, 4 tweets, 2 min read Read on Twitter
If you wondered what is producing the #highstreet retail CRE carnage, the Diesel jeans BK fling is a good place to start. They made a strategy shift in 2015 to move their stores to premium high profile locations (locking in peak cycle rents). It was a total disaster:
Note that their current 625 Madison Ave flagship store replaced the former flagship on 5th Avenue, which itself consumed $18MM in capex over six years, while producing operating losses.
Rent expense for the company exceeds $25MM. Depending on how much of that is for retail space, that would imply a cost of occupancy in the 20-30% range. Will be interesting to watch who fills these spaces.
This filing and the $TSLA decision to close its stores show that even high end landlords face headwinds to rent growth.
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