Summer 2008 Newsletter

by Harold Shumacher

Atlanta Restaurant Real Estate News header

Welcome to the 21st year of Atlanta Restaurant Real Estate News. The information that follows is compiled from a variety of industry publications, restaurant insiders and personal observations.

Since 1987, we’ve been distributing this publication to Atlanta’s leading real estate developers, landlords, brokers, restaurant owners and operators, and vendors to the food service industry. It’s provided us an excellent means to keep in touch with our core audiences and make them aware of who we are and what we do. Your thoughts and comments are welcome. Please contact me at harold@shumacher.com.

cuba

cuba3Someday, when the American travel embargo to Cuba is lifted, we’ll learn what the rest of the traveling public already knows — Cuba is a very cool place. Earlier this summer, I had the opportunity to spend a week in Cuba, including five days in Havana and two in Trinidad, the country’s oldest city on the Caribbean coast. Some observations.

Life is hard here. The average wage is $30/month. Granted the government provides basic services — health, housing and education — but day to day life involves waiting in lines, bureaucracy and general inconvenience. It’s said in Cuba, that when the government solves one problem two more are created.

cuba2The tourist infrastructure is surprisingly well developed thanks to years of visits by Canadians, Europeans and residents of Mexico and South America. When you arrive at the Jose Marte International Airport in Havana, a modern jetport, you can rent a brand new Audi and head off unfettered to a myriad of coastal resorts, mountain eco-lodges or five star hotels in Havana. There are accommodations and restaurants in all price ranges (many of which can be found on the internet), English speaking tour guides and activities to suit almost any interest. Virtually all businesses are owned or controlled by the government. There is an entrepreneurial spirit but it mainly consists of residents trying to find ways to make extra money as artists, musicians and self-appointed tour guides leading you to stores and restaurants where they can earn a commission.

Politics are seldom discussed out loud; when they are it’s in very general terms. Castro (Fidel or Raul) are seldom mentioned by name but referred to as “he.” There is optimism that if, and when, the U.S. boycott is lifted economic conditions will improve. For now, the country depends on mining, tourism and money sent from abroad as its leading sources of income. (One-third of Cubans have relatives living outside the country.)

cubanThere are fresh fruits and vegetables for sale on the streets but they’re part of a multi-level distribution system that includes government stores that sell staples to luxury grocery stores that only accept tourist dollars (approximately equal to a U.S. dollar in value) with similar prices to what we’d find here.

Good Bones Needs Paint
There are few signs of construction or new development. What little renovation that is going on is mainly old, historic buildings being converted to government use-such as galleries and museums. It’s very rare to see a private home that has been renovated. Cubans can “own” property (basically a right to occupy) but in reality the government sets the price and controls the underlying real estate. The majority of the houses have good lines with a distinctly Miami Beach art deco influence. You can imagine what the city would look like if residents had extra money for paint, plaster, awnings, shutters and landscaping. Those are luxuries beyond the reach of most citizens.

cuba4With a housing shortage, it’s not unusual for three generations of a family to live together. The proximity and lack of privacy contribute to the high divorce rate, well in excess of fifty percent. The Cuban population has doubled, from six million to almost 12 million, since Castro seized power in 1959. The composition of the population has also changed from almost 70 percent European descent (i.e. white) to 70 percent Caribbean (black and mulatto.)

Cuba is the largest island in the Caribbean, approximately equal in size to England, but with one-sixth the population. Once you’re outside the main cities, it’s essentially a rural farming society with bicycles, scooters and horse drawn carriages being more common than autos. Old cars can be found in abundance-mainly because they run on regular gas which is cheaper than the unleaded that new vehicles require — and the fact that you need governmental permission to buy a new vehicle. As a result, most residents hold onto their cars.

cuba1

What does the future hold … There is nothing more dangerous than a “one week expert” whose views and ideas are often shaped by tour guides and official declarations. It’s hard to believe that the boycott currently in place will continue another fifty years. The proximity to the U.S. mainland, the dwindling influence of the expatriate community in South Florida and the general nature of the world economy make it difficult to believe that the economic and political powers to be will ignore a market so close to our shores.

It’s expected that in the first year after the boycott four million Americans will visit Cuba. When that happens expect to see significant upgrades in tourist facilities, and the development of additional retail space and a housing boom. Until then, Cuba will remain a step (or more) back in time and a place to be experienced if the opportunity occurs.

As predicted in our Spring 2008 newsletter the pace of development has significantly slowed in metro Atlanta. There are hints and glimmers of new projects slated for 2010, and beyond, but most are based on commitments from anchor tenants-that are not immediately forthcoming-and financing that is still shaky. We wouldn’t at all be surprised if current market conditions don’t remain this way for another six to nine months. That six to nine month gap is also apparent in land prices, sellers seeking prices from nine months ago and buyers wanting to pay what the property might be worth nine months hence. In essence we’re in an extended stalemate.

There is growth in the non-traditional markets. In another sign of Atlanta’s growing international community the Macy’s at Gwinnett Mall will soon become home to M, the first U.S. location for South Korean based Megamart. A combination grocery store, apparel store, food court and catering hall the 240,000 square foot store is expected to open in mid 2009

varsityHappy Birthday – Atlanta mainstay –The Varsity – recently celebrated its 80th year in business, while Poncey Highland’s Manuel’s checked in at a robust 52.

Some interesting factoids about the Varsity. On a typical day, the world’s largest drive in restaurant serves over two miles of hot dogs, 300 gallons of chili and 5,000 fried pies.

Some Atlanta newcomers that hope to achieve that longevity include 4th & Swift on North Avenue: The Shed at Glenwood, Cakes & Ale, Decatur; a second Chow Baby at the Galleria and J. Christopher’s, downtown Woodstock.

Four restaurants, all new to Atlanta, will anchor phase one of 12th & Midtown. The new spots include Ri Ra Irish Pub, Ra Sushi, Piola (pasta and pizza) and Noon Midtown, a gourmet sandwich concept.
Recent closings of note include Houlihan’s, colony square; Kayson’s Grill, Howell Mill; Bear Rock Café, Peachtree Battle and Huey’s, South Buckhead.

Trendy ingredients and exotic cuisines may “reign supreme” on the Food Network and in glossy slick magazines but in the real world burgers take the main stage. According to research groups NPD Group and Dataessential, hamburgers made up 14 percent of all food orders in 2007. Almost half of all restaurants (44 percent) have a burger of some kind on their menu and burgers represent 42 percent of all sandwiches sold. On average 85 percent of consumers eat burgers at least once a month. The most popular locations — fast food restaurants.

What do we eat on our burgers? Forty two percent of us opt for cheese and another 15 percent throw on some bacon for good measure. The most popular condiment is barbecue sauce with ketchup in a close second.

If food makes the man consider the following: University of Central Florida Hospitality Professor Chris Muller utilized the history, personality and demographic support for leading presidential candidates Obama and McCain. His conclusion, McCain would lean to Morton’s of Chicago, Ruth’s Chris Steak House, The Capital Grill and Outback. Obama’s taste is a little more varied; Starbuck’s, P.F. Chang’s, Seasons 52, Houston’s and Panera Bread.

Speaking of “the man”, a lunch with Warren Buffet recently sold for over $2 million at a charity auction. The winning bid was submitted by a Hong Kong-based investment banker.

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