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The 2009 Chicago Roundtable was printed in edited form in the October issues of Shopping Center Business and Heartland Real Estate Business. The following is Part One of the complete transcript.

Shopping Center Business recently held a Chicago Retail Roundtable hosted by the law firm Levenfeld Pearlstein. Despite a lackluster year for retail, turnout at the roundtable was robust and the discussion was again lively, offering a snapshot of activity within the market and a view of general industry trends. In attendance this year were: Adam Secher, Baum Realty Group; Peter Eisenberg, Clark Street Development; Peter Caruso, Intercontinental Real Estate & Development; Lew Kornberg, Jones Lang LaSalle; Marlon Stone, Katz & Associates; Richard Kahan, KB Real Estate; Marc Joseph, Brian Kozminski and Keith Ross, Levenfeld Pearlstein; Terry McCollom, McCollom Realty, Ltd.; Ben Wineman, Mid-America Asset Management; Jim Schutter, Newmark Knight Frank; Robert Rowe, Sierra Realty Advisors; Marc Siegel, SJS Realty Services; Ryan Murphy; SRS Real Estate Partners; Tim Thanasouras, Thanasouras Commercial Properties; Aaron Gadiel and Jonathan Payne, The Jaffe Companies; James Turner, The PrivateBank; Sy Taxman, The Taxman Corporation; Richard Dube, Tri-Land Properties; Glen Todd, U.S. Cellular; and Camille Julmy, U.S. Equities.

SCB: How are retailers viewing the Chicago market as a whole?
Murphy: We are still busy. We have a pool of tenants that are active. The large box tenants — JC Penney, Lowe’s and the like — have slowed down. They are still looking, but they are not as active as they were. Discount Tire, Famous Dave’s and Tilted Kilt are expanding. We are looking in multiple markets for them. Verizon is looking at some deals, as is Genghis Grill.

Stone: The economic reset has influenced site selection from the standpoint of asset class, gross occupancy and opportunity. There is no new development; therefore, the older shopping center once bypassed has become relevant again. At the same time, our long overbuilt industry is now feeling the impact of fewer retail concepts to absorb a substantial inventory of space, and as a result, the supply-demand curve has shifted and rents have compressed. Having a tenant who can take existing space is driving the business today. A retailer may very well secure a rare first-tier location where high occupancy had prevented them in the past.

Kornberg: Everyone is looking for things to turn to the positive. The discounters are in pretty good shape these days. Everyone else has hunkered down and is looking for more tangible signs of recovery before they are willing to emerge from the bunker and start doing deals aggressively again.

SCB: How is Chicago faring versus other national markets? Is it doing better or worse?
Kornberg: Historically, Chicago has fared better, and it continues to do so during these times. Chicago is healthier than most of the markets I’ve been to.

Stone: I’ve always described Chicago as the anchor of the Midwest. We have an MSA approaching 10 million with significant growth projected. The economy remains diverse with employment generators that keep the city and suburban areas vibrant. The retailer understands the purchasing power of this marketplace, and while store openings may be limited, temporarily, Chicago will always be on the radar for those companies seeking market share within the Midwestern United States.

SCB: Marlon [Stone], you represent a lot of retailers and are national in scope. What is the feedback you are getting from your other offices regarding their markets?
Stone: In my estimation, until we see the condition of the American consumer improve, our industry will remain sluggish. The needs-based retailers, such as Dollar General, are experiencing robust growth as customers trade down to save money, generally speaking, though people are not spending and retail companies are reporting comp store decreases. It becomes increasingly difficult for a CFO to throw capital at store growth when the existing network of stores loses money.

SCB: Are the tenants looking more at urban areas?
Stone: There has been more focus on the urban trade areas throughout the country — and in Chicago — versus the greenfield, high-growth suburban areas. Most of the greenfield areas were built and sold to retail companies on high growth. That growth has been curtailed. You don’t get a full bang for your buck in those areas. The areas that have sustained themselves over the years have density.

SCB: In a city like Chicago, are the neighborhoods still of interest to retailers?
Stone: I think so. If you go back to when residential was built on top of retail in the 1920s, ‘30s and ‘40s, you saw that come back into vogue in the past 10 years. It didn’t have to be regional per se or down the street from a regional mall. If you have something that’s convenient for people and that fits into how they run the rest of their lives, you’ll be able to find a market for tenants. There is a niche in the neighborhoods for everyday needs retailers.

Kornberg: Many retailers, out of necessity, are being forced to go to landlords and ask for rent relief. A lot of landlords aren’t able to provide that relief because of restrictions — whether its loan covenants or something else. There are virtually no retailers in today’s market that aren’t being opportunistic to their leasehold agreements and looking for relief. If they are successful in 25 or 40 percent of leases, that’s a pretty good hit rate.

SCB: We’ve heard that a lot of retailers who are getting relief are causing their co-tenants — who are doing well — to ask for relief. Some think that because one gets it, everyone is entitled to it. Have you found that true?
Taxman: Unless a tenant has been with us a number of years and unless they can provide us financials, they won’t get it. On the other hand, if we are dealing with a local tenant that has been with us for a number of years, rent relief is granted almost automatically. We talk about this in theory. The problem is that those of us who actually own these properties know that these leases have been assigned as additional collateral to the lenders. Modifications of leases are not just a matter of calling your landlord. This is a process. There are many situations where the mortgages have been sold, and you have no one to talk to about lease modification. Even though you may want to grant a modification to the tenant, technically, you’d be under default in your mortgage. It is a complex issue. As a general rule, we will provide relief for local tenants if we know the tenants, if they’ve been with us for a number of years, if they are not in default and if they come to us before they are in significant trouble. If they default on their lease, don’t pay their rent and then want modifications, we won’t even talk about it. Our occupancy rate in the properties we own is just under 94 percent. That requires a lot of hands-on work.

SCB: On the legal side, are you seeing issues like this from your clients?
Joseph: We are not seeing as much leasing work. We are seeing some restructuring work, and sometimes we see some concessions in leases

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