Mike Sigrist quote:"Compass exclusively represents La Familia. The NY Times article outlines just how strategic locations and opportunities can meet to make great real estate investments."
More than 6,000 Blockbuster locations have closed in the last few years, leaving dark stores at many a shopping center and intersection.
“They have great real estate, they’re in great locations, the size is just what we need, about 6,000 square feet. It works out just perfect,” said John D. Thedford, who has been filling former Blockbusters with his pawn shop, La Familia Pawn and Jewelry.
He has opened La Familias at five former Blockbuster locations in Florida and Puerto Rico, and is about to close on a sixth. And he is expecting even better options soon. Bankrupt Blockbuster is down to 2,400 stores, from a peak of more than 9,000 in 2004. And it agreed on Wednesday to sell its assets to Dish Network for $320 million, leaving the future of the remaining stores in doubt.
“So many of them started popping up as we started doing our site selection work,” said Mr. Thedford, chief executive and co-founder of La Familia. “It’s just a lot of availability.”
While a video store and a pawn shop might not seem to have much in common, Mr. Thedford says that is a misconception.
Blockbusters are usually on high-traffic intersections or in neighborhood shopping centers near a drugstore or grocery store, since people like to rent movies as they are completing other errands.
So, too people like to pawn items after picking up milk or aspirin.
“Customers generally go to the grocery store a couple of times a week, so we’re in a convenient location for our repeat customers,” Mr. Thedford said. The Blockbuster spaces are “generally very well positioned,” he said, “and there’s often very good comparables around — auto parts stores, furniture stores and things that are healthy in driving our business, because our customers use those services.”
La Familia’s business model is to make loans, almost entirely to people without bank accounts, using a customer’s ring or television or iPod as collateral. The borrowers are given 60 days to pay back the loan, and La Familia charges a 20 percent interest rate per month. (So for a $100 loan, the borrower would need to pay back $140 after 60 days.)
If the customer does not pay back the loan plus interest after 60 days, or pay additional fees, the collateral item is put up for sale. About 80 percent of the customers pay off the loans, and also buy other items while they are in the store, Mr. Thedford said.
The most common reasons for taking out the loans are “for electricity, a shortfall on rent, an unexpected medical bill,” he said. “It is cheaper than bouncing a check, and than a payday advance.”
Mr. Thedford says La Familia focuses on the Hispanic community, and since many Blockbuster locations in Puerto Rico and Florida overlap with Hispanic neighborhoods, it is a good match.
The La Familia stores are clean and bright, with employees dressed in suits and the merchandise displayed neatly in glass-topped counters.
Just like a Blockbuster, the colors are blue and yellow, and the block lettering on the stores’ exterior looks as if it was lifted directly from a Blockbuster sign.
Mr. Thedford said that was coincidental: “I paid a marketing agency to come up with it,” he said.
More stores will come on the market soon. Blockbuster has said it will close 700 stores by the end of this month. Dish Network has not said what its plans are for the remaining 1,700 stores. Some analysts expect it to liquidate all Blockbuster stores and focus on its streaming-video business, but others think it will continue to operate at least some stores.
That means a lot of supply in a weak retail real estate market.
With lackluster mall traffic, lots of empty spaces from earlier bankruptcies (Circuit City and Linens ‘n Things, in particular) and years of sliding retail sales in some markets, leasing activity in 2009 was 70 percent below where it had been in 2006 and 2007, according to ChainLinks, a retail real estate advisory firm.
That improved in 2010, but “over the last year and a half the only people who were growing were discounters and off-price retailers,” said Garrick Brown, director of research for ChainLinks.
In the first quarter of 2011, the mall vacancy rate was at its highest level in a decade, at 9.1 percent, according to real estate research firm Reis. And the neighborhood shopping centers and strip malls where Blockbusters tend to be located had an 10.9 percent vacancy rate.
Still, ChainLinks expects some expansion. It tracks annual growth plans for major retailers and restaurants, and the amount of space retailers say they will add this year has risen 40 percent from this time last year. That is largely because holiday spending was strong enough that “a lot of the publicly traded retailers suddenly felt a lot more pressure to up their growth plans for the year,” Mr. Brown said.
Unlike a giant store that only a handful of retailers could fill, the small Blockbuster spaces are attracting a fair amount of interest.
“There’s such a longer list of tenants that can take these spaces,” said Michael P. Glimcher, chairman and chief executive of Glimcher Realty Trust, which does not own any property with closed Blockbuster stores. “Restaurants can take them, you can cut them into two and have a lot of small usage, you can have a cellphone guy in there.”
Mr. Thedford said he was pleased with the Blockbuster locations. His newest stores in former Blockbuster sites are both on track to have sales of $1 million this year.
“I think there’s going to be a lot more Blockbusters available, probably more than the market can absorb,” he said. “We’ve got better real estate alternatives than I’ve ever had.”
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