Finding A Special Site In A Tough Area

A successful national retail chain contacted Schuckman Realty to secure locations in areas where they were unsuccessful. One such area was in Queens County, City of New York. This area had begun to evolve into a hot bed of retailing. Two national tenants were finding success in locations with little visibility but, where both performed at very high volumes. Directly opposite these tenants, a developer purchased a warehouse that it planned to demolish and rebuild as a 300,000 square foot retail center with rooftop parking. Adjacent to the proposed 300,000 square foot retail center, a national discount retailer had purchased, closed and pulled building permits from the City of New York on a ten-acre site. SRI realized that since little or no opportunity existed, it had to be created.

SRI estimated that this national discount retailer's investment in the project was approximately $25,000,000. Capitalizing on the fact that this national retailer faced cash flow problems and that the cost of the project was quite high, SRI called the discount retailer and offered them an opportunity to sell the property. Simultaneously, SRI suggested that the discount retailer secure an alternative site, which was estimated to produce the same volume but would be constructed partially by the developer of the site. The discount retailer was looking at a potential return of millions of investment dollars without having to surrender the market.

It was Schuckman's assumption that if the developer were to build the discount retailer's shell, the developer's position would be secure in the event the financially troubled discount retailer went out. The tenant would have to complete the facility at an estimated cost of $40.00 per square foot or $4,000,000. The net effect would be that the discount retailer could sell their original project to the retailer Schuckman represented and bank approximately $16,000,000 to $18,000,000 after paying $4,000,000 to complete the alternate site shell.

The deal closed and Schuckman's retailer has opened a new facility while the discount retailer continues their negotiations on the alternative site. Schuckman's retailer's real estate representatives attempted to penetrate this market for several years while Schuckman created the opportunity within a short time of being assigned to the task.

SRI Signs Exclusive Broker and Consulting Agreement

SRI was initially retained by a major regional retail chain to evaluate 18 store leases in response to creditor pressure to file bankruptcy. SRI determined that the leases had little value due to the fact that they lacked sublease or assignment flexibility. SRI suggested a two-phase strategy that required the support of the retailer's creditors and banks. All stores were to remain open and fully-stocked for a minimum of one year while SRI directed potential replacement retailers to landlords to negotiate deals subject to the retailer's demise.

Banking on landlords' desire to profit from their real estate investments, SRI saw that if the retailer's stores stayed open and well stocked, notwithstanding lease limitations, landlords would change their posture from waiting to pursuing. Ultimately, a number of deals concluded, generating substantial sums for this retailer.

As cash was being generated from the sale of certain leaseholds, Schuckman suggested a limited expansion. Instead of building large 70,000 sq. ft. units to compete with a major regional chain he suggested a smaller community-oriented units with very favorable lease terms.

After five additional years and approximately 25 new stores negotiated by Schuckman on very favorable lease terms, the owners are in a much better financial position with significant lease values.