May 6, 2016
By Dennis Kaiser
George Smith Partners recently secured financing on behalf of Canadian retail investment firm CormackHill, LP for the $43-million acquisition of the iconic Fred Segal retail property at 8100 Melrose Ave. in Hollywood, CA. Connect Media asked David Rifkind to share insights behind the deal.
Q. What shifts are transpiring in the retail sector that makes this deal stand out?
A. Retail is in the midst of a generational change that is reshaping financing in this sector. The shift toward a multi-channel strategy that provides customers with a seamless shopping experience, whether online or in-store, is changing the way retailers view physical space and retail districts. The result is increased caution among lenders, especially those who don’t yet understand exactly how this shift will impact the commercial real estate market moving forward.
Q. How does this deal reflect a larger trend in the retail market of retailers and retail insiders being willing to make substantial investments in quintessential shopping districts?
A. Brick-and-mortar properties in key high-end shopping destinations such as Melrose are more important than ever to a retailer’s long-term brand. Chanel’s recent acquisitions in SoHo and Beverly Hills, as well as recent Beverly Hills acquisitions by Zara and LVMH illustrate this trend.
Q. What made this acquisition attractive for the investor?
A. CormackHill, LP is extremely knowledgeable in the retail sector, and understood the long term value of this irreplaceable location. Contrary to what many in the industry claim, enlightened players in the retail sector are highly profitable – utilizing big data, efficient sourcing and manufacturing. In fact, retailers adapting to technology integration are operating at higher margins than ever before. Many retailers will continue to reduce their store counts, concentrating instead on flagship locations. This trend will continue to define the strongest retail districts for years to come.