Monthly Archives: May 2020

And Just Like that……Everything Changes!

These days, my blog just seems to write itself. Experiences and new ways of accomplishing almost everything, from washing clothes to shopping, are the norm. But as humans, it takes an exceptionally long time to change our ways so that all our new activities feel stiff and unfamiliar. Take for example, shopping, my passion! Here in Napa County, we are in Phase Two A of the process. That means many retail locations can reopen, except ones that involve person-to-person contact like salons, nail parlors, gyms, and spas.

About a week ago, my husband and I went to the University of California San Francisco hospital, where he had a follow-up appointment for a recent health scare. Since no one is allowed in the hospital other than the patient, I had to occupy myself with walking around nearby.

UCSF is in Mission Bay, as is the beautiful new Chase Center Warriors and concert arena. This venue opened in September 2019 at a cost of half a billion dollars. Besides the 18,000-seat arena, the project boasts 580,000 square feet of office space and 100,000 square feet of restaurant and retail space. Additionally, a new light rail system connecting the arena to downtown is also proposed, at a cost of $1.0 billion. The MANICA designed arena opened with a Metallica concert playing to a sold-out crowd.

Huge investment full of vision and promise. A community gathering space that would be alive at least 250 nights each year. The one and only first-class arena for concerts in San Francisco. A new space for artists to add to their tour routes! We attended the Sara Bareilles concert in January and though the house was set in the concert-configuration at 10,000-capacity, it seemed like we were onstage with her.

Here is what it looks like now:

Eerie. A boarded-up ghost town cordoned off to all seeking to visit. The many restaurants were either not yet operational when the Pandemic began or closed now because of it. A special favorite of Northern Californians is Gotts, a local hamburger and milk shake joint that now offers sushi and other fancy stuff. I almost cried when I saw this:

   

How could this happen? Who could have predicted this devastating blow to a brand-new entertainment venue in one of the best entertainment regions in the world?

And just like that, everything changed again! Last week, stores were allowed to open in Napa County, where I live. I was thrilled. It was advertised that the Napa Premium Outlets were not yet open, but that the Vacaville Premium Outlets were (both Simon Properties). I drove the 35 minutes to the Outlets and was greeted by a very spotty opening sequence. Most stores were still closed, and signs disclosed they would be open next week or the week after. The few stores that were open look like this:

One or two customers in each shop.  The stock was plentiful because it has been sitting in a warehouse for two or three months, awaiting opening of the stores . I felt particularly sorry for a new William Sonoma Factory store that just opened for the first time, with no customers in its beautiful store:

I have PTSD from trying to keep up with the world. It’s like when you have your first baby, or worse yet, your second baby, and just when you think you have it nailed, their behavior changes, they start sleeping less or more; they don’t like the food today that they loved yesterday; they cry endlessly for no reason, and you want to run away. But of course, you don’t, except for maybe a minute or two when you lock yourself in the bathroom and sob for, which is all the time you are allowed to yourself as a new parent. That is what I feel like today. I want certainty; I want routine; I want to get on a plane and go on my summer vacation; I want to see my grandbabies; I want to kiss my kids! I will just keep muddling along, as I imagine we all will. And I will keep writing blogs that someday may seem like the poetry you wrote when you were a stoned college kid.

What are you doing to stay sane? Share with us your tips for slogging through your days.

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It’s the Throughput, Stupid 1/

Someone very famous once told me, “Jill, always remember you’re a numbers gal.”  Every entertainment-infused real estate development has industry standard numbers that equate to profitability.  All retail, dining, entertainment attractions, public assembly, hospitality, sports and cultural facilities follow set rules.  So, for those of you who aren’t throwing in the towel yet, here are some simple rules and some complications, based on a couple of very simple formulas:

  1. Annual Attendance = Gross Market Size x Market Penetration Rate
  2. Design Day Attendance = the Percent of Annual Attendance seen on any of the 15 to 20 busiest days of the year.
  3. Peak On-Site = the Length of Stay relative to the Period Open, accounting for arrival and departure patterns.
  4. Gross Revenue = Annual Attendance x Per Capita Revenue for Admission, Retail, Food & Beverage, Merchandise, and Ancillary Sources of Revenue
  5. Net Operating Income or EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) = Gross Revenue minus Projected Expenses for each year the project is open.  The formula normally refers to a stabilized year.
  6. Warranted Investment = EBDITA x Industry Standard Years to Payback. (For non-entertainment real estate projects this number is the basis for the capitalization rate.)

In my experience, the throughput’s the driver, followed by per caps. Since throughput is being curtailed by up to 75% in some industries including theme parks, movies, and restaurants, this is a major issue.

Therefore, any entertainment real estate project hoping to make it through to the other side (wherever that lands) must look to increase per capita or lower development and/or operating costs.  That’s a tall order.

Another way to keep NOI thriving is through development of other sources of business, in other words, diversification.  Disney is doing a particularly good job:  an example, they will be releasing the digital version of “Hamilton” with the original Broadway case on Disney + within the next 60 days.  Theme parks are being decimated so the company is diversifying into creative and original digital offerings.

I don’t really have any easy answer because this is an evolving situation that changes daily.  What I can say will absolute certainty is that leaving out necessary planning and development steps will result in failure.  During the last recession, we had a few clients who didn’t plan enough parking for design day on-site needs, to save money.  And sadly, they had to fix this after the fact, spending millions of dollars of cap ex in subsequent years.

There is lots of work to do to create the new business model.  My clients and friends should be working on this right now!  What are you doing?  How are you developing new capital and operating models?  Let us know, and together we can save our industry!

1/ Throughput is the annual number of guests visiting a project on a given day, month, week, or year.

 

 

Musings From a Bored Feasibility Consultant  

My practice lives and dies with innovation and optimism.  With most clients and friends scared to death about what this crisis will bring when it is over, or whether it will ever be over, my normally optimistic client base is taking a nap.  They are shut down and not practicing good old American ingenuity.

I have lived through many downturns and booms, a litany of business cycles.  My space in the entertainment development world falls between the idea and execution. Is this idea crazy?  Does it have legs?  Can I afford to develop it?  Where will I get development funds?  Am I nuts to be thinking this right now?  These are some of the questions my practice is hired to consider.

In all cases, I provide one of the following answers:

  1. Brilliant idea. Let’s do some preliminary testing.
  2. Hmmmm, I think that’s been done before, but maybe we can improve on the existing model.
  3. I like it, but I really think the idea needs more development on your part, or if you like, we can help you move it along.
  4. That is the dumbest idea I have ever heard. Save your money, don’t hire me, or if you’ve already hired me, you should fire me!

A couple examples of the ill-though-out ideas:

  • A large INDOOR entertainment center on the beachfront of a major East coast resort.  The branding strategy: It’s a beautiful beach day, let’s all head inside!
  • A 100,000 square foot museum at a major Indian casino in the U.S. with the theme “The slaughter of the tribe by the White man.”  (Footnote: The gamblers at the resort are 95% White.)
  • A major entertainment company’s decision to disallow wine at a park in France.
  • The decision to build two competing 20,000-seat amphitheaters across the highway from each other in a major Orange Co. California city.

But happily, more of my practice involves ideas that have you smacking your forehead and saying, “Why didn’t I think of that?”!  Some examples:

American Girl Place (built and wildly successful),

Academy of Motion Pictures Museum (to open year’s end 2020),

Hollywood and Highland (the initial plan didn’t follow our advice);

Sony Metreon (also, didn’t follow our advice);

A new hospitality/retail/dining/entertainment/ development in Mecca, the Hajj (they didn’t hire us:  I wouldn’t have either!);

A mixed-use sports and entertainment-infused $1.0 billion development in downtown Edmonton (The Oilers got 60% of their Phase One development funds from our numbers, the first time ever a sports venue received public funding in the province):

Maybe soon we will have a few new brilliant ideas to report to you.  Until that time, stay safe, well, healthy and hopefully, not too bored!

 

 

 

 

 

Some Bright Spots on the Jobs Horizon

While we’re all at home doing a bit of R&R and obsessively watching the news (oh, maybe that’s just me) for any glimmer of hope, I found some good news.  While the GDP shrank by 4.8% in the first quarter of 2020 and unemployment nationally is upward of 16%, there is plenty to worry about. 

But some companies are expanding and hiring like mad! These are the frontline businesses that need to ramp up workers to meet the short-term growing demand for their products and services, according to a report by Linkedin.    Here is a list of some of these growing companies:

Upwards of 51,000 Employees 

25,000 to 50,000 Employees 

  • CVS Health is hiring 50,000 employees to serve in various capacities across its business.
  • Dollar General says it’s looking to add 50,000 employees by the end of April.
  • Walmart is hiring 50,000 workers for its distribution and fulfillment centers.
  • FedEx is hiring 35,000 people for essential roles.
  • Allied Universal is hiring more than 30,000 people for open positions.
  • Ace Hardware is hiring 30,000 people to work in its stores nationwide.
  • Pizza Hut is hiring 30,000 permanent employees to serve as drivers, shift leaders, cooks and managers.
  • Lowe’s is hiring 30,000 employees
  • Dollar Tree, which is also the parent company of Family Dollar, is hiring 25,000 workers for its stores and distribution centers.
  • Walgreens is hiring 25,000 employees for permanent and temporary roles.

10,000 to 20,000 Employees 

400 to  9,999 employees 

  •  Office Depot is hiring up to 8,000 people to be seasonal retail        associates.
  • PepsiCo says it plans to hire 6,000 employees over the coming months.
  • AdventHealth is hiring more than 5,000 people to fill open roles.
  • TNG Retail Services is looking to hire 5,000 people for hourly roles.
  • Amwell is hiring people to fill 5,000 positions across the country.
  • Nestle USA is hiring more than 5,000 people.
  • Lockheed Martin is hiring more than 5,000 people to fill open positions.
  • Tractor Supply Company is hiring more than 5,000 people at its stores and distribution centers.
  • Rite Aid is hiring 5,000 people to work in their stores and distribution centers.
  • Big Lots is hiring 5,000 people to help meet increased demand.
  • Outschool is looking to hire 5,000 teachers to start offering online classes.
  • Providence St Josephs is hiring people for more than 3,000 positions.
  • Bon Secours Mercy Health is hiring nearly 3,000 people for open positions.
  • United Wholesale Mortgage plans to hire 2,500 people over the coming months.
  • Addus HomeCare is hiring people for 2,400 open roles.
  • CommonSpirit Health is hiring for more than 2,200 positions.
  • Mercy is seeking to hire more than 2,000 co-workers for essential health care roles.
  • Fidelity Investments plans to hire 2,000 people to fill roles, including financial consultants, licensed representatives and customer service representatives.
  • Salesforce is hiring for more than 2,000 positions.
  • Love’s Travel Centers and Country Stores is hiring more than 2,000 people to meet demand.
  • IQVIA is hiring for more than 2,000 roles.
  • Takeda, a large pharmaceutical company, is hiring for 2,000 positions.
  • Mercy Health is hiring nearly 1,900 people for open positions.
  • L3 Harris is hiring more than 1,800 people for open roles.
  • BAYADA Home Health Care is hiring more than 1,5000 people.
  • Trillium Health Partners are hiring 1,500 people for open positions.
  • Capital One is hiring for more than 1,300 roles across the U.S.
  • UCHealth is hiring people to fill more than 1,200 positions.
  • Bon Secours is hiring nearly 1,100 people for open positions.
  • Aveanna Healthcare is hiring more than 1,000 people for open roles.
  • Pruitt Health is hiring people for more than 1,000 roles.
  • Parsons Corporation is hiring more than 1,000 people for open positions.
  • Tetra Tech is hiring people in North America for 1,000 roles.
  • Better.com is hiring 1,000 employees — with a focus on hospitality employees.
  • Success Academy Charter Schools plan to fill about 1,000 full-time positions in New York City.
  • Publix Super Markets is hiring “thousands” of workers to meet increased demand.
  • Safeway is hiring thousands of workers due to the demand created by the virus.
  • Shipt is hiring “thousands” of people across the country.
  • CHRISTUS Health is hiring more than 1,000 people for open positions.
  • Regions Bank is hiring more than 900 people for open roles.
  • Philips is hiring roughly 900 people for open positions globally.
  • Ball Aerospace is hiring to fill more than 800 positions.
  • Veeva Systems is hiring people for more than 800 positions.
  • Fifth Third Bank is hiring nearly 750 people for open positions.
  • MUFG is hiring 700 people for open positions.
  • KLA is hiring workers for 700 roles.
  • Electronic Arts is hiring people to fill more than 700 roles.
  • Autodesk is looking to hire nearly 700 people for open roles.
  • Apple is hiring people for 600 roles in the U.S.
  • GoHealth is hiring 600 people for open positions.
  • Fortive is hiring 500 people for open roles.
  • New York City is hiring people for 500 non-clinical positions.
  • The CDC Foundation is hiring up to 500 people for open positions.
  • FactSet is hiring people for nearly 500 positions.
  • FirstGroup America is hiring people for 475 jobs.
  • Corizon Health is hiring more than 400 people for open roles.
  • Western Governors University is hiring more than 400 people.
  • Liberty Mutual is looking to hire more than 400 people to fill open roles.
  • DocuSign is hiring people for over 400 positions.
  • CommScope is hiring 400 people for open positions.
  • Fannie Mae is hiring 400 people for open roles.

Other Businesses that are expanding:

  • GHA Technologies
  • Cargill
  • Koch Industries
  • ServiceNow
  • The U.S. Census
  • BJ’s Wholesale Club
  • Blue Apron is looking to hire in New Jersey and California.
  • Land O’Lakes is looking to hire to meet increased demand.
  • Support.com is hiring a for remote positions.

These businesses are essential  retailers or those with strong cloud formats They include drug stores; other “Essential Retailers” (especially those that offer cheap good such as Dollar Tree), and businesses that can conduct all business remotely.

Will these firms continue their growth for the long term, or are they merely meeting new demand generated by the COVID-19 pandemic?  That’s the big question! Let us know your thoughts?  We love hearing from you!