Worries About New York City Grow

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Goldman Sachs ($GS) predicts that the proposed new tax law will spark some David Tepper-like rich flight out of New York and Connecticut. Choice quote, “These changes could create additional fiscal challenges for the high-tax areas, some of which already face structural pension funding issues,” the economists said. Luckily there are no services issues in the city like, we don't know, busted ferries, busted buses, or busted subways that will require vast amounts of capital to fix up to 1980s standards, let alone 2030. Go Yanks. 

New York City in Trouble?

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We've been concerned about New York City since we started and it finally seems like others are coming around to realize how much this retail situation is affecting things. "One by one, cherished local shops are disappearing, replaced by national chains or, worse, nothing at all."  Welcome to the party pal. And so the New York Times proposes some solutions, including a "vacancy tax." Good luck with that. 

Unicorns 2.0 (Scooping Up Retail)

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Hudson's Bay & WeWork Say "Let's Make a Deal"

Hudson's Bay Co. ($HBC) was a real newsmaker this week. The company sold its Lord & Taylor NYC location to WeWork for $850mm. It also got a (convertible preferred) equity infusion of $500mm through a joint venture between WeWork and the Rhone Group. Which means that Softbank basically owns a piece of Fifth Avenue now. Regulate THAT misdirection/obfuscation. Anyway, HBC will use the proceeds to pay down its $1.6b of debt and, presumably, pretty itself up for a potential take-private transaction. For sure, the future is uncertain. P.S. This re: WeWork (firewall). Bankruptcy Judge ABC: "And so, Banker XYZ, on what valuation basis is the company's plan of reorganization viable and feasible?" Banker: "Our valuation and size today are more based on our energy and spirituality than it is on a multiple of revenue." Judge ABC: "Come again? Bankruptcy plan confirmation denied!" Going forward, whenever we have a typo or a busted link we hope you'll only judge us on our energy and spirituality. 

Why Shake Shack Says Short Thermal Paper

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Appvion Inc. is the Canary in the Coal Mine

Appvion Inc. (summary below) filed for bankruptcy early Monday morning. This shouldn't have come as a surprise to people following the situation as (i) the company had previously issued a "going concern" warning and (ii) S&P Global Ratings had issued a credit downgrade. The First Day Declaration filed in conjunction with the bankruptcy notes that the thermal paper segment is being counted on for growth. Seems like that segment, then - currently 60% of net sales - would be the cornerstone of a restructuring. It's not clear from the papers how much of that business is point-of-sale receipts and coupons. We HAVE to imagine, though, that that portion of the segment is under threat. To point, note that on Monday Shake Shack ($SHAK) announced that it will be testing a cashless kiosk near New York University in New York City's East Village neighborhood. Cashless and receipt-less. Notably, Sweetgreen has also taken this step. Disruption, in real time.

Distressed Real Estate on the Rise

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Should We Be Worried about New York City?

Combine lower tax collections, high commercial vacancies, decreased tourism and now this (spoiler alert: the most foreclosures in NYC since 2009) and we're beginning to think there's some reason to worry about New York City. You couldn't tell, though, from the mayoral race. Big Bird will probably come in second place via write-in vote. 

TheRealReal > 2nd Time Around. We hope.

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 TheRealReal plans to followup on the reported success of its Manhattan-based pop-up with a brick-and-mortar location in SoHo. This is good news for those who feel as retail has absolutely nothing positive going for it these days. 

That said, we can't help but wonder if the sudden and shocking closure of 2nd Time Around might have a negative effect on this initiative, as consignors got BURNED. Time will tell, we suppose, but those looking to enter into consignment agreements ought to protect themselves accordingly.