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Wolfe Pack Retail Sales Update | August 2019

August retail sales grew 4.6% year-over-year (unadjusted), and up by 0.4% month-over-month, excluding automobile dealers, gasoline stations and restaurants. 

As of August, the three-month moving average was up 4.1% year-over-year versus 3.5% in July. 

While retail trends continue looking good, tariff talks are having an impact.

“While consumer attitudes about the economy indicate some retreating optimism, the bottom line is that consumer spending remained resilient in August and continued to be a key contributor to U.S. economic growth,” NRF Chief Economist Jack Kleinhenz said. “Trends remain strong, but August grew somewhat slower than July, which could reflect consumers’ concerns about the unpredictability of trade policy. It is too early to assess the impact of the new tariffs that took effect at the beginning of this month, but they do present downside risks to household spending.”’

YOY August Winners (in descending order):

  • Grocery and beverage stores were up 4.9% YOY but down 0.2 percent month-over-month seasonally adjusted.
  • Sporting goods stores were up 3.8% YOY and up 0.9 percent month-over-month seasonally adjusted.
  • Health and personal care stores were up 2.9% YOY and up 0.7 percent month-over-month seasonally adjusted.
  • Clothing and clothing accessory stores were up 2.3% YOY but down 0.9 percent month-over-month seasonally adjusted.
  • General merchandise stores were up 2.2% YOY but down 0.3 percent month-over-month seasonally adjusted.

YOY Losers:

  • Electronics and appliance stores were down 2.9% YOY and unchanged month-over-month seasonally adjusted.
  • Building materials and garden supply stores were down 0.6% YOY but up 1.4 percent month-over-month seasonally adjusted.
  • Furniture and home furnishings stores were down 0.1% YOY and down 0.5 percent month-over-month seasonally adjusted.

Online & Other Non-Store Watch:

  • Online and other non-store sales were up 14.3 percent year-over-year and up 1.6 percent month-over-month seasonally adjusted.

What do you think about the latest numbers and category trends?

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

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Sale-Leasebacks Explained

What are sale-leasebacks?

If you’re a commercial property owner and are looking to expand your business, a sale-leaseback may be an option for you.  A sale-leaseback is when a property owner, who is also an operator, sells their property but continues to operate it by leasing back the property from the new owner.

A sale-leaseback arrangement is useful when a property owner needs or wants to gain access to cash, or wants to divest from a property but maintain the existing operation on the site. The sale-leaseback option will allow the property owner to access the equity in their property and reinvest the funds in the business. The lease agreement is executed at the same time as the sale. The seller of the property becomes the tenant while the buyer becomes the landlord.

SELLER BENEFITS

The transaction allows the business and property owner to increase their liquidity while reducing their debt. In addition, the immediate access to capital allows sellers to:

  • Add additional units
  • Upgrade equipment
  • Invest in marketing, new team members, inventory, etc.
  • Pay off business debt

Plus, the Seller/Operator:

  • Can write off the entire lease payment instead of just the interest on the mortgage
  • Is able to remain in the same location without incurring moving costs
  • Can improve their income statement and balance sheet
    • For example, if the property is sold any existing loan will be removed from the balance sheet
    • Interest and depreciation are also removed from the property owner’s financials
  • Can benefit from a lower cost of funds than debt financing through off-balance sheet financing
    • Since sale-leaseback investors get the tax benefits of owning and depreciating the property, the seller can often be successful in obtaining a lower cost for capital than the cost for debt.

Seller Benefits & Opportunities Snapshot

  • Access to capital
  • Liquidity
  • Stronger balance sheet
  • Tax benefits
  • Lower cost of capital
  • Opportunity to grow your business
  • Reinvest in your business

BUYER BENEFITS

Buyer Benefits & Opportunities

  • The buyer and the seller have the unique opportunity to negotiate the lease with terms that meet their specific needs from the rental rate to a division in management responsibilities
  • The buyer can ask for the opportunity to review the tenant’s financials to gauge their financial health and stability. In the majority of lease agreements already in place at the time of the purchase of a property, the buyer has less negotiating power to request access to financials.
  • The property is already improved to meet the needs of the tenant

Attention Restaurant Owners:

Listen to my conversation with Jim White of Katz Sapper & Miller on how restaurant owners, who also own their properties, can benefit from sale-leasebacks.
This Episode: ‘Grow Your Restaurant’ Podcast with Barry Wolfe of Marcus & Millichap

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

#NetLeasePro #NNN #CRE #Retail #Sale-Leaseback#NetLease #CREInvesting #STNL #BarryWolfe

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1031 Exchanges Explained

1031 Exchanges Explained

What is a 1031 Exchange?

A 1031 Exchange allows you to defer the taxes from a commercial property sale by reinvesting the proceeds from the sale in “like-kind” property, within the specified time frames, potentially saving you tens of thousands of dollars.

There are two critical deadlines that must be met.

Deadline #1: The 45-Day Property Identification Period

Within 45 days of the sale of your property, you MUST:

  • Identify a replacement property in writing to an intermediary, specifying the property you want to acquire.
    • You can identify three potential properties for the exchange as long as you eventually close on at least one of them.
      • The identification of the property must be specific and not ambiguous.
    • As an alternative, the 200% rule allows you to designate more than three properties, which may add up to a maximum of 200% of the exchange value.
  • The proceeds from the sale of the property must be held by a qualified intermediary, also known as an exchange accommodator.
    • To avoid taxes, the total value of the replacement property or properties must be equal to or greater than the relinquished property.  

Deadline #2: The 180-Day Exchange Period

  • You MUST close on the new property or properties within 180 days of the sale of the old or relinquished property.
  • The countdown on both deadlines begins simultaneously when the sale of your property closes.
  • There’s no limit to the number of times you can do an exchange so you only have to pay taxes on the final sale for which you want to realize or cash-out on the gains.

If your debt decreases in the exchange, the difference is treated as income–sometimes called boot–and is taxable as is any cash you may have left over after the exchange

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NOTE: 1031 Exchanges can only be executed with investment and business property, not primary residences.

Q&A

  • What is a like-kind property?  

According to the IRS, properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Real properties generally are of like-kind, regardless of whether they’re improved or unimproved.

 

  • How do I find a like-kind property within 45 days?

This can be tricky, which is why it is recommended that you work with a broker who has expertise in both the type of properties you are looking for and 1031 Exchanges

 

  • Why is broker expertise important?

There are thousands of properties listed, many expired or no longer available. Some have encumbrances or other issues that could delay the process impacting your ability to close or your timeline, or both, not to mention the hours of your own time you’ll have to put in to do the research.  An experienced broker can take all of that stress off your plate and provide you with a fully researched list of viable properties that meet or exceed your criteria.

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

#NetLeasePro #NNN #CRE #Retail #1031-Exchanges#NetLease #CREInvesting #STNL #BarryWolfe

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What Is A Single-Tenant Net-Leased Property?

What Is A Single-Tenant Net-Leased Property?

A STNL Q&A CHEAT SHEET

 

Q: What is a single-tenant property?

A single-tenant property is a freestanding retail, office, medical, or industrial building that is leased and occupied by one tenant, user, or company.

 

Q: What is a net lease?

A net lease is a type of commercial lease between a tenant and property owner where, in addition to paying the rent, the tenant–and not the landlord–is responsible for paying the rent as well as some or all of the building’s operating expenses such as insurance, taxes, maintenance, repairs, and utilities, depending on the type of net lease agreement.

The three most common types of net leases are:

  • Single Net Lease: Tenant pays Rent + Taxes
  • Double Net Lease: Tenant pays Rent + Taxes + Insurance
  • Triple Net Lease: Tenant pays Rent + Taxes + Insurance + Maintenance/Operating Expenses

 

Q: Which one gives me the most freedom?

The triple net lease affords the property owner the most freedom and flexibility.

 

Want to learn more? Watch our video here!

 

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

#NetLeasePro #NNN #CRE #Retail #Single-Tenant #NetLease #CREInvesting #STNL #BarryWolfe

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The Time/Money/Risk Benefits of Triple Net Leases

The Time/Money/Risk Benefits of Triple Net Leases

 

Investors will often hear that there are many benefits to triple net leases but for those who may be exchanging from multi-family, land, or manufactured home parks—or new investors that may have inherited property—the benefits of the triple-net, may not be clear.

A net lease is a type of commercial lease between a tenant and property owner.  The three most common types of net leases are:

  • Single Net Lease: Tenant pays Rent + Taxes
  • Double Net Lease: Tenant pays Rent + Taxes + Insurance
  • Triple Net Lease: Tenant pays Rent + Taxes + Insurance + Maintenance/Operating Expenses

For the purposes of this article we will conduct a Time/Money/Risk analysis on the triple net lease, which is where, in addition to paying the rent, the tenant-–and not the landlord–-is responsible for paying some or all of the building’s operating expenses such as insurance, taxes, maintenance, repairs, and utilities.

TIME:

Freedom

  • The triple net lease, whether on a single-tenant or multi-tenant property, affords the property owner the most freedom in terms of time and flexibility thanks to its hands-off management structure.

Hands-Off Management

  • With NNN properties, landlords can avoid the typical property management obligations and hassles to enjoy more time to dedicate to things they prefer to do. As noted earlier, in a triple net lease, also known as NNN, the tenant pays for and manages all of the building’s operating expenses, real estate taxes, insurance, and maintenance, freeing the property owner from the responsibility and hassle.

Assets That Hold & Grow Value

  • Triple net lease properties often attract corporate-backed credit tenants. Long-term leases with credit tenants allow your investment to grow and weather economic cycles.

 

MONEY:

Steady & Predictable Passive Income

  • Triple net properties allow property owners to receive a steady and predictable stream of income from a reliable source every month with minimal management and attention.

Reliable Source of Income

  • Single-tenant net-leased properties attract an array of corporate-backed credit tenants that provide greater long-term reliability.

Owner-Friendly Leases

  • Triple net leases often have built-in increases that offer opportunities for better planning for both the tenant and landlord, and provide a hedge against long-term inflation risk. In addition, they also often have options to extend in five or 10-year increments.

Defer Taxes at the Time of the Sale

  • When a property owner is ready to sell, 1031 Exchanges allow them to defer the capital gains on the property

 

RISK:

Less Risk

  • Triple net-leased properties tend to offer less risk than other commercial real estate investments that have tenants with non-investment grade credit profiles, although no investment is risk-free.

Longer Leases / More Stability

  • Triple net-leased properties have longer-term leases that provide greater stability and reduce risk and worry.

 

Ready to invest in a triple net property? Contact us at: 954-245-3416.

 

Learn more about NNN and single-tenant net-leased properties. Watch our video

 

 

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

#NetLeasePro #NNN #CRE #Retail #Single-Tenant #NetLease #CREInvesting #STNL #BarryWolfe

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4 Paws Up for Dunkin’ Donuts!

It’s 4 Paws Up for Dunkin’ Donuts!

Dunkin’ Donuts has been on fire lately stepping up to the challenge and firing on all cylinders. They’ve taken their, “BLUEPRINT FOR GROWTH” 2018-2020 initiative to heart  and been mega-strengthening their in-store menu as well as their to-go offerings while staying fresh with topical items. But the fresh, fun, and familiar brand isn’t stopping there. In the past year alone, Dunkin’ Donuts:

 

  • Opened their next gen store that includes a beverage bar tap system with Nitro Coffee and new Double Drive-Thru with the first On-the-Go Lane; kiosk ordering and uniforms designed by Life Is Good

  • Announced they plan to eliminate foam cups by 2020

The chain has also announced it plans on 1,000 net new restaurants by the end of 2020, with 90% built outside the Northeast.

These changes are producing results. Second quarter highlights include:

  • Dunkin’ Donuts U.S. comparable store sales increase of 1.4%
  • 64 net new Dunkin’ Donuts in the U.S.
  • Revenues increased 4.9%

Dunkin’ Donuts has done a great job of playing to win. We think they deserve the Wolfe Pack’s Retail Ratings’ Four Paws Up!  Do you agree? Let us know here LINK to LINKEDIN Post

See our available Dukin’ Donuts property for sale here: https://wolferetailgroup.com/properties/dunkin-donuts-7/

#CRE #RETAIL #Dunkin #Donuts #QSR #Restaurants #Coffee #RealEstate #NNN #STNL #RetailRealEstate #Retailing #RealEstate #Dining #DunkinDonuts

 

Images Courtesy of Dunkin’ Donuts

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Macy’s Gets 2.5 Paws Up!

It’s 2.5 Paws Up for Macy’s!

While Macy’s has gotten a bad rap in the last couple of years, we think they’re on their way to making a comeback. Ignoring the recent data breach, Macy’s has been making an effort to reposition itself and play on at least some of its assets.

For example:

  • They’ve recently started to work more closely with influencers, well-known ones with established followings and even more interesting, using its store employees and stylists as Instagram influencers to drive salesRead more here.
  • They’re extending their store-within-a-store concept to include pop-up marketplaces which are meant to drive traffic back repeatedly to view what’s next, similar to Story which they recently acquired
  • Although they’re still trying to figure this out, Macy’s also jumped into the popular off-price segment by opening Backstage

While they’re stumbling in some of these initiatives, we give them credit for making a go of it and for being willing to fight to stay in the game. They’re choosing interesting trends, tapping into their biggest assets–such as beauty, an audience, and real estate–and seem to have stopped looking back to look toward a brighter future for the brand.

We look forward to your comments on LinkedIn here.

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Walmart Vs. Amazon – The Battle of The Retail Giants

Walmart Vs. Amazon – The Battle of The Retail Giants

What’s their next move?

Post by Barry Wolfe

Did you see this one coming?

Sam’s Club is building a small-format concept that will be “centered on convenience and a digital experience” stocking only 1,000 to 2,000 skus. (Read story here: http://www.supermarketnews.com/retail-financial/sam-s-club-develops-small-format-concept)

On the same day, it was revealed that the company opened the first of its new e-commerce fulfillment centers in Memphis, TN.

Interestingly, both announcements were made by Jamie Iannone, CEO of SamsClub.com and EVP of membership and technology.

I see this as a sign of things to come as e-commerce, fulfillment centers and brick-and-mortar locations merge in an omnichanneling landscape. In so many ways, Walmart is ahead of the game on this one. They have 660 Sam’s Clubs ands 4,672 Walmarts in the U.S. for a total of 5,332 sites. Amazon has 75 fulfillment centers and 412 Whole Foods.

This tells me that Walmart is in an excellent position to achieve penetration across a broader spectrum of markets, those that are e-commerce-friendly to slow adapters, from the coasts to rural areas. And, it also tells me that Amazon isn’t likely to sit by on such an unbalanced equation. They are likely to make a move that will allow them deeper market penetration, faster deployment, and access at a localized level. What will give them that advantage?

My inclination is toward drugstores. They’ve tackled food through Whole Foods, whose consumers mirrored their own customer profile and gave them grocery market entry via a physical location in a demographically-aligned trade area.

Next, would be medicine/drugstores/beauty. I’ve said this before as it gives them entry into a growing market segment (beauty) while gaining a foothold in a recession-resistant category (medical/drugstores). I’m not the only one thinking this is their next move. CVS is rolling out delivery for prescriptions and some over-the-counter medicines as it is said to be bracing for Amazon’s possible disruption. (Read more here: https://www.cnbc.com/2018/06/19/cvs-starts-drug-delivery-as-it-braces-for-expected-amazon-disruption.htmlThe drugstore’s merger with Aetna makes it an even more interesting player as Amazon has been making various supply-side moves.

Interestingly, Walmart just recently filed for several patents including a patents system for accessing medical records stored on a #blockchain, and just last month, Walmart was awarded two patents; one for a digital marketplace system that customers may use to resell items and the other geared towards facilitating customer deliveries to restricted areas using autonomous ground vehicles. Read full story here: https://www.ccn.com/walmart-patents-system-for-accessing-medical-records-stored-on-a-blockchain/

What will be Walmart’s next move? What will be Amazon’s next play?

Let me know your thoughts here: https://www.linkedin.com/feed/update/urn:li:activity:6415976467259224064

 

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Panera Bread Four Paws Up

We’re giving Panera Bread Four Paws Up for their commitment to continuous innovation and evolution while staying true to who they are as a brand.

 

 

As an example of their willingness to innovate, Panera recently grew their omni-channeling capabilities by expanding its delivery program to ~13,000 drivers and employees, up from 10k in 2017, making delivery available from 1,300 locations, in 897 cities, in 43 states using their app or website. 

Delivery is driving their digital sales which currently account for 30% of total sales, including kiosk orders. Unlike other chains that have turned to 3rd party delivery partners, which can take a significant cut (up to 30%!), Panera has developed their own fleet to control the process and profit end-to-end. (Think, pizza delivery but for bakery-cafe set.)

In addition, they’ve extended their technology to include mobile ordering and Rapid PickUp®, have a commitment to 100% clean food, and have one of the largest loyalty programs in the industry with over 25 million members (APR ’17).

As a result, Panera has been one of the most successful restaurant companies in history. Before the JAB acquisition in July 2017, Panera was the best-performing restaurant stock of the past 20 years, delivering a total shareholder return up 86-fold from July 18, 1997, to July 18, 2017, compared to a less than twofold increase for the S&P 500 during the same period.

Panera’s vision isn’t solely focused on technology and delivery.

In late 2017, Panera further enhanced its brick-and-mortar commitment by acquiring Au Bon Pain Holding Co. Inc., parent company of the 304-unit Au Bon Pain bakery-café chain. The acquisition reunites Panera and Au Bon Pain, and enhances Panera’s positioning and growth opportunities in new real estate channels, including hospitals, universities and transportation centers.

Excluding the Au Bon Pain acquisition, Panera grew its brick-and-mortar footprint through franchise and company-owned location growth with:

2017 Franchise-Owned*:

  • Outlets at the Start of the Year:  1,099
  • Outlets at the End of the Year:  1,112
  • Net Change:  +13

2017 Company-Owned

  • Outlets at the Start of the Year:  901
  • Outlets at the End of the Year:  931
  • Net Change:  +30

(*Source: FranchiseChatter.com)

In their last public quarterly report in APR 2017 (the same month in which they entered into an agreement to be acquired by JAB), the company reported that company-owned comparable net bakery-cafe sales increased 5.3%, franchise-operated comparable net bakery-cafe sales increased 0.3%, and system-wide comparable net bakery-cafe sales increased 2.6% compared to the same period in fiscal 2016.

 

Be a part of the Panera success model. See our extraordinary selection of single-tenant Panera properties from across the country here: https://wolferetailgroup.com/available-properties-for-sale/

 

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Amazon’s Next Brick-and-Mortar Move

We can all agree that Amazon has been a trigger in the evolution of the retail landscape. This infographic offers a quick look at Amazon’s acquisitions. We think Amazon’s purchase of brick-and-mortar Whole Foods will not be its only foray into physical stores. It was a strategic move that gives them an advantage into a segment which they can service online and offline to maximize their purchasing power and economies of scale in a category which everyone on the planet buys from: food. Plus, it strengthens its Amazon Fresh division and investment. We predict one of its upcoming brick-and-mortar moves will be into another must-have category: drug, health, & beauty. 

Graphic via The Visual Capitalist and Business Insider

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