Mark Thompson (RTS #26)
Guest: Mark Thompson
Topics: Grocery centers, investing
Chris Ressa 0:01
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management.
Welcome to retail retold everyone. Today I’m joined by Mark Thompson. Mark is the founder of nn and capital and grocery anchored. Mark has been in the commercial real estate industry for the last 20 years. I’m excited to have him on the show today. Welcome, Mark. Thanks, Chris. having me here, buddy. Awesome. Mark, tell us a little bit more about you and what you’re up to these days. Yeah, sure. So I guess the beginning I started commercial real estate, do an Office tenant rep for CBRE in Richmond, Virginia, we tend to rep the Commonwealth Virginia. For two years I was a low man on a three man team, and then got into investment sales. My timing was perfect. I started investment sales in the summer of 2008.
Mark Thompson 1:04
My investment sales career just before Lehman fell, that September, I can remember like it was yesterday. So I started my investment sales career and first deal ever did was a little strip deal. Three tenants actually was one tenant, two of which had blown out. So it’s a three space strip center. So that for $225,000. And then over the course of time over the course of just slugging it out, ended up doing grocery anchored shopping center investment sales. So from 200,200 25,000, the biggest deal we’ve done to date was 112 million Publix portfolio across three different states. So I did investment sales for a while and then got into the tech side of things. We launched grocery anchor.com in 2018. And that’s been a great a great success for us and a lot of fun. And then we we also do stl.com, we got a team of guys that sell single tenants, it just recently acquired triple net.com, which is a lot of fun as well. So we’re really busy. 2020 was a crazy year, as we all know. And in 2021. We’re, we’re glad 2020 is behind us. So you asked me what I’m working on today. Well, we’re working on grocery anchored to point out this year, and also the launch of triple net.com. And we also to add more to it. We also have the internet Academy, which is basically going to teach first time investors how to buy triple net leases, every day is different. But it’s a lot of fun. And I enjoy what we do here at in capital. So thanks for having me again. I appreciate it. Awesome. So nn capital is the primary source of revenue, commercial real estate deals. Is it the tech side? What what’s driving the bus here? Yeah, so it’s we have the tech side, which, you know, I think today is is is fascinating and interesting and ever changing. And then we also, obviously, obviously do transactions. I think over time, the tech will take over the transactions in terms of revenue. But you know, I think with 2020, we actually had a pretty decent year on the revenue side for transactions as well. So our goal is to be more on the tech side. But as we build one point, I want to point out, see what works and what doesn’t work. We’re doing transactions to make sure we have plenty of capital in order to invest in the tech side of things.
And you, Mark, are you focused on running your business? Are you making deals or both? What is what is the day to day of Mark Thompson? Yes. So that’s a that’s a fun, fun question. So
you want to work on the business, not in the business. And so I’m doing everything I can to fire myself from working in the business. We’ve got some great guys here that transact the deals for us. I’ve got brokerage in my jeans, it’s really hard to stay out of it, you know, because I just love transactions. It’s so much fun. But more more or less working on the business right now. So that’s my day to day and doing a lot of coaching a lot of teaching for our younger guys. And then also on top of that, basically running the bus in terms of tweaking grocery your.com and building an n.com as well. And how many how many brokers do you have working for you on the transaction side? Yeah, total. Our total company is right around 18 right now. So we got four, four guys on the transaction side. And then we’ve got about 14 people on the other side of things working on the tech side and we’ve got some outsourcing as well with some some tech guys who are much more sophisticated in terms of programming, that sort of thing. So we’ve we’ve got a pretty decent ship. Awesome. And so let’s talk about the tech side. What are you trying to accomplish with the tech side? What do you what are you doing with the tech right now? What can you do today and what are you trying to do? Yeah, so
grocery.com Just to kind of take a step back, there’s roughly 25,000 grocery stores throughout the country, at any given time, there’s between 507 100 that are on the market for sale. And what we found is that there’s not one place if you’re specifically into the grocery and goods sector, that you can find all of those very, very easily, very, very quickly. And so grocery.com is kind of like, if you think of Panama Costa, like cable grocery.com is kind of like the Golf Channel. So if you’re really into golf, if you’re really into grocery shopping centers, grocery.com is a great resource for you as soon but grocery.com is very simple. We show you every deal that’s on the market, we show you every transaction. And then we also have a news feed that basically goes through and call it distills the real estate news in the grocery sector. So for example, we have I think, we’re approaching 20,000 articles, you can search by, by banner, and see every real estate related newspaper article, it’s out there. So as an example, I think a couple months ago, there was, I don’t know $1.2 million for the cocaine found in a banana box and a grocery store. And I’m like that is as interesting as that is, you know, I don’t think our our subscribers care about that as much as they care about transactions. And they, you know, so every day we’re going through slip and falls and lawsuits, and getting rid of all that stuff, and filtering all that stuff out to distill the 20 to 40 articles that, you know, Chris rest can log on to grocery.com. Within a matter of minutes, I know exactly what’s happening on the real estate side of things. So we’re filtering, we’re filtering the news. And then we’re filtering out all the other kind of ancillary product types that are out there. So you can basically get on and get off very quickly and have your expertise pretty much curated for you in about five to 10 minutes. So it’s a pretty, it’s a pretty simple concept. But you know, it’s kind of like taking a specific channel of costar and distilling that if you’re an expert in that particular business, it helps you out a great deal.
Very, very cool. And the getting to what’s on the market, how are you making sure you have everything on the market? Because it’s not like as transparent as the residential business?
Yes, so we don’t we curate everything ourselves. And we talk with brokers all the time. And obviously, if you’re a broker, you want your products on as many platforms as you can, at least most brokers do. Now, what I shouldn’t say it’s about grocery.com, you have to be a landlord of a grocery shopping center to subscribe. And so that helps us in some ways, it helps us because those brokers that want to showcase their particular version of your shopping center to landlords only, we’re the only platform that they can do that for. And so that interaction with us and brokers, I guess it would accelerate our ability to have a pretty decent coverage at grocery shopping centers that are out there, because we can tell them, hey, look, your grocery shopping center will be exposed to members members only and every member is indeed an owner of a grocery shopping center. So I think that helps us in that regard. And the other thing is we also report comps, comparable sales. And one of the things we don’t do in this, you know, I get this question all the time when we talk about it with prospective customers is we don’t tell you who who bought the shopping center, we tell you what it’s sold for we give you the cap rate and the NOI give you all the pertinent details. And then we tell you who the broker was the broker the deal. And because we do that, a lot of brokers will give us information they will do that deal. Now, there’s customers out there that wish we showcase the buyer, but they’re also happy to see a pretty significant amount of information on the sale comp as a result of that. So if there’s a principal to principal situation, we’ll tell you who the seller was, we’ll tell you, the buyer was and that’s that. And we’ll let them decide whether they want to tell you the buyer wasn’t ideal.
So on a principal to principal, you’ll tell who the buyer is. But when there’s no, when there’s a broker involved, you don’t sell who the buyer is. And what’s the purpose of that,
I think is brokers really appreciate the idea and concept that we’re going to someone has an interest in the deal, how transacted we’re going to guide you to the broker on that the broker that transacted the deal. And because that exchange, we have brokers give us information they wouldn’t otherwise give other services or platforms. So I think you got to be you got to be fair, and you got to look at all the constituents involved, because you can’t just throw information out there haphazardly, and expect to have all constituents be thrilled about that. So that’s what we’ve kind of tried to do to bridge the gap. And I’m a Foreign broker. So I know what it’s like to to be on the flip side of a platform like that. And I’m trying to make sure that we curate in such a way that we’re fair to this. Very cool
and these members there is an annual subscription monthly subscription. How does it work?
Yes annual subscription and Do we people do a preview and then sign up accordingly. And then, you know, we give them all the information, we count the grocery sector, I like to say that we’re kind of applying to be their intern. You know, if you had an intern that was never sick, there was an expert in grocery anchored shopping centers that basically when you walk through the door every day, had a stack full of articles for you to read, told you every deal is on the market and every dealer transacted that’d be a pretty good intern. And so that’s kind of what we’re doing. We’re kind of like applying to be the intern for various companies be read through mom and pops, and we’ve had success doing that. So that’s the that’s the angle there.
Very, very cool. So that’s the grocery anchored.com. And but you have STL, STL, n.com, and a bunch of a couple other websites and tell tell us about those.
Yeah, so stl.com is just traditional brokerage, we have a handful of single tenant brokers that are on and transacting, as you know, single tenant Net Lease products throughout the southeast, probably in Florida. But those guys are transacting those deals. But what we’re really excited about is triple net.com. That was a domain name that we cashed in three or four years trying to wire we own the word triple net.com. We bought that many, many years ago. But you can’t own triple net.com Without an id.com. So we spent, it was a it’s a long story is a four year process. And when we bought it from a guy in Japan, it got stolen by a group of Chinese we file a federal lawsuit in DC, and it was just, it was crazy. I’ve never experienced anything like it. But we look at you know, domains is real estate on the internet. And so we wanted to have that domain set, triple that.com is something that we have to launch in 2021. And we’re working on that certainly the triple that business is an exciting business to be in I personally think that there’s a there’s a lot more brokers in that space now than there were even five, six years ago, there’s some great brokerage teams. And I think there’s pristine brokerage houses that come out and just specialize in triple net transactions. But there’s not a platform out there that’s that’s really captured the triple net market in such a way that you can go to this platform and understand everything that’s gone on the space. And so we hope to build that and build it well and will interact with with the brokers out there that the top line brokers to make sure that we build a product that they’re happy with. And I think the other thing is, is that I don’t think the triple net market is even tapped out. And there’s so many people out there that don’t even understand that you can actually own a Starbucks, you know, I mean, Chris, you know, this, you’ve been in the business a long time, most people who are listening this podcast, understand that. But there’s a whole ecosystem of untapped folks out there that are looking to deploy their hard earned money into a safe investment of tangible investment, I don’t even think we’ve tapped the surface for the amount of people that want to buy or own triple nets in because I don’t think they even understand that you can own one. So we’re looking forward to educating the market in that capacity and driving more investors potential first time investors to the space through an n.com. And hopefully, the brokers that are on there benefit from that. And the whole industry in the whole ecosystem, the whole vertical of triple net has benefits from that as well. So that’s a huge monumental task, and hopefully what we’re up to do, and you know, it’ll take multiple versions. So be patient with us out there as we develop it. We’re thrilled about the acquisition of n n n.com and launching that product towards the end of 2021.
Unknown Speaker 13:20
sectors or what how will you find your target audience for that? Where are you going to target? Because that’s an interesting, quite candidly, we’ve got some ideas on classes at DLC and you know, things that we’re planning on doing. But I’m curious, who who would you target? Would it be like you’re going to target the Doctors of the World? Are you going to target like multifamily operators who might not understand about this? What would you Who are you targeting?
Yes. So for for first time investors, I think that there’s I mean, we just started, I’ve been thinking about this for years, but we just started to really put pen to paper in terms of a strategy to, to find this type of investors. And I don’t, I don’t necessarily want to get into too much in the secret sauce, but there’s opportunity out there. And I think that on a larger scale to be able to get out there and get the word out there to beat the drum, so to speak on this particular vertical. And like I said, I don’t think we’ve even scratched the surface of it. So, you know, I think that there’s certainly folks out there, if you want to deem high net worth individuals somewhat that you know, $500,000 with equity out there that can deploy, they can play in the space. How many folks out there have $500,000 of equity? There’s quite a few, I mean, relative to the amount of folks that are playing in the space, the single tenant space. There’s a ton of untapped potential out there. So I’m not really answering your question. I’m kind of dodging it to be to be quite frank, but we feel like there’s a ton of opportunity out there and and we’re just ready to go tap into it.
Really excited to see what you guys
I want to pivot the conversation and talk a little bit about Your you’ve been focused on the grocery anchored world and you have a lot of information that others don’t have on the grocery anchored world. Let’s start with the investment sales market as it relates to grocery stores. What happened in 2020? As it relates to grocery anchored shopping centers trade?
Yes. So obviously, it took a hit as a result of COVID. It was not, it was not immune to that. And there’s debate as to exactly why that is, but predominantly is because of the shop space. Investors didn’t quite know how to capitalize shot space tennis. But let’s get into the facts. So if you talk about the investment sales market in terms of the total number of deals, that went to market 2019 versus 2020, I’ve got some notes right here. So 2019 606, grocery anchored shopping centers, went to market across the country in 2019 2020 389. So that’s a drop of 36% of inventory that went to market across the country, that grocery anchored space. Now, when did that hit? Again, I’m referring to my notes right here. But you had a huge drop in terms of total deals in the grocery anchored sector. In the month of, obviously, March, April, and May May was a low point. So may typically and again, refer to my notes here in 2019. With 115 grocery anchored shopping center centers hit the market and 2018 at 119. And 2020. You want to guess how many grocery deals hit the mark in the month of May?
Oh, man, great question. Let’s say 37.
Good guess really good guests. 27 Oh, 20. That’s a drop of 77%. So obviously, the month of May is a big month, because we’re all going to Vegas in the month of May, that’s when everyone kind of ramps up. They’re they’re listening because it’s a broker, the last thing you want to go do is sit down with Chris ReSSA and not have inventory to show him. So that’s a huge month in the grocery sector that was down basically 77%. So for the year, for the year of 2020, we’re down basically 30 To 35 to 38%, depending on how you count those particular deals. Now, that’s deals to market, we’re not talking about sales. So if we look at the number of sales, let me just paint a picture for a year going into the month of January. In 2020. We were at a total number of 74 transactions for the month of January. So we’re not talking about deals to mark, we’re talking about actual consummated transactions. So 74 transactions in the month of January 2020. That was up from 42 in 2019. So we came out of 2019 cooking with gas that’s up basically 70 some odd percent year over year, then you go to February, February, we had 54 transactions in the grocery anchored sector that was up 25% from 43 in 2019. So 74 and 2020 20, January 54 and 2020, February 58. And March, which relative to 2019 was one off. So basically 58 in March of 2020 57 and 2019. April hits. So April, we went down 60%. So the market basically came to a screeching halt, we had 25 Grocery anchor transactions in the month of April, kudos to those sellers for closing those deals in escrow in the midst of the COVID pandemic, prior to that in the month of April, 2019 and 63. So think about this in this four to five months swing, you go into January 2020, up 76%. Year over year, for that month, you hit April, and you’re down 60%. So I’m not great at math. I’m from Tennessee, that’s 136% swing right there. And so that’s what happened to the market, and
how many how many transactions happened in May. So we’re
still solving for that these normally have to get about six to seven months out. We’re still finding a couple more on there. But we’ll have those answers out we’re actually going to produce that we’ll have that out probably next week, next 10 days. Got it. And I can tell you just from our rough numbers that we don’t have an exact number on that. But it was less than April I can tell you that so we had 25 and April and it was less than that in May. And obviously June and July was was a cold cold time. That said we start to see things get better towards the end and again we’re getting the numbers finalized on this it’ll probably be out by the time the podcast hits by the time that by the time you air this but June July, August, September it’s I think people just got fed up they had to sit they just said Look, I can’t sit on the sidelines. I’ve got this money, I’ve got to deploy it. Let me get to the best that answer for myself. And I think pretty much the sellers had been beaten pretty bad by COVID. And there were some sellers out there and to monetize, so there were some there that occurred with you know, quite a quite frankly COVID pricing. But if sellers were looking for you A maxed out value, that’s really didn’t happen. But if buyers were looking for this huge, huge COVID discount, we didn’t see that mass, we not see it on the grocery anchored space, we just saw the deals get delayed. So I think it’s gonna be very fascinating to see what we what it looks like at the end of January 2021. And compare it 1920 and 2021. And see how we do this year. I think that, you know, you’re probably a better person to talk about this, because you’re on the leasing side of things, and you see it up close every day in terms of how tenants are doing. But I think that we’re going to see 2021 The grocery sector is already starting to rebound, and we’ll start rebounding I think, you know, we probably won’t mirror 2019 and 2021. But I think by 2022 will mirror 2019 and never go
very interesting stuff. I really, I love the statue rattled off. I don’t love them. I love that you have then
how are you seeing
based on all the networking you do and the information you have? Where are the lenders right now in their, in their response to the marketplace? What do you what are you seeing from the lender market?
Yeah, so if you’re over 100,000 square feet, shopping center, a very tough for a lender to get excited about that kind of deal. So what we’re seeing lenders do is if that particular Publix or the Vons or the Kroger or whatever it may be, represents north of 55% of the GLA and typically if it’s north of 85%, the GLA it’s gonna be north of 55% their gross income, lenders are more apt to loan on that kind of deal and load aggressively. But that being said, if you’re over 100,000 square feet, if your grocery box doesn’t have transparency on sales, if you are, you know, rarely was shop space, it’s very difficult to get a loan on that kind of product right now. So it’s, it’s kind of the tale of two cities, the best of times and worst of times, because lenders are out there aggressively loaning on deals that are, you know, credit worthy boxes with 60% in ally and 60% GLA, but it is difficult to get a deal done over 100,000 square feet, very, very difficult to do. Unless again, it’s you know, Class A and we’re seeing Whole Foods deals transact and that type of product class. But you know, Whole Foods, I’ve always said like, if you if you own a whole foods, you basically got a membership to retail relevancy in perpetuity because your your anchor is Amazon. So that’s a little bit of a different deal than going out there and trying to do a save a lot in a rural market. So I think all the fundamentals that we all know and understand are still there that said they’ve just been exacerbated, to a great extent in terms of getting much more difficult to get a secondary market deal done. Much more difficult to get a deal done over 100,000 square feet. To that’s that’s pretty much the lending market on topical, that’s a topical answer to your very specific question.
We’re gonna take a quick break here. And now a word from one of our sponsors. Hey guys, I know we always have guests on the show to retell their story and share how to work in a smarter way. So I would like to share something that we do and introduce all the landlords and building operators to a solution called PRISM. By one of the powerhouses in cre building engines. We use these guys here at DLC and as part of our strategy for operating effectively during the pandemic. communication to our retailers is key. Building engines is key to making that happen. And they just acquired a company called Rev T. That really helps the retail space manage HVAC systems smarter and help with tenant compliance with their triple net lease obligations. They have a service and procurement vendor network built right into the solution that enables them to seamlessly keep up with maintenance, perform repairs, and install replacements, all at market beating prices. And for the retailers out there. We know you have a lot going on meeting the ever changing state and city protocols for operating during the pandemic. Building engines can help you too, by taking the burden of quarterly service and reporting on upkeep of your HVAC system off your shoulders. This means more time to focus on your business and your customers. To learn more about what building engines can do for you visit building engines.com/retold Thanks let me take it a step further. In March I’ve heard every retail word known demand that goes into lease department store off price discount and the differences between a value retailer discount retailer and off price retailer and all these things and our leases define them. And then comes this word essential the government created that we never we never heard of and there’s they might not be considered grocery stores but they are essential On let’s call them Costco and Walmart and Target and BJs Wholesale Club in Sam’s Club. The first question I have
been wanting to sell toilet paper. Yes.
And so my first question is do you track those? Do you track WalMart super centers?
Yes, we don’t track the wholesale clubs, BJC and Costco, because they kind of are their own ecosystem. And by and large, a lot of those are actually owned by the parent company. But we do track Walmart track, Walmart neighborhood markets, we do the distinction between the two. Yeah.
So Walmart Supercenter is, could be 200,000 feet on its own. How are you seeing or target could be 150,000 feet on its own? My experiences lenders have been favorable to those. Are you seeing that? 100%? So even though they’re over 100,000 feet?
Yes. Yeah, those are those are certainly lenders love Walmart. So I don’t think that comes to surprise anybody. You know, from 2020, Walmart was the number one listed banner, Walmart Supercenter, Walmart, in general was the number one listed banner for grocery shopping centers in 2020. So that’s 70 went to market. And I think what we saw as a gravitation towards brokers saying, hey, look, we can’t monetize a traditional, you know, grocery store, 45,000 55,000 square foot deal, let’s do more Walmart deals. So in 20, in 2020, there were 70 that went to market, that’s actually down 2019, there was 93 that went to market. So but number one spot and both years, Walmart was the number one spot now, you can probably guess as it relates to essential retailers in grocery stores. And if you think through okay, well who’s the grocery store that may be the single tenant. Of course Aldi was number two. So Ali, there was 34 allergies that were listed across the country in 2020. That was actually down from 66 and 2019. But your top five banners listed were Walmart Aldi, food line Kroger, save a lot in that order. And I think that’s indicative of, you know, people trying to get deals done and what products will be monetized during COVID in an essential business type scenario. Now, one of the things that that was interesting that that I, you know, tried to put our finger on is it, we talked about 100 deals over 100,000 square feet, transacting the transaction volume was down. So deals that went to market over 100,000 square feet that are grocery anchored. And 2020 133. In 2019, that number was 314. So that number is down 57%. And what I thought we would see would we’d see the proliferation of single tenant grocers. And the single tenant space pretty much stayed on par. So in 2020 136, went to market and 2019 143, so it just dropped 5%. So that market stayed on pace, the single tenant grocery sector in which is probably filled with alleys and deals and Walmart neighborhood markets. But the deal is over 100,000 square feet suffered. Now, with that being said, the kind of outlier there is that Walmart Supercenter that Walmart transaction, which obviously the Walmart credit dominates the underlying Gln underlining cashflow.
Got it? That makes sense, helpful. Interesting.
One of the things we’re seeing today is, you know, we saw this pandemic panic buying in March to grocery stores. And we are seeing a pretty robust expansion of grocery stores right now in the United States. We’re seeing the specialty grocers. Were seeing, you know, at both ends, the high end and the low end. I think one of the reasons is is they’re capturing food sales that were once sold by restaurants that are no longer there. And so they’ve got new market share, and they’re really, they’re really taking advantage of that opportunity. I am seeing much more growth in what I would call the specialty grocer world than I am the traditional grocery world. Are you seeing the same?
Unknown Speaker 29:10
I’m not a maybe that just geography, in terms of it may just be the product type that you specifically work with. But we’re seeing growth of the traditional grocery variety.
So they’re all opening new stores?
That’s correct. Yes. And you hit the nail on the head. I don’t think it’s like I don’t think it’s a controversial statement. I think we all went through this and lived through it. Groceries had a windfall of capital go through, go through their doors, and a lot of them are used a lot. Utilizing that capital to expand a lot of them are utilizing that capital to reinvest in their existing boxes. I think it’s a huge, it’s 22. One has been a great year for those particular banners. And, you know, they’re reinvesting that money and into growth and trying to keep that consumer in the grocery business is a tough business. I mean, it is a really tough business in terms of trying to capture that consumer very difficult for for a new grocer to steal a consumer from a shopping center that they’ve been going to once a week for however long. So, you know, we can talk about delivery too, as well, if you want to dive into that. But essentially, we’re seeing to answer your question to your point. We’re seeing traditional grocers expand all over the country.
I will caveat what I just said we’re seeing traditional grocers expand. We’re just seeing the pace at which specialty grocers are growing significantly higher than traditional grocers. But
how do you just want to find a specialty grocery? So
I’m thinking when I’m thinking of that I’m thinking the
all the Lidl
as specialty not traditional supermarket? I’m thinking of the sprouts and Trader Joe’s and and even Whole Foods versus a traditional shop, right. Stop and Shop Food Lion Publix Winn Dixie, yes, so
Okay, great. So what I would say on the sprout side sprouts has been just so consistent. They want to grow about 10% a year, they crest over 300 stores in 2019 Going into 2020 They opened up around 3035 stores this year. So they’re like their captain consistency on their growth plan. They’ve altered their footprint just a little bit and just really haven’t missed a beat Aldi. If you go to grocery anchor.com And your subscriber, I feel like we’re putting one to three articles a day about Aldi opening somewhere in the country. I mean, they I don’t understand and they’re you know, I’d love to hear you should get someone from Aldi on the pod because they’d be fascinating to talk to. But their development side the ability to to grow. I mean, they’re on page like Dollar General amazes me, as does their ability to produce stores. So those two I think have been very consistent. You mentioned who else you mentioned, you mentioned Aldi, you mentioned sprouts, Lidl, Lidl, obviously we know came in a couple of years ago they were the rage that was all the news about Lidl, I think they caught their their pace and they’ve altered their their development plan a little bit at first they were going to be only freestanding and standalone. They’ve altered that. And you know, man, they had a tough time they hit in the Carolinas they launched in the Carolinas and Virginia and talk about a knife fight of a market in the Carolinas I mean that that is everyone is in the Carolinas there’s been a lot of scholarship and documentation and articles on on the Carolinas and grocery that’s kind of ground zero in terms of expansion, tough place to launch, they launched there. They took their lumps in there, they’re now an expansion plan as well, which obviously is expanded to New York and so forth. So yeah, especially groceries have have not missed a beat. Now we also saw some special groceries hit turbulence, you know, Kroger pulled out of Florida, but by and large with the Lucky’s concept or fair had a little bit of struggles there. They’ve actually emerged. And they’re now in the development side, again, launching new store. So certainly there’s some some specialty grocers that took some lumps who by and large, but 2020. If you’re a grocery, you cannot complain. It’s a great year. Great Year.
Totally agree. Well,
one of the other topics that we wanted to talk about moving along, that’s really the investment sales side what’s going on from the market in grocery stores trading. I think he gave really good insights and good intel. I think the last piece one of the things you are pretty up to speed on is what’s going on with grocery delivery.
Oh, yeah. Yeah. So fascinating space. By and large. Look, I think that one of the things that attracted me to grocery that it makes it unique is that one in seven people are going to walk into a grocery store today, one in seven. So name a retail vertical, that’s going to basically capture one in seven people. And so when you get that kind of feedback loop so to speak, you’re able to make adjustments much much faster, because your customer is going to your store your location, essentially once a week. It’s the worst case scenario once a month, but at least once a week, or rather at least once a month at most once or even twice a week. So you can make adjustments there. So that’s fascinating to me on a number of different levels. And I think grocers this vertical itself has really led in terms of innovation. And so now we’re starting to see that morph where now you can go pick up your groceries, Walmart launched to a store outside of Chicago. It was strictly picked. That was And you certainly roll out. Publix and they’re starting to run commercials in Florida about delivery. They went on I’ll send you a photo that I took. They had an ad as you walked in the Publix that they calculated the number of hours you spent in a Publix a year is 56 hours you spent in a Publix a year and said you don’t have to do that. I mean, how many retailers are out there telling you don’t come to our store, you can do Publix delivery, you can do Publix pickup. So it’s a fascinating space. And I think it’s fascinating to think about how a consumer gets a good either getting to the property or the property good concerns is, is that you risk customer loyalty, you know, on terms of delivery, and you’re also handing that item to a third party spotty, that delivery reflects on you, but you don’t necessarily control that. So groceries you’re trying to solve for that right now. And then I think one of the big stories that I think a lot of folks have talked about is Kroger’s relationship with Akata. In the fulfillment centers across the country, I think they’ve got 13. Right now either in development, they have one in Florida right now, that’s supposed to open up in 2021. What’s interesting about those particular fulfillment centers is that they cost roughly about $50 million. And it’s the equivalent of having basically 35 grocery stores for that capacity. So when Kroger puts one of those things down, they basically locked 35 grocery stores with a capacity in a market. Now, we’ve not seen those get up to speed yet, they’re not officially running yet. But it’ll be interesting to see how that shakes out, and how that impacts the markets, they allocate this this fulfillment centers to, but it’s a fascinating, fascinating space, for sure. And it’s one that there’s gonna be a lot of money put into, as more and more people opt out of going to the grocery store and save that time, and stay at home, or use and allocate that time doing something else and your groceries get delivered to us. So it’s gonna be fascinating to see how these companies adjust the next 10 years in this particular vertical economy. absolutely astonishing changes.
Well, let’s talk about the the the most interesting one to me, is Amazon. And they’ve opened the grocery store, they’re pretty good at delivery. In general, as a retailer, what do you think about Amazon, opening up grocery stores across the country?
So I don’t, you know, I don’t know how much of that is, is out there in the public. But they’ve obviously got a new concept that they’re opening up traditional box in that in that regard. So meaning that it’s standard size between 40 and 50,000. And they’ve certainly plotted to set out to launch a lot of those stores, look, Amazon’s operating on a different balance sheet than the rest of the world. You know, they can go out there and they can take chances they can afford to make mistakes. And that’s exciting, because we’re gonna see some revolution on the grocery side of things with a with a with a group that doesn’t really have the same balance sheet restrictions is more traditional groceries. So I think the one thing is their acquisition of Whole Foods, I think spooked the market significantly, if you looked at that acquisition with the stock prices of everybody. The next day, the stock prices and the stock, the stock prices of those grocery stores, all those grocery stores are publicly traded Fell Precipitously, it did not spook me or bother me. And I think most people in the commercial real estate business were not spooked or bothered by that. Were actually excited about that. I mean, look, you have Amazon basically said, Look, we demolished significant amount of retailers, but we could not demolish the grocery space, we had to become one of you to be in the space. So I think that, you know, in our time a little about this offline. You know, Amazon did what they did in the late 2000s, I guess when they when they acquired Whole Foods was mid to 20. Teens. It’s really no different in a lot of ways. There’s a lot of similarities in terms of the late 1800s, early 1900s, with Sears and Aaron Montgomery award in the mail order catalogs. Really what Amazon is, is the modern version of the mail order catalog at one point, and I don’t think a lot of people realize the history of this. But in the early 1900s, Montgomery Ward and Sears started with basically a one page flyer. And that catalog was then basically adopted and I get some notes here on this I was looking at it’s actually last night, thinking that we may talk about this. But just to give you an idea in 1897, these two guys did about $7 million in sales by 1920. Sears in Montgomery Ward and the catalog business was doing $500 million of sales out of catalogs by 1920. Now to put that in perspective, that’s roughly 5% of the GDP of the country in 1920. And to give you an idea, Amazon, I think two years ago did foreign $50 billion in sales, that’s 2.3% of GDP. So the catalog business was twice the size of Amazon in the 1920s. Now get this. The reason the Postal Service is what it is to today is because some savvy guys, namely Sears went to Congress and said, Hey, look, there’s guys out in rural markets. There’s families out rural markets farmers out there that cannot afford to get mail order catalogs. So what we want is we want free shipping, and the Congress gave them free shipping. So at the height of their night in the 1920s, doing 5% of GDP, Congress basically said, hey, you know what? Go take free shipping, we will sponsor that. So imagine if Jeff Bezos and or, you know, Amazon in general approach Congress and said, We want the United States to pay for shipping. I think everyone would go bananas. That’s a technical term. But yet, Aaron Montgomery Ward, and Sears Warren Sears did that in the 1920s. Now, they came up with this revolutionary idea in the 20s, when sales began to drop off sales being a drop off in the 20s, the catalog industry began to get saturated. And so these guys on their own accord said, Well, you know, we should do we should start storefronts. That’s what we should do. We should start storefronts. And so that’s what they did. They launched storefronts, and obviously, the rest is history, Sears, and Montgomery Ward started storefronts, and that catalog business kind of maintained equilibrium, but dropped significantly off after that. So all of this is just a cycle. And it repeats itself. And I think that if people understand the fact that hey, look, there’s nothing new under the sun. Amazon is basically a more technological mail order business. And yet, it’s half the size of what Sears in Montgomery Ward more in the 1920s. It puts things a little bit in perspective, I think,
totally does. Just so we’re clear. What happened was Ward and
Sears lobbied Congress for free shipping, and that was the genesis of the post office.
It had a lot to do with the post office. Yeah, absolutely. expand to the post office, for sure. Wow. Now log business is really responsible for the postal business. Because thing about delivery did not exist in one minute. It was just unheard of, in terms of like packages, and so forth. I mean, it was a totally foreign concept was totally revolutionary at that point. So breaking news, breaking news on on the retail retail podcast. Yeah, the postal businesses really owes itself to the retail business by and large.
Right. Yeah. The post office is pre that, but the expansion of the postal businesses, the expansion of the postal business. Wow. Well, that’s a good note to end on. Really fascinating stuff. I want to bring us to the last part of the show. Are you ready?
I hope so. I don’t know what’s happening here. But laid on me, buddy. All right.
So we got three questions. Here they are. Question one. What extinct retailer Do you wish would come back from the dead?
Easy Toys R Us man? Toys R Us. I mean, I can tell you this, like think about this Toys R Us. If someone’s at my age a little bit or a little bit older. You can finish this line. I don’t want to grow up.
I want to be a Toys R Us kid. Think about that
Toys R Us is in your head. You know how much money it took to get that line in your head. I mean, the amount of marketing that they did to make sure that line is ingrained in people’s head is off the charts. So yeah, as a kid going to Toys R Us that was like the highlight of the month. You know, my parents, you know, I’d saved my allowance up like $10 or something and go up and down the aisles at Toys R Us. And I think about that, like if I can I think about that retailer. Like Toys R Us should exist. I mean obviously there’s a lot different reasons why it doesn’t but I think Gary Vaynerchuk said this one time like you know we should be doing company parties at Toys R Us like we should be dumping slime on each other’s heads we should be in the Lego championship should be at Toys R Us. There’s just so many opportunities there that that company should still exist. But if I had to pick one, I’m probably partial nostalgia is a very strong emotion and a very strong sales tool. So go to Toys R Us.
Awesome. Love the answer. Question two. What is the last product north of $20 that you bought in the store?
This weekend, I went to Dick’s Sporting Goods. I went to go buy a hoodie. A black hoodie, black Nike hoodie, they were sold out suedette buying a like a light jacket from Dick’s Sporting Goods. I think it was like 20 bucks or something like that. I don’t know how you’re sold out of Nike hoodies but they sold out in Christmas and they have not been restocked. So if anyone watching this from Dick’s since then Nike hoodies down to Florida, if you would, because the weather is tumultuous down here. It’s a balmy 68 today, and we need hoodies so
awesome. Last question. We talked a lot about Walmart. Yeah. You and I were in Walmart and I lost you what I find doing
Unknown Speaker 44:49
lecture. We’re not walking to Walmart unless they sell groceries. Chris It’s against my constitution. So we’re in the food aisle or at least that’s where you find me. And I don’t know which part of that I don’t know maybe finding the chips and salsa aisle like, I don’t know, are we just going to eat chips and salsa for the rest of our lives? I think that’s it like Life is like taxes, taxes, life kids marriage and then chips and salsa. That’s probably what you find. Awesome.
Well listen, Mark, this was great. Thank you for playing.
And really appreciate
you coming on.
Hey, Chris. Thanks for having me. Love the podcast, retail retail. Awesome. Keep it up. I think you’re doing a great thing. We’ll talk to you guys soon. Thanks so much.
Thanks, Mark. Take care. Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode