Distribution Cuts and Verbal Sparing

It is time to take a trip deep into the woods.  I recommend reading the transcript of yesterday's FSIC earnings call.  FSIC announced a distribution cut of about 14%, dropping the quarterly distribution from $.22 per share to $.19.  FSIC is waiving .25% of its asset management fee for a year as a partial offset, which is about the same percentage reduction as the distribution.  FSIC blamed the distribution drop on a borrowers' market and "non income-producing equity" investments from restructurings.  Non income-producing investments from restructurings are former income producing debt investments that are now equity investments.  There was no discussion as to how the value of the new equity positions compares to the FSIC's original debt investments.

I am seeing across various income oriented BDCs and mortgage REITs that spreads are tightening, which means that the returns on the riskier assets these funds specialize in are dropping.  The situation is not unique to FSIC.

In an almost casual comment at the and of his prepared statements, FSIC CEO and Chairman Michael Forman stated that FSIC's "board is evaluating the timing and benefits of a merger with FSIC II, which remains a key focal point and could be a 2018 event."  This is news.  There is no date or definitive announcement, but a merger that remains liquid is positive news. 

The sparing is between FSIC management and Wells Fargo analyst Johnathan Bock and came during the question and answer session.  Bock questions the value of Franklin Square in the relationship with GSO as sub-advisor, wondering, "Of the deals that GSO submits to you, how many deals either early or late in the process do you at FS reject, given you are the final investment authority?"  Basically, he is wondering what Franklin Square does to earn a portion of the management fee because, according to Bock's implication, GSO does all the work.  FSIC does not directly answer his question in several answers from its executives, choosing to instead focus on the collaboration between FS and GSO.  Bock gets the final word by questioning FSIC's commitment to transparency as stated on its website. 

Do not think it random that Corporate Capital Trust abandoned its advisor / sub-advisor relationship before its planned listing. 

Money Where Your Mouth Is

W.P. Carey closed its syndication business at the end of June, citing high prices for net lease real estate as a reason.  According to Carey, offering its real estate investment trusts no longer made sense due to low cap rates, which means that net lease real estate is too expensive to buy and the yields too low.  I am going to call baloney on this excuse.   If Carey believed its rhetoric it would be either selling the entire company to maximize shareholder value to take advantage of the high net lease values, or it would be selling individual properties or portfolios in particular low cap rate sectors.  I have not read an announcement that Carey is looking for strategic buyers, and its property sales listed in its most recent 10-Q appear incidental.  Two the four listed dispositions in the first quarter involved giving properties back to the lender, not a real estate company's favorite type of disposition, and not the moves of a company capitalizing on a strong market.  Carey did not buy any meaningful real estate, either.

Carey had a unique syndication business.  It was conservative in its approach to managing its real estate funds - favoring long-term mortgages and not the tempting, low interest, variable rate lines of credit adopted by so many sponsors to increase near term cash flow - and its sales team was always professional.  Carey's core REIT product had some of the highest up-front fees in the industry along with some of the lowest ongoing fees.  This runs against today's market, which wants lower up-front fees so that investor's initial statement values do not differ too much from the share price investors paid for their shares*. 

It is my opinion that Carey, as a listed company, expected to make a certain amount of revenue and profit on the high initial fees of its syndication business, and likely built this revenue into its earnings estimates.  I suspect that Carey was unwilling to adapt to products that provided it less up-front revenue and short-term profit, even if it meant foregoing greater profit potential over time.  If it lowered its initial fee income Carey would have to lower earnings estimates, a task loath to any company.  I have been hearing that net lease real estate is too expensive for years, since at least late 2013 or 2014.  Maybe it is, heck, it probably is, no one knows for sure.  Until Carey puts itself up for sale, or sells large portions of its portfolio, I will stick with my opinion that Carey was unwilling to lower up-front fees and that is why it exited the syndication business.

*For example, an investor buys shares listed at $10.00 per share.  With a traditional front end cost of, let's say, 11%, an investor that bought shares at $10.00 would get an first statement showing a real value of $8.90.  Sponsors have been lowering, paying, deferring, and reclassifying costs to bring the statement value up to a more investor palatable price, which are discounted 4% to 6% ($9.60 to $9.40 per share) rather than the 11%.   

Alphabet Asphyxiation

Alternative investment sponsors are hurting themselves with all their multiple share classes.  There are Class A and Class K, Class C and Class T, Class D and Class P, and Classes S, W, and I.  Oh my!  I am sure there are more share classes, but these are the ones that come to mind.  Sponsors are confusing investors and advisors in an attempt to blur the difference between the price investors pay for their shares and the price that shows up investors' initial statement.  Sponsors have spent millions of dollars creating multiple share classes that try to solve the riddle of what discounted share price is investor-acceptable enough to the initial purchase share price.   

It is time for sponsors to simplify.  I would like to see two share classes:  Class A shares with a 5% commission and a no-load Class I shares.  Sponsors should ditch all other share classes, starting with the malignant Class T shares.  Class T shares penalize investors, advisors, and broker dealers, but allow sponsors to maintain, if not increase their fees.  Class T share investors get a lower distribution because the ongoing "distribution fees" payable to advisors are credited against investor distributions for three or four years, advisors get lower commissions than in an upfront loaded share class, and broker dealers have seen their fees reduced for selling alternatives.  But sponsors get more money because their acquisition fees are based on net investable assets, and because the Class T shares provide more net investable assets, the Sponsors' fees are higher. 

Despite this dichotomy, Class T shares are bringing in the most non-traded REIT capital at funds that are raising any meaningful money.  But there is a glaring consequence to the push for Class T shares - low level equity inflows.  Excluding the Blackstone non-traded REIT, only four non-traded REIT sponsors raised more than $20 million in equity in June, and one of these firms was in a close-out that skewed sales upward.  Only three non-traded REITs raised more than $20 million, and again, one was in a close-out.  Twenty non-traded REITs failed to break the $20 million level, and eighteen of these did not even raise $10 million.  This is bad.  Failure to launch or death by neglect are cliches that have become real points of analysis. 

Advisors, as a group, have never avoided high fee products as long as their compensation was not impacted.  Advisors know their fees have been lowered while sponsors make the same or more, and are looking for other investment options, and twenty-six share classes, or one for every letter in the alphabet will not solve this issue.

Getting Serious

CNL / KKR's Corporate Capital Trust (CCT), a business development company (BDC), filed an 8-K on Monday, July 10, 2017, announcing that it plans to list its shares on the NYSE shortly after its August 3, 2017, shareholder meeting.  It plans to trade under the stock symbol CCT.  The planned liquidity event was initially announced on April 3, 2017, and a fourth-month time from announcement to listing is fast.  As part of its listing, Corporate Capital Trust is lowering its annualized distribution to $.715 per share from $.805 per share.  It will make two special distributions over the next year of $.045 per share each to make up for the $.09 per share by which it is dropping the distribution. 

The distribution adjustment puts it in line with what Corporate Capital Trust is earning in its Net Investment Income, while the bonus distribution is coming from cash reserves.  Realistically, the market's reception to a BDC paying a distribution more than its net investment income would not have been kind, so the cut makes sense for shareholders.  Corporate Capital Trust's Net Asset Value per share is currently $9.00 and has ranged from a high of $10.15 per share in June 2014, to a low of $8.62 per share in March of 2016.  The price investors paid for their shares is NAV plus offering costs.  Investors should use the price they paid for their shares to determine their yield, not the current NAV.  For example, if an investor paid $10.00 per share their yield is 7.15%, and if an investor paid $11.00 per share their yield is 6.5%

A nearly $3 billion liquidity event is good news for a market place that has not seen any liquidity in a long time.

Shroud of Fireworks

FS Energy & Power filed an 8-K late on July 3, 2017, announcing that it had decreased the price at which it would issue shares under its distribution reinvestment plan.  The day before a major holiday is a good time to release some bad news.  The decrease was from $7.65 per share to $7.20 per share, or a 5.9% drop.  This is a big decline in what is essentially the BDC's net asset value.  There is optimism in the energy sector, but like with all other assets, energy is subject to the supply and demand.  Oil closed today at $44.33 a barrel, near its low for the year. 

Just End It Already

According to this Reuters article, Sears is closing another forty-three stores - eight Sears and thirty-five Kmarts - in addition to the 150 stores it had already said it was closing in 2017.  Just shut them all and be done.  Sears is even closing its store in San Diego's UTC mall, a regional mall undergoing a huge expansion and that shows no signs of experiencing the downturn afflicting other regional malls.  If Sears cannot make that location work, it has no business staying in business.

KBS Ditches BDs

The DI Wire reports that KBS is closing its flatlined non-traded REIT, KBS Growth & Income REIT, Inc., effective June 30, 2017.  This REIT raised $5.4 million since its inception in April 2016.  This is a horrible capital raise effort even in a tough DOL dominated market.  I am not optimistic about the REIT's plan to continue to raise capital through an on-line private offering.  KBS Growth & Income is returning to investors the difference between the price investors paid for their shares and the pending NAV price per share, which is the offering load, unless there is some aggressive valuation math.  This is a positive move by the REIT, but at $5.4 million of total capital, KBS should just return all investor money and start fresh.

Commenting in hindsight is easy, but looking back, KBS really should have listed or sold the $1.8 billion in equity KBS REIT II outright in 2014 rather than liquidating the portfolio asset by asset.  KBS REIT still owns eleven properties four years after it began to sell its portfolio.  It had an estimated NAV of $5.49 per share as of December 31, 2016, so the REIT still has a long way to full liquidation.  An outright sale would have allowed for a potential large capital reinvestment.  Periodic distributions, even if they eventually total more than the initial $10.00 per share, are harder to reinvest, especially when spread out over more than four years.

Testimony Confirmation

Here is a Wall Street Journal article from yesterday.  The article discusses the securities fraud trial against former American Realty Capital Partner CFO Brian Block.  I had always assumed Block and former ARCP chief accounting officer Lisa McAlister were acting either direct or implied orders.  McAlister's testimony at the trial has confirmed this, but her acknowledgement of past lies does not help her credibility.  This is an ugly mess.

Sounds Legit

First Capital Investment Corporation's (FCIC) board of directors has named its chairman as interim chief financial officer, treasurer, and secretary, as filed in an 8-K on June 23, 2017.  His interim term ends when the business development company files its March 31, 2017, financial statement.  The interim tile may be permanent, given that FCIC's real estate investment trust sibling, First Capital Real Estate Trust (FCRET), has not filed a financial statement since said chairman it took over nearly two years ago.  What could go wrong given that FCIC's first investment was to an affiliate and that multiple FCRET subsidiaries are filing bankruptcy?

Griffin Pounces

That did not take long.  Late Thursday W. P. Carey announced it was exiting the distribution of non-traded investments, and today Griffin Capital announced that it has hired former W. P. Carey executive Mark Goldberg, who among other duties at W. P. Carey served as Chairman of Carey Financial and President of W. P. Carey Investment Management.  I guess Griffin Capital is not the "other" non-traded alternative investment sponsor rumored to follow W. P. Carey's example and quit the industry.

Separately, I always laugh at the sycophantic claptrap quotes in press releases.  Just once I would like to read: "We hired Mr. So-and-so because he is a ruthless SOB who will not only help us gain market share and crush our competitors, but he also will fire the slacking employees we did not have the courage to terminate."

W.P. Carey Quits Selling Non-Traded Products

W. P. Carey filed an 8-K and press release late yesterday afternoon announcing that it will no longer sell non-traded products.  The 8-K was short and to the point:

On June 15, 2017, the Board of Directors of W. P. Carey Inc. (the “Company”) approved a plan to exit all non-traded retail fundraising activities carried out by its wholly-owned broker-dealer subsidiary, Carey Financial LLC, effective June 30, 2017, in  keeping with the Company’s long-term strategy of focusing exclusively on net lease investing for its balance sheet. The Company anticipates that it will incur non-recurring charges to exit its fundraising activities of approximately $10.0 million, in aggregate, during the second and third quarters of 2017, consisting primarily of severance costs.

The news was unexpected, but when you think about the management turnover at W. P. Carey over the past year, culminating in the departure of Carey Financial's President Mark Goldberg earlier this month, the decision should have surprised no one.  W. P. Carey is a large listed REIT and carrying a syndication division that is raising limited capital puts pressure on earnings. 

W. P. Carey provides sponsors that remain in the non-traded space some clear lessons for moving forward:

1  Know your skill set.  W. P. Carey was known for its CPA net leased real estate investment trusts (REITs), not business development companies (BDCs) or hotel REITs.  Carey tried to move away from something it knew, believing its sales organization and substitute products were interchangeable, and that broker dealers would adapt to products based on Carey’s earned reputation with its CPA product.  W. P. Carey's net lease knowledge did not transfer to new product acceptance.

2.  Products matter.  W. P. Carey was late to offer a BDC and then came in with a lackluster sub-advisor and a structure that left W. P. Carey open to broker dealer objections.  (I liked the master / feeder structure.)   Its sub-advised hotel REIT was fine, but as a sector investment it was no replacement product for the core CPA product.   Sponsors need to stick with their knowledge and competency, not chase sectors or product fads. 

3.  Fees matter.  W. P. Carey products were always expensive, especially on the front end, which is a difficult position to maintain in market now focused and concerned with DOL and its low fee requirements.    Yesterday's decision tells me that W. P. Carey was unwilling to adjust its fee structures in a manner to compete with broker dealer requirements in a DOL dominated environment.

The most attractive new products have low upfront costs, and align and subordinate sponsor compensation with investor returns.  Investors need profitable sponsors, and meaningful and attainable incentives for sponsors are required as the industry moves forward.

One final note on W. P. Carey.  Exiting the new product distribution removes a big incentive for W. P. Carey to provide liquidity to its existing investments.  These investments are externally advised, which means they pay asset management fees to W. P Carey.  A liquidity event means those fees go away.  An earnings focused public company will want to extend the fee inflow.

Juggling Chainsaws

Sometimes I get opaque on this blog, and this is one of those times.  I have been reading through several health care REITs' 10-Qs and 10-Ks, and while I am not ready to sound an alarm, I do see an area of concern.  In particular, REITs holding skilled nursing facilities worry me.  Skilled nursing investments are the medical sector that can juice up a healthcare portfolio.  Like student housing is to a multifamily portfolio or mezzanine loans are to a mortgage portfolio, skilled nursing has the potential to add return to a healthcare portfolio.  Skilled nursing properites typically trade at cap rate of 10% or more, which is 200 to 400 basis points or more than other healthcare properties, so when I see REITs buying these properties I take notice.

Skilled nursing is heavily dependent on medicaid reimbursements, which is the lowest level of reimbursement and can represent 80% or more of patients in a skilled nursing facility.  The balance is from much higher paying medicare and private pay patients.  A well run skilled nursing facility needs administrators that can work with hospitals and families to keep the "quality ratio" of medicare and private pay patients high compared to medicaid patients.  Skilled nursing properties that are subject to net leases with operators offer a REIT some protection, putting the patient risk on the operator, not the REIT.  I am seeing skilled nursing facilities in healthcare REITs where the REIT or a subsidiary is the operator, which means the REIT is taking on the operating risk of the facility.  
Skilled nursing facilities trade at cap rates higher than other healthcare properties for a reason - and that reason is risk.  If things go well the extra 200 to 400 basis points is great, but a slip in the quality ratio and that return goes away.  Investing in skilled nursing is a tantalizing opportunity for REIT managers to overcome loads, support distributions, and generate total return.  I am watching to see whether some managers went too far into skilled nursing and bought assets they did not fully understand.

The Unraveling

First Capital keeps falling apart.   Here is an InvestmentNews article on the most recent round of layoffs at the wannbe product sponsor.  The employees no longer on the First Capital "journey" should be grateful.  I bet the First Capital journey won't appear on resumes.  Neither of First Capital's two public programs have filed financial statements, although the InvestmentNews article quotes First Capital's CEO Suneet Singal saying "We plan to have all filings current in short order."  Right.  The DI Wire reported a week ago that the third party firm that provided First Capital's BDC with a chief financial officer and chief compliance officer has terminated its contract with First Capital, leaving the BDC without a CFO or a COO.   This is quite the horror show, but I can't look away.

Palace Intrigue

W.P. Carey's Carey Credit Income Fund 2016 T and Carey Credit Income Fund 2018 T filed 8-Ks late on Friday with the following news:

On May 30, 2017, Mr. Mark M. Goldberg informed W. P. Carey Inc. (“W. P. Carey”) of his intended resignation, effective as of July 10, 2017, from his positions with W. P. Carey, the ultimate parent of the investment adviser to Carey Credit Income Fund (the “Master Fund”) and his positions as President of the Master Fund, Carey Credit Income Fund 2016 T (the “Company”) and each of the other feeder funds, to pursue other interests.

Additionally, Mr. Goldberg has resigned as the Chief Executive Officer and President of the Master Fund's investment adviser Carey Credit Advisors, LLC (“CCA”). Mr. Jason E. Fox, President of W. P. Carey, has been named Chief Executive Officer and President of CCA.

Mark Goldberg has been around non-traded alternative investments since the 1980s on both the broker dealer and product sides.  I view his departure as big news, and it's probably not random.  Carey is coming up on two months with no commission-based non-traded products available to sell, and had to send money back to investors in its Carey Credit Income Fund 2016 T when the offering closed on April 28, 2017, a move anathema to a product sponsor.  Carey Credit Income Fund 2018 T, which was declared effective by the SEC in October 2018, had to refile its prospectus and is pending SEC re-approval before it can offer shares.  The refiling clarifies Carey Credit Income Funds' accounting method for the ongoing trail commission it must pay broker dealers on T shares.  (The ongoing trail commissions are future obligations and a liability that lowers net asset value, and one more reason T shares stink.)  I can't help but wonder whether Goldberg is the fall guy for Carey's product missteps.

Tough To Read

Here is a Bloomberg article on the decline of Sears.  It is a sad story for a company that was America's top retailer for nearly 100 years.  The article states that Sears' decline in the 1980s when it "made a real estate play instead of focusing on selling stuff."  I am not a fan of financiers owning retailers, but Sears' issues pre-date Eddie Lambert's acquisition of it in 2004, although he has played his part in Sears' downfall:

Since then, Sears and Kmart have been slowly dismantled by Lampert. Implementing a culture of warring tribes, one in which divisions would battle it out for resources, little cash was funneled back into reviving physical stores. Chunks of the business were sold to keep the lights on. In January, the company sold the famous tool brand Craftsman to Stanley Black & Decker Inc. for about $900 million. “He did nothing to maintain the stores—nothing to spiff them up and make them a nice place to go shopping,” said Robin Lewis, a longtime industry analyst and chief executive of the Robin Report.

Is A Financial Flu Contagious?

I received a long email from Walton International, the large land syndicator, describing its Canadian parent's restructuring.  I don't know Canadian bankruptcy terms, but it sounds like a Chapter 11 restructuring.  Walton offered many land deals in the United States, but its Canadian housing operations were always touted as the backbone of the organization.  Here is part of the email:

On April 28th, 2017 Walton International Group Inc. (“Walton Canada”), an entity organized in the province of Alberta Canada, and several other Canadian affiliates and Canadian development entities (collectively, the “Canadian Filing Entities”), announced that they have obtained an Initial Order from the Court of Queen’s Bench of Alberta (the “Canadian Court”) for creditor protection under the Companies’ Creditors Arrangement Act (“CCAA”). This filing in Canada (the “CCAA Proceeding”), allows Walton Canada to stabilize its affairs, with a goal of restructuring certain obligations and other attributes of the Canadian Filing Entities and Walton Canada emerging as quickly as possible as a more profitable operating company. The Canadian Filing Entities are wholly owned direct and indirect subsidiaries of Walton Global Investments, Ltd. (“Walton Global”), a parent company also organized in Alberta Canada, which is not a Canadian Filing Entity.

The relief requested by the Canadian Filing Entities was precipitated by the downturn in the Alberta economy. The primary driver of the poor economic situation in Alberta is the severe and sustained drop in energy prices that began in 2014. The resulting decrease in demand for Walton’s products in Canada and resulting liquidity and financial difficulties of certain development projects in Alberta has created this situation.

I have been trying to think of a situation where the financial problems of a sponsor have not impacted its funds, even though the funds are separate entities from the sponsor.  No example jumps to mind.  Walton goes to great lengths in its email to distinguish between its Canadian operations and entities and its American land funds, and this is correct.  One thing about Walton though, there was always lack of transparency on the other entities involved, besides the U.S. funds, on its U.S. land deals, so I would not be surprised to learn that U.S. investors own land near or adjacent to land owned by a Walton Canadian entity.

Walton has been sloooooow to sell its land deals, in large part, in my opinion, because the longer Walton owns the land the more of the up front reserved management fees it gets to keep (and believe me, Walton reserved years of fees).  With its Canadian financial problems, and a stack of prepaid, reserved fees in its U.S. land funds, do not look for Walton to start selling properties until its gets all those reserved fees.

Towards the end of the email Walton says, "While we know this information may cause concern, we ask for your patience in contacting Walton with further inquiries on the situation while we work through this restructuring."  Don't call us, we'll call you.  Comforting.

Yanking The Deal

I read in this morning's DI Wire that Resource Real Estate is suspending its Resource Innovation Office REIT, and will restructure it as a Net Asset Value REIT.  The REIT had raised less than $5 million in the nearly two years since it was declared effective, so I am guessing that tweaking the fee structure is not going to suddenly make this REIT attractive to broker dealers and investors.  Resource America, the parent of Resource Realty, was purchased by C-III Capital Partners, a large real estate investment firm, in deal that closed in early September of last year.  

I don't know C-III's plan for the Resource non-traded REITs, but I think broker dealers and investors would like to see an investment offering C-III's real estate expertise.  Trying to push legacy Resource deals in a tough environment is not working.  C-III has controlled Resource for eight months and its time put its institutional real estate expertise and its balance sheet to work attracting retail investors. 

Quicksand

Yesterday's DI Wire was full of press release reprints.  I noted one in my previous post, and here is another on First Capital Realty Trust hiring a new CFO.  I have lost track of how many CFOs this firm has had since new management took over in September 2015, but I am running out fingers to count them.  First Capital still has not filed any financial statements since the second quarter of 2015.  I don't see working with outside auditors as a job description when I read the duties of the new CFO: "overseeing all aspects of the finance function, including capital market activities, financial reporting, accounting, tax and internal audit." This new guy will last until he realizes he is getting paid in Operating Partnership units.

The DI Wire story also noted First Capital's big transaction in Sacramento, California, called Township Nine, and how it is working on a strategic transaction with Presidential Realty Corporation.  The story omitted that the mortgage securing Township Nine is in default and how resolving this debt supersedes any activity on the property.  Oops.  I wrote about the Township Nine mess here. 

The good news is that there are still third party "due diligence" firms writing reports on this outfit.  I bet they are not getting paid in OP Units.

Mystery Solved

Strategic Storage Growth Trust Inc. raised over $93.5 million in equity in the last month of its offering.  The March equity inflow represented nearly 41% of all the equity the REIT received in its entire offering period, which was over two years, and the REIT's last three months of equity inflows totaled a staggering 57% of its equity.  A non-traded REIT, long into a previously weak offering, does not experience big inflows without a reason.  

Yesterday, I believe I learned the reason.  The DI Wire reported (OK, mostly reprinted Strategic Storage's press release) that Strategic Storage Growth Trust had announced a Net Asset Value per share of $11.56 per share.  All the new money - $131.5 million in the first three months of 2017 -  that went into the REIT at $10.05 per share, now have a new value of $11.56 per share.  Nice!  

I suspect Strategic Storage was whispering about the higher pending valuation and that resulted in the huge money inflow.  This strategy has been used before by Strategic Storage and other sponsors to raise big money over the short period between when they receive the new valuation and when they announce the new revaluation.  It is a good story: market a non-traded REIT at price per share that the sponsor knows for sure is going to show a much higher value in a matter of weeks, and then sponsor and financial advisor look like geniuses and new investors are happy.    If something works, stick with it.  But remember, you can't spend a valuation increase in a non-traded security.

Retail Tipping Point and Wider Impact

Here is a New York Times article from over the weekend on the impact of store closings.  The article is broad in its scope.  There are so many factors impacting retail that it is hard to point to one dominant cause for retail's problems.  E-commerce is surely a factor and the improvements to delivery will drive its growth.  Still, trying clothes on before purchase is not going to go away.  Buying online on spec and hoping clothes fit gets old fast with the hassle of returns. But something big is happening, especially since the overall economy is still growing.

Store closures, meanwhile, are on pace this year to eclipse the number of stores that closed in the depths of the Great Recession of 2008. Back then Americans, mired in foreclosures and investment losses, retrenched away from buying stuff.

The current torrent of closures comes as consumer confidence is strong and unemployment is low, suggesting that a permanent restructuring is underway, rather than a dip in the normal business cycle. In short, traditional retail may never recover.

A strong real estate market is not helping retailers.  As landlords push rents they are forcing retailers to close, and apparently, it is not just the small, local retailers, as evidenced by empty stores on 5th Avenue, Beverly Hills, and SoHo.  I noted this urban high rent blight here. 

I repeat this passage in the middle of the New York Times article without much comment because of its severity:

Between 2010 and 2014, e-commerce grew by an average of $30 billion annually. Over the past three years, average annual growth has increased to $40 billion.

“That is the tipping point, right there,” said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. “It’s like the Doppler effect. The change is coming at you so fast, it feels like it is accelerating.”

This transformation is hollowing out suburban shopping malls, bankrupting longtime brands and leading to staggering job losses.

More workers in general merchandise stores have been laid off since October, about 89,000 Americans. That is more than all of the people employed in the United States coal industry, which President Trump championed during the campaign as a prime example of the workers who have been left behind in the economic recovery.

The job losses in retail could have unexpected social and political consequences, as huge numbers of low-wage retail employees become economically unhinged, just as manufacturing workers did in recent decades. About one out of every 10 Americans works in retail.

I think it's time to start start re-purposing or razing real estate.