Microsoft hired a former Wal-Mart executive to oversee a rollout of branded stores at lifestyle centers and malls, in an apparent swipe at rival Apple. David Porter, who headed worldwide product distribution at DreamWorks Animation SKG, joins Microsoft this week as corporate vice president of retail stores.

There are tremendous opportunities ahead for Microsoft to create a world-class shopping experience for our customers,” Porter said in a prepared statement. “I am excited about helping consumers make more informed decisions about their PC and software purchases, and we’ll share learnings from our stores with our existing retail and OEM [original equipment manufacturer] partners that are critical to our success.” Defining the time frame, locations and specifics for Microsoft-branded stores will be Porter’s first order of business. The purpose of these stores is to deepen engagement with consumers and continue learning what they want and how they buy, he says.

Before joining DreamWorks in 2007, Porter spent 25 years with Wal-Mart in various posts, including store operations, merchandising and information technology, and most recently as vice president and general merchandise manager of entertainment.

The global recession continues to boost growth for many discount retailers and other businesses that offer bargains. Last week McDonald’s announced a 7.1 percent same-store sales increase for 2008, versus a year ago, aided by its increasingly popular dollar menu. Meanwhile, Wal-Mart continues to beat analysts’ expectations, with same-store sales up 2.1 percent year on year for January.

Taubman writes off planned developments

Like other developers, Taubman Centers will be focusing more on redevelopment than on new projects for the foreseeable future, he noted. “Given the overall retail environment and capital market status, we have reduced our predevelopment spending in both the U.S. and in Asia,” said Taubman. “In 2008 we spent $18.5 million on predevelopment activities. We expect to spend about $13 million in 2009, including roughly $2 million that we will be expensing for efforts at Oyster Bay.” The firm will continue to make renovations a priority, he said. “Several centers that have recently been remerchandised, such as Fairlane,Fair Oaks,Regency, Stamford and Westfarms were down, but less so than the overall portfolio. This illustrates the importance of continuously reinvesting in centers to maintain their freshness and customer appeal even in tough times.”

The firm laid off 40 development executives and reduced foreign development expenditures during the fourth quarter. Taubman Centers posted a loss for the quarter of $98.7 million, versus earnings of $21.4 million a year ago. The firm blamed the loss chiefly on the cost of abandoned projects. Taubman Centers lost $116 million related to the Mall at Oyster Bay, for instance, and an additional $8.3 million in planning costs related to the shelved University Town Center, in Sarasota, Fla. The firm posted a $43 million loss in funds from operations for the quarter, versus a gain of $70 million a year ago.

Macerich doubled net income in fourth quarter

 Macerich enjoyed a strong fourth quarter, during which net income and funds from operations rose as the firm paid down debt and raised rents. Funds from operations climbed to $184.3 million for the quarter, up from $132 million a year ago, while net income reached $63.2 million, up from $39.9 million. Macerich wrote off $8.7 million in costs associated with abandoned development projects, but it also gained about $40 million through the retirement of some $80 million in convertible debt, executives said on an earnings call.

CFO Thomas E. O’Hern warned investors to expect occupancy rates to continue weakening in the coming months. “We’re assuming a reduction in occupancy, the likes of which we’ve never seen,” O’Hern said. “Even going back to the late 1980s, early 1990s we never saw a 130-basis-point drop in occupancy in any one year. So we’re assuming it’s going to continue to be a pretty tough year, and we’ve considered that in both the occupancy levels as well as tenant sales expectations for purposes of estimating percentage rent.”

Macerich has also scaled back its development plans significantly, said COO Tony Grossi. “The marching orders are renew and retain,” he said. “We’re not doing anything dramatic with respect to merchandising. We’re maximizing retention. We’re keeping leases on a short-term basis if we don’t feel the rate or the tenant is not proper for the space or the shopping center. In 2010 we hope to get to some of our remerchandising goals and create a more dramatic growth, but that will be reviewed later this year as we get a clearer picture for 2010.”

Inland to focus on tenant retention during downturn

Inland Real Estate Corp. reported $17.5 million in funds from operations for the fourth quarter, down 27 percent from a year ago. Net income, meanwhile, was $3.2 million, down 72 percent from a year ago. Executives said on an earnings call that the firm plans to focus on property management and tenant retention. “Like all landlords, we are getting our share of requests for rent relief,” said D. Scott Carr, president of Inland Commercial Property Management, on the conference call. “Borrowing from Ronald and Nancy Reagan, our approach ranges from ‘just say no’ to ‘trust, but verify.’ In those instances where rent relief is warranted, the objective is to structure deferrals in lieu of reductions; we renegotiate critical lease terms and ultimately get the right to recapture the space. This final condition is the true litmus test, as we see many requests withdrawn when we advise tenants that we want the right to replace them.”

TRANSACTIONS

Cedar Shopping Centers and London-based Prime Commercial Properties paid a total of $72.5 million for two grocery-anchored shopping centers. The venture bought the 260,000-square-foot New London Conn. Shopping Center from a joint venture of JPMorgan Investment Management and Centro Properties Group. It also acquired the 264,000-square-foot San Souci Plaza, in, from Bryn Mawr, Pa.–based WP Realty.

Alfred Lehmann, a private investor in Texas, sold Ennis (Texas) Plaza, a 31,400-square-foot neighborhood center, to an unnamed private investor for $5.1 million.

THE COMMON AREA

Westfield is assisting with relief efforts in Victoria, Australia, where brush fires destroyed 840,000 acres and 750 homes and killed at least 126 people, in what is being called the worst natural disaster in that country’s history. Westfield has given its workers there three days of paid leave to allow them to volunteer. The firm has also donated $1 million to the Victorian Bushfire Appeal Fund, a partnership of the Red Cross and the Australian government. “Our Victorian centers will also work closely within their communities to meet particular local needs, ranging from functioning as a drop-off point for donations of emergency goods, to working with retailers to provide various goods to families in desperate need,” said Bob Jordan, Westfield’s managing director for Australia and New Zealand, in a prepared statement.

Gap Inc. named David Zoba senior vice president and head of corporate real estate. Zoba was a principal and COO of Steiner + Associates.

Denver-based Smashburger says it wants to take its concept national. The fast-casual chain, which currently operates 10 restaurants in Colorado and one in Kansas, signed regional agreements with five franchise operators. The partners will open units in elsewhere in Colorado and Kansas, as well as Arizona, New Mexico, New Jersey, Oklahoma, South Dakota and Texas.

SunWest Burgers LLC Restaurant Concepts says it plans to roll out 30 stores in the Phoenix area over the next six years, with the first two slated to open this year.

(SCTWeek is a publication of Shopping Centers Today, February 16th, 2009. Vol. 14 No.7)