Triple net Pier 1 import as tenant

[Alexandre Tude]

Would you buy a triple net with a Pier 1 imports as a tenant with 4 and a half years remaining in the contract? Location is good but my concern is the situation of Pier 1 importa, numbers are dropping so quick that afraid they go bankrupt

[Joel Owens]

I look at about 1,000 a week. It's gets old hearing comments from people with doom and gloom about retail that do not live it and breathe it day to day.

Online IS NOT,IS NOT killing brick and mortar retail.

Online sales used to be about 2% of all sales many years ago. Now it is hovering around 8% total. Only about 4% is online only stores and the rest are simply existing brick and mortar retailers expanding internet marketing to rebalance omnichannel (brick and online) sales. Really big box that are merchandising type stores have been getting crushed for about the last 6 years so nothing new about that to those in the business. Plans have been in place from owners and developers to adapt to the changing landscape a long time ago  for adaptive reuse. There are some areas in mid to cold belt states with limited growth where once a big box goes out it could sit for years and years. The warm belt states experiencing high growth from baby boomers retiring and migrating out of the cold belt states have plenty of retail tenants small and large with expansion plans ready to go in those spaces.

Typical time in most warm belt states to re-tenant and get rent coming in to dark STNL could be anywhere from 3 months to 1 year depending on box size, location, mom and pop versus regional and national tenants who tend to move slower and be more methodical.

We are not moving to a society where people sit at the computer all week long and stay in a house and drop ship 50 packages by drones. People are experiential beings. They like going out to movies, adventure sports, vacations, eating out, etc. Most of the population only wants to stay in their house so many days a week. The rest want to get out and DO STUFF.

WHAT IS a growing trend now is CLICK and COLLECT consumers. So big box retail is starting to have a smaller space at the front of the building like Target or around the side and consumers can order and pick up items and also might do more shopping at the physical store. Physical stores like to use per sq ft for general merchandise high volume mover items and leave more specialty items in the warehouses. So a consumer can have it delivered to the store for a specialty item without worrying when UPS,FEDEX, postal mail comes and whether the item gets stolen and instead pick up the other item as the store while they cross shop. They can also inspect the item before taking it home and if a problem have it handled right there. Online shopping people have liked the process of ordering in general but about 90% can't stand trying to return something. Most of the time you talk to people overseas in customer service departments, the defective item sent back in takes weeks to get to the warehouse or it get's lost at the warehouse etc. It's a huge inconvenience consumers do not like.

There was a new report that came out for (clicks and bricks) that showed when a brick and mortar store closed to go online only revenue dropped by about 40% on average. There are many stores that were online only but now are adding in physical stores (Amazon included) which should tell people brick and mortar is not going away just transforming and updating like any industry across the board in the United States as times change.

Dollar Stores typically have a size of about 10,000 to 12,000 sq ft and pay about 8 to 10 bucks a foot in rent for freestanding unless location is stellar and then I have seen sometimes up to 14 or so a foot in most markets. The Pier 1 I would really want to see the language in the lease for the latest amendment and the original about default provisions and landlord rights. Sometimes if there is language in the lease than the landlord  can remove their property out of the BK filing if tenant tries to add it in.

Additionally is pier 1 a NN lease or NNN? If you the landlord have to replace the roof, a/c units, exterior lighting, parking lot reseal and recoat that could be hundreds of thousands of dollars in cost or more.

Is this a free standing box or is it wedged in between other stores being sold off more like a retail condo?

I would have to see the OM or flyer to really comment on it in detail. These days I have passive investors for my retail projects as a sponsor and then I have clients that buy retail properties with me directly. Contrary to people mentioning retail is not doing well I stay busy around the clock and it is one of the strongest buying markets I have ever seen. Investors are very bullish on retail in fact latest quarter data is retail sales are up about 6% across the board.

Of course you have businesses that did not update in time,their concept is no longer functional in the marketplace, they haven't (right sized) their box requirements to maximize sales per sq ft compared to rent rate, etc. Those businesses likely close up shop but if area and dirt is good then plenty of strong tenants to jump right into the space especially anything 20k square feet and under. The larger box sizes take more time to fill.

In retail you also have buying the retail businesses (merger and acquisitions, buyouts, etc.) but I have no interest in that. I like being a developer, retail syndicator, and commercial principal retail broker that helps clients nationally invest passively with me or buy directly.