Propmodo Daily

Greetings!

Red Lobster, America's iconic seafood restaurant, has filed for Chapter 11 bankruptcy, citing overwhelming real estate costs as a primary factor (not endless shrimp). Once owning most of its locations, the chain sold off properties under new ownership in 2014, leading to costly long-term leases. As we discuss in today's email, the company now seeks to cancel 108 leases to stay afloat.

The U.S. Department of Energy has launched a $2 million competition to boost energy-efficient window technology, highlighting windows' key role in reducing energy use. In a new article, we explore how innovations like solar window technology, triple-glazed glass, and heat-retaining glass are drastically cutting energy consumption and emissions, helping buildings achieve their sustainability goals.

Join us on May 30, 2024, at 1:00 PM ET for a Propmodo Live webinar discussion on adapting office leasing strategies. Industry experts from CoStar, JLL, Cohesion, and Propmodo will share insights on hybrid work, high interest rates, shrinking workspaces, innovative office design, and effective lease negotiations. Don't miss out—register now!

This week in Propmodo Technology, we delve into access control for multifamily and commercial buildings. We'll examine the new standards that are mitigating cybersecurity threats in modern high-tech access control systems and discuss the role of access control within a building's broader security ecosystem. We'll also explore the growing trend of replacing traditional keys with mobile devices like smartphones and smartwatches, and how this shift is revolutionizing access control.

Now, let's dig in!

Red Lobster Real Estate Fallout

America’s most well-known seafood restaurant has announced that it has filed for Chapter 11 bankruptcy. Red Lobster, founded in 1968 in Florida, grew to have more than 700 locations at its peak. Now, the brand is bankrupt. One of the main reasons for the chain’s struggles is its handling of real estate, not the $11 million loss from the endless shrimp promotion, as many have claimed.

Red Lobster used to own most of the real estate that its restaurants occupied. However, in 2014, it was purchased by a private equity group called Golden Gate Capital, which decided to sell off its property. Much of it was sold to American Realty Capital Properties, which then rented it back to the company on long-term leases, mostly 25-year terms. Selling off real estate to fund business expansion was common practice at the time. “They don’t need to own the real estate; they can rent it,” said Nicholas Schorsch, CEO of American Realty Capital at the time. “The big REITs are almost becoming shadow banks.”

Now, those leases are too much for the struggling company to overcome. Changing consumer preferences have put Red Lobster in the red, and they have no way to get out of the leases without bankruptcy protection. They have filed two motions calling for the cancellation of 108 of their current leases. These leases are located all over the country, and the vast majority are owned by single-purpose LLCs.

Losing a tenant is never good for a landlord, but losing Red Lobster might be more painful than usual. Red Lobster locations are generally large, between 7,000 and 9,000 square feet, making them hard to lease in a market where smaller, “fast casual” restaurant layouts are more sought after, especially in informal strip malls. Red Lobster locations also have their signature red siding and rock-clad entrances, which will be costly and time-consuming for new tenants or landlords to replace.

Losing just over one hundred restaurant locations will not significantly impact the overall restaurant leasing market. However, there is no guarantee that Red Lobster will turn its business profitable even after bankruptcy. If Red Lobster goes out of business altogether, it will leave a lot more empty retail space that will be hard to fill. The fall of Red Lobster will also serve as a cautionary tale to other restaurants, highlighting the risks of selling off real estate to raise money. While selling real estate might provide quick cash for growth, it could leave a business with nothing more than cheddar biscuits in the end.

Buildings

Insider Insights

📝 Word checker: Zillow has released an AI software that will help make sure that real estate brokers and agents don’t write anything that doesn’t comply with Fair Housing laws.

🥅 Self safety net: The New York City Employee Retirement System pension fund has pledged a $60 million investment in affordable housing units that have been affected by the bankruptcy of Signature Bank.

Overheard

Propmodo Technology: Access Control

Are You Enjoying This Newsletter?

Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

📧 Forward it to a friend and suggest they check it out.

🔗 Share a link to this post on social media.

🗣 Have ideas for future topics (or just want to say hello)? Share your feedback and tips at [email protected] or connect with us on X through @propmodo.

✅ Not subscribed yet? Sign up for this newsletter here.

📫️ Please add our newsletter email, [email protected], to your contacts to make sure you don’t miss any updates.

Explore Propmodo

• Read exclusive articles about a variety of topics, including Real Estate, Workplace, Buildings, and Development.

• Browse our collection of interactive Propmodo Research e-books.

• Sign up for upcoming Propmodo Live Webinars or watch past Propmodo Live videos on-demand.

• Dive into Propmodo Technology articles, podcasts, and short videos about the future of commercial real estate.

Enjoy reading about trends and innovation in commercial real estate? Subscribe to Propmodo.com for unrestricted access to reliable, data-driven journalism and exclusive insights available only to subscribers.