Dear Clients:
This year Metro Commercial Real Estate, Inc.
celebrates its 15th year in operation thanks to our many loyal customers.
Much has changed at our company in response to the challenges and opportunities
presented by the economy, in addition to the changing face of retailing in
America.
The transformation of retailing includes the continued
consolidation of large regional grocery chains; the entry into, and emergence
from, bankruptcy of the large theater chains; the decline of retail classics
like Kmart, Bradlees and Montgomery Ward; the rise of hot Big Box retailers
like Target, Wal-Mart and Kohl's; the continued expansion of category killers
such as PETsMART, Circuit City, CompUSA; and, finally, the economic and demographic
forces that have brought a seismic shift in consumer focus and, as a consequence,
the way the traditional shopping center has evolved.
We are proud to have completed numerous Big Box retailer
leases, including deals with Target, Kohl's, Lowe's, Home Depot and Burlington
Coat Factory; a dozen supermarket deals, leasing properties to Acme, Genuardi's,
ShopRite, Stop & Shop and Super G; also, numerous leases with category killer
retailers such as L.L. Bean, Best Buy, PETsMART and Michael's Arts and Crafts
in 2002. There is no evidence that any of this will change in the short term.
Indeed, the demographics and psychographics driving the change in retail habits
are clear. We see it in the explosion of retail categories that simply didn't
exist 15 years ago, including the super bookstore and specialty chains like
Barnes & Noble and PETsMART and the absolutely dynamic growth of the furniture
market. Despite the accelerated pace of change, some historical constants
remain. Foremost among these is the value of location. The continued strong
market in new housing developments is prompting the construction of new power
centers in the farther reaches of suburbia. Metro Commercial was privileged
to represent Developers Diversified Realty in the acquisition of the 85-acre
Centerton Square Retail Project in Mt. Laurel, NJ, slated for a 750,000 square
foot power center. Construction of new power centers in existing neighborhoods
is slowing down with Big Box and category killer retailers battling for existing
space, refilling vacated space from bankrupt stores, bidding up prime locations
and, in fact, repositioning entire centers. This focus on the remaking of
existing space, reevaluating prime locations for redevelopment, construction
oversight and ongoing maintenance during and after major remakes, has made
all the processes more complicated and brought demands for whole new sets
of skills at our end of the business. Metro Commercial is currently involved
in several redevelopment projects acting as leasing agent, property manager
and construction manager. Metro Commercial's Construction Services Division
continues to set a strong pace for the industry, providing construction management
for several projects throughout the region. One notable project is the redevelopment
of Boulevard Plaza Shopping Center, a 325,000 square foot property in Northeast
Philadelphia that entails the relocation of five tenants, the demolition of
210,000 square feet of existing shopping center and pad and site construction
for a 145,000 square foot Target and a 20,000 square foot PETsMART. The Construction
Services Division also handles expansion and tenant improvement for locations
such as: Manoa Shopping Center in Havertown, PA; Festival at Hamilton Shopping
Center in Mays Landing, NJ; Hillview Shopping Center in Cherry Hill, NJ; and
the Gallery II Mall in Center City, Philadelphia. Also this year, Metro Commercial's
Property Management Division was contracted by CIGNA to lease and manage a
second enclosed mall, the 525,000 square foot Camp Hill Mall in Camp Hill,
PA. In addition, the Gallery II Mall in Center City Philadelphia has undergone
a revival with Metro Commercial's leasing, management and construction team
bringing in new anchor tenants, Burlington Coat Factory and Old Navy, which
has, in turn, attracted many new tenants to the property. Enclosed malls,
in tandem with other property management assignments, such as Airport Square
in Montgomeryville, PA, brings Metro Commercial's managed property to a total
of 5.4 million square feet. Economists will tell you that the strength of
the U.S. economy over the past several years has been the American consumer.
That strength in consumer spending and lower interest rates has been a positive
force for shopping center owners. Declining interest rates, as well as lower
returns on alternative investments, have resulted in declining cap rates and
a corresponding increase in value for most acquisitions. Our Investment Sales
Group wrapped up another record year with 10 deals closing in 2002, including
the 525,000 square foot Camp Hill Mall. We will continue working this year
for one of the hottest retailers on the national scene as the exclusive agent
for Target, as it extends its expansion in the Northeast this year, adding
to the 20 locations previously acquired in the Philadelphia region through
Metro Commercial. In addition, PETsMART, a growing retailer with a well-defined
niche, will use our company this year as its exclusive agent for new locations
from Virginia to Maine. Clearly, Metro Commercial has built the kind of expertise
and developed the kinds of relationships that will sustain it as retailing
changes and evolves well into the future. We are extremely grateful to our
clients and staff for these opportunities and look forward to the challenges
ahead. Daniel J. Hughes, President
