 20-year lows (the fact that very little shopping center space has been built in the last 15 years is a hugely positive factor behind this). The question is who is looking for space in the 10,000 SF to 20,000 SF range that could be a suitor?

The good news is that a lot of concepts are. Here are some that I am aware of that want to add at least 20 additional units over the next year; Michael’s, Harbor Freight, Grocery Outlet, Tractor Supply, ALDI, Lidl, Trader Joe’s, ULTA, Dollar Tree, popshelf, and Five Below would be the biggest name concepts that are both in growth mode and for which a 14,000 SF former drug store might potentially be close enough to their preferred store footprints as to work.

Regardless, it’s likely that the best locations of any vacated stores will lease quickly so long as current market conditions hold. But some of the space may prove challenging. I suspect in areas where Rite Aid still has some larger footprint stores (mostly the former Thrifty locations), that those may be among the units they may walk away from. This could be a good thing as their 14,000 SF prototype is likely smaller than most small format grocers would consider, while spaces in the 30,000 to 40,000 SF range open up a while new category of potential new tenant.

Though I don’t see this potential outcome as being a serious challenge to the current momentum in the retail marketplace, I also do not want to sugarcoat it. It’s certainly bad news for Rite Aid’s employees who will—no doubt—see layoffs. And it is going to create some short-term challenges for landlords. But at a time where leasing volume has increasingly been challenged not by lack of demand but by a lack of available product, these challenges are likely to be modest.

By the way, if you want more fascinating reading or watching regarding the opioid crisis, there are links on this page to some amazing documentaries, and I also cannot recommend enough the Hulu series, Dopesick. In terms of podcasts, American Scandal did a great one called Opioids in America/The Cure for Pain as well as the amazing “legal podcast (not just) for lawyers,” Bankruptcy for Billionaires, which details the Purdue Pharma case.

THE GALLELLI GAZETTE Retail Roundup

Museum of Illusions Las Vegas Celebrates Official Opening

Cision PR Newswire 8/30

Upscale Bowling Lanes, Pier Pins, Roll Into NJ’s Shore Pier Village Costar 8/29

Hamilton OH Escape Room, Escape Goatz, Opens Journal-News 8/22

HIGH STREET HAPPENINGS

Pakistani Fashion Retailer Khaadi to Open 1st US Store at Tysons Corner Washington Business Journal 9/5

Brilliant Earth Makes Mall Debut at 3 Malls Across USA

Retail & Leisure International 9/4

More Than a Dozen Luxury Retail Stores Open this Year in Vegas

Las Vegas Review-Journal 9/2

Yohji Yamamoto Plants Concept Store in NYC WWD 9/1

Breitling Opens New Boutique in NYC’s Meatpacking District WWD 9/1

Crate & Barrel Unveils Growth Plan

Retail & Leisure International 9/1

The Body Shop: Highs and Lows of an Ethical Beauty Pioneer Fashion Network 9/1

Australian Brand Frankie4 Footwear to First Open US Flagship in Seattle Suburb

Retail & Leisure International 8/31

Fred Segal on Major Push to Expand Stores in US and Around the Owrld WWD 8/31

Clothing Retailer Cotton On Opens Manhattan Store

Retail & Leisure International 8/29

What to Watch: Printemps NYC Venture WWD 8/29

Apple Store Launches Show Down as Focus Moves to Refurbishment Apple Insider 8/28

Maria Shriver’s MOSH Secures $3M for Retail Expansion Retail Insight Network 8/24

The Most Important NYC Store Openings in 2023 L’Officiel 8/24

RETAIL CHAIN STORE OPENINGS AND GROWTH

Five Below to Add 200 New Stores

Retail & Leisure International 9/5

State Forty Eight Expands Presence w/4th Store in Phoenix Metro AZ Big Media 9/5

Tennessee-based Tractor Supply Has Huge Expansion Plans. Here is Why… The Tennessean 9/5

Primark Opens New Chicagoland Store Next Month

Cision PR Newswire 9/5

Alabama Sports Apparel Brand Tom Beckbe Opens 3rd Store in Mississippi’s Oxford Square Alabama.com 9/3

Construction Coming Along for Colorado’s First Buc-ee’s

What Now Denver 9/2

Lululemon Increases Store Opening Plans as Sales Climb 18%

Retail Dive 9/1

Copenhagen Imports to Relocate Austin Showroom to Larger Space

Costar 8/31

JC Penney Announces $1B Turnaround Plan

Retail Dive 8/31

Dollar General Set to Open Nearly 1K New Stores Despite Profit & Margin Declines

Retail Dive 8/31

Buc-ee’s Plans to Open New Wisconsin Site

CStore Decisions 8/30

60-Unit Pure Hockey Opens 11.3K SF Store in New Jersey

REBusiness Online 8/30

Academy Sports + Outdoors Enters Indianapolis Market

Retail & Leisure International 8/29

PGA Superstore Opens First Richmond VA Store

REBusiness Online 8/29

Gabe’s Opens 76K SF Store in St. Charles MO

REBusiness Online 8/28

Nordstrom Pushes Ahead with Rack Expansion Despite Declines

Retail Dive 8/26

Homesense Opens 6 Stores S Far This Year

Retail Leader 8/26

Winn-Dixie Opens in-Store Party City Department

Retail Dive 8/25

Petco Expands Veterinary Hospitals

Costar 8/24

Love’s Unveils New Sites in Colorado & Texas

CStore Decisions 8/24

Ace Hardware Plans to Open More Than 170 Stores This Year

Retail Leader 8/23

Kohl’s Cautiously Plots Expansion w/Smaller Stores

Costar 8/23

THE GALLELLI GAZETTE Retail Roundup

Issue No. 11 | September 6th, 2023

Macy’s to Open 4 Smaller Format Stores in Northeast & West

Retail Leader 8/23

Dick’s Sporting Goods Adds to House of Sport Store Roster on Way to 100 Planned Units Costar 8/22

BJ’s Wholesale Club to Open 3rd Club in Tennessee

Retail Leader 8/22

THE GROCERY AISLE

Pennsylvania ShopRite Opens

Specialty Food 9/5

Aldi Invests in Bigger Stores as Consumers Seek Discounts PYMNTS 9/3

Local Grocer El Rio Grande Latin Market Opens 5th Dallas Store

Winsight Grocery Business 8/31

Island Pacific Supermarket Goes Head-to-Head w/H Mart

Progressive Grocer 8/31

135+ Unit Fareway Opens New Store in LeClaire, IA

Winsight Grocery Business 8/30

East Chattanooga TN Food Desert Gets Oasis with IGA Store Opening Local 3 News Chattanooga 8/30

Save A Lot Unveils 2 New England Store Remodels

Progressive Grocer 8/30

Fresh Market Will Open 22 Stores in Next 2 Years

Retail Leader 8/29

Why Both ALDI and Lidl Pose a Threat to Grocers Across the US Progressive Grocer 8/29

FoxTrot Opens 4th Austin Location

Winsight Grocery Business 8/28

Grocery Outlet to Open 1st Las Vegas Store

Winsight Grocery Business 8/25

Sprouts Adds 10 Stores in Next 3 Months

Retail Leader 8/25

ShopRIte of Drexeline to Open Next Friday in Drexel Hill, PA

Winsight Grocery Business 8/24

Aldi to Open 3 Stores This Week; Edges Closer to 2,400 US Stores

Winsight Grocery Business 8/23

Lidl, the Discount Grocery Store, is Opening in The Bronx

Timeout 8/21

FOOD HALL NEWS

Instead of the Mall, Crawl at Three Cool LA Food Halls LA Times 9/2

H Mart Opens in West LA LA Times 9/2

Commas Food Hall Expected to Open in Silver Spring MD by End of Year Source of the Spring 9/1

DC’s Massive New Downtown Food Hall, The Square, is Opening September 5th DCist 9/1

Love, Makoto Writes a Food Hall Size Mash Note to the Tastes of Japan Washington Post 9/1

As New Orleans Food Hall Flounders (St. Roch Market), One of Its Vendors Seeks to Take Over Eater NOLA 8/31

Durango’s Casino ‘Eat Your Heart Out Food Hall’ News 3 Las Vegas 8/30

This Acclaimed SF Food Hall Helped Low Income Chefs. What do They do When it Closes? San Francisco Chronicle 8/30

Uptown Charlotte NC Food Hall Announced First Tenants WSOC-TV 8/30

How Michelin Level Cuisine Entered the Food Hall Landscape

Tasting Table 8/29

FOOD & BEVERAGE

21-Unit Hickory Tavern Eyes Growth

Nation’s Restaurant News 9/5

Surfin’ Chicken Opens Maiden Location in Yuma, AZ

Verdict Food Service 9/5

180+ Unit Sweetgreen Adds Sixth Colorado Restaurant

9 News 9/4

PJ’s Coffee Opens 3 Stores in US (w/another 13 to come before EOY) Verdict Food Service 9/4

330+ Unit Shipley Do-Nuts Coming to Colorado Springs What Now Denver 9/2

Checkers and Rally’s Exoand Georgia Footprint

QSR Web 9/1

Tapville Social to Open 5,300 SF Restaurant in Pittsburgh

REBusiness Online 9/1

DC-Based Neapolitan Pizza Chain Pupatella Looks For Local Growth

Nation’s Restaurant News 8/31

McAlister’s Deli Expands in Centerville, OH QSR Magazine 8/31

Bobby Flay’s Burger Restaurant at Phoenix’s Sky Harbor Airport Opens

Phoenix Business Journal 8/31

Qdoba Expands in Maryland

Verdict Food Service 8/31

Layne’s Chicken Fingers Refranchises 3 Units in Texas; Looks to Grow Territory

QSR Web 8/31

Angry Chickz Opening in Thousand Oaks, CA

QSR Magazine 8/31

Zaxvy’s Heading to Phoenix for the First Time

QSR Magazine 8/30

54-Unit Foxtail Coffee Brews Up Experiences; Wants 300 Units by 2028

QSR Magazine 8/30

Dave’s Hot Chicken Projected to Have 170 Stores by Year End

QSR Magazine 8/29

Bad Daddy’s Burger Bar Opens in Madison AL

RNR Restaurant News 8/29

TAG Restaurant Group to Open New HashTag Boozy Brunch Joint in Colorado

FSR Magazine 8/29

Capital Tacos Makes Northeast Debut w/Most Recent Deal in NJ

Nation’s Restaurant News 8/28

THE GALLELLI

Retail Roundup

Krystal’s Laubches Refranchsiing Program As it Looks to Open 200 Units in the Next 3 – 4 Years

Restaurant Dive 8/28

Lazy Dog Opens 1st PA Restaurant at King of Prussia Mall

Philadelphia Business Journal 8/27

24-Unit Buddy’s Pizza Charts Growth w/New CEO

FSR Magazine 8/25

Rock N Roll Sushi Comes to Kenner, LA

FSR Magazine 8/25

20+ Unit Cookie Co. Opening New Store in Kansas City—Wants 100 by 2026

QSR Magazine 8/25

Marco’s Pizza Targets 1,200 Units Restaurant Dive 8/24

Subway Plans to Pump Up Global Expansion w/New Owner Costar 8/24

Another Broken Egg Café to Make Maryland Debut FSR Magazine 8/24

Italian-Style Tapas Concept Pelato Opens in Nashville TN

FSR Magazine 8/24

Slice House by Tony Gemignani Opens in SoCal Pizza Marketplace 8/23

Pretzelmaker to Rebrand and Remodel Stores

QSR Magazine 8/23

95+ Unit Robek’s Has 45 Units in Development and is Ramping it Up Further

QSR Magazine 8/22

6-Unit Colorado-Based Yampa Sandwich Company Eyes Utah Expansion

QSR Magazine 8/22

JINYA Ramen Bar To Open Topanga, CA Flagship

FSR Magazine 8/22

Jars by Fabio Viviana is Dessert Concept That Could Be Coming to Town Near You QSR WEB 8/22

Anchor Bar, Inventor of the Buffalo Wing, Opens First of Multiple Northern VA Locations RNR Restaurant News 8/22

LOCAL MARKET NEWS

Phoenix Registers Record Low Retail Vacancy Rate

Chain Store Age 9/1

Available Retail Space in Louisville at Historic Lows Costar 8/31

More than a Dozen Luxury Retail Stores Open This Year in Las Vegas

Las Vegas Review-Journal 8/31

Retail Leasing Flattens in DFW Due to Lack of Available Space Costar 8/31

San Antonio Retail Space More Expensive Than National Average Costar 8/30

Los Angeles Retail Evolves as Tenants Reign Supreme REBusiness Online 8/29

Limited Availability of Retail Space Dampens Boston Leasing Activity Costar 8/29

Join me in Atlanta in two weeks for the 2023 CREW National Convention! And see my keynote: Retail 25: Opportunities and Challenges at the Quarter Century Mark! Only a few years ago many, if not most, of the headlines about shopping centers were decrying, “Retail Apocalypse.” Bloomberg even launched a game on their website. “The American Mall Game,” where players were charged with saving a dying shopping center, complete with real mall rats. And that was before the challenges of a global pandemic. Yet, only a few years later, the retail sector has emerged as the darling of commercial real estate.

Of all the commercial real estate property types, retail is the most challenging to understand because it moves the fastest. It must. In the digital age consumer tastes are evolving faster than ever before. But it also means that retail has a short memory… maybe too short. In this informative and entertaining session, I will explore and detail where retail is today, versus where it was and share where he thinks the opportunities and the challenges of tomorrow are.

THE GALLELLI

Retail Roundup

Florida Has 5 of the Top 12 Markets for Retail Rent Growth

Costar 8/29

As Retail Rents Flourish in Philadelphia’s Suburbs, Center City Stalls

Costar 8/24

RETAIL CHAIN STORE CLOSINGS AND CONTRACTION

Veggie Grill Closed Nearly Half Its Stores to Protect its Future, CEO Says Restaurant Dive 9/5

Michigan C-Store Chain Mega Co-Op Filing BK; Closing 13 of 31 Stores

The Sun 9/4

Moe’s Southwest Grill Shuts Down 7 Indiana Units

The US Sun 9/2

Save A Lot Closes in Birmingham AL Neighborhood Shifting to Food Desert

WVTM 9/1

On the Latest Bartell Drugs (Rite-Aid Owned) Closure in Seattle Brings it to -6 on the Year

Seattle Times 9/1

Mitchell Gold + Bob Williams Closing

Washington Business Journal 8/31

Kentucky-Based 10-Unit QSR Chain Green District Files Chapter 11 Local 12 Cincinnati 8/28

Rite Aid Reportedly Preparing Chapter 11 Bankruptcy Filing

Winsight Grocery Business 8/25

Southeast Chain Fatz Café Closes All 18 Stores

FSR Magazine 8/24

Tip Top Tux Files Chapter 7; Closing All Stores

WOW TV 8/22

M&A MANIA

Body Shop’s Owner Sells Aesop to L’Oreal Retail Leader 9/1

Authentic Brands Closes Boardriders Deal, Now Worth $29B+ WWD 9/1

Maverik Completes Purchase of Kum & Go C-Stores; Doubling Footprint

Costar 8/29

A Closer Look at Kimco’s Acquisition of RPT Globe Street 8/29

Instacart Files Plans to Go Public Retail Dive 8/28

After Selling Off Aesop, Natura & Co Considers Selling The Body Shop Retail Dive 8/28

Neiman Marcus & Saks Reportedly in Merger Talk, The Body Shop May be Sold Costar 8/28

Kimco & RPT to Merge in $2 Billion Deal Costar 8/28

Jimmy John’s Owner Roark Buys Subway for $9.6 Billion Retail Leader 8/25

Rolex to Buy Luxury Watch Retailer Bucherer Retail Touchpoints 8/25

Garrick H. Brown

Gallelli Real Estate gbrown@gallellire.com

(916) 789-3324

ABOUT THE WRITER

Garrick Brown is one of the leading real estate analysts in the United States; he is a 25-year industry veteran analyst and thought leader in the space, as well as an experienced manager of large, national teams of researchers. He has a strong background in all the commercial real estate product types, though for the last 15 years he has primarily been known for his work in the retail space.

Garrick is regularly quoted on real estate, retail and economic matters by the Wall Street Journal, the CBS Evening News, NBC News, CNBC, National Public Radio, Women’s Wear Daily and dozens of Business Journals and other industry publications.

Mr. Brown is a major business influencer; he has over 21,000 followers on LinkedIn, where he regularly posts economic and commercial real estate commentary to an audience consisting primarily of brokers, retailers, developers, site selection professionals, appraisers, lenders, investors, private equity, economic development professionals and business media.

Garrick also produces a regular podcast, The Retail Grind, with Bill Yanek, the CEO of ConnexFM (North America’s largest facilities management trade group), where he explores the latest economic, retail and real estate news.

Mr. Brown is frequently asked to contribute to major industry publications. He authored the retail real estate portion of the 2023 edition of the Urban Land Institute and PriceWaterhouseCoopers’ trademark industry publication, Emerging Trends in Real Estate.

Garrick is a renown public speaker on economic, real estate and retail matters. He is known for his dynamic and entertaining speaking style and for his ability to tell the stories behind the data, synthesizing trends and connecting dots beyond the obvious. He regularly speaks to private and academic groups (Baruch College, Florida State University, Harvard Graduate School of Design, UCLA Ziman Center for Real Estate, etc.), and all the major, national commercial real estate-focused trade groups (BOMA, California Bankers Association, CCIM, ConnexFM, CREW, ICSC, NAIOP, Urban Land Institute, etc.).

Mr. Brown currently works as a freelance writer and consultant for a number of private clients. In addition to his public speaking engagements, Garrick frequently advises corporate real estate teams regarding economic conditions, market forecasting, business and brokerage strategies.

His previous experience includes managing Cushman & Wakefield’s retail research for the Americas, as well as managing commercial real estate research functions (all property types) for the Western United States for Cassidy Turley and Newmark. He began his career as a research associate with Grubb & Ellis in Kansas City, Missouri and later managed research operations for Colliers International for the Indianapolis, Indiana and Sacramento, California markets.

Gary Gallelli CEO - Partner gary@gallellire.com

Brandon Sessions Senior Vice President bsessions@gallellire.com

Phillip Kyle Senior Vice President pkyle@gallellire.com

Pat Ronan Vice President pat@gallellire.com

Kannon Kuhn Associate kkuhn@gallellire.com

Kevin Soares Executive Vice President | Partner ksoares@gallellire.com

Matt Goldstein Vice President mgoldstein@gallellire.com

Aman Bains Associate Vice President abains@gallellire.com

Kristopher Krise Capital Markets Advisor kkrise@gallellire.com

Bob Berndt Executive Vice President | Partner bberndt@gallellire.com

Kurt Conley Senior Associate kconley@gallellire.com

Adam Rainey Associate Vice President arainey@gallellire.com

Jeff Hagan Senior Vice President | Partner jhagan@gallellire.com

Robb Osborne Partner rosborne@gallellire.com