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Yes, high debt is an ingredient; yes, higher interest rates are an ingredient; but hey, they ain't that high (See The death of the Colorado model, March 30). And the alternative to marginally higher (4.5 or 4.75 per cent is hardly high) interest rates? More consumer debt?
Would it be wise central bank policy to go down the path of the US, UK, and Ireland, for example? Their financial systems are a complete shambles. On the other hand, Glenn Stephens and Co are doing a pretty reasonable job with a leg on either side of a barbed wire fence!
Our analysis – and we have done a hell of a lot of research – is that rental fixed costs in the malls are well outside all reasonable benchmark levels. I feel a lack of reporting on this is making it harder for the investing public (bankers who invest in financing businesses, property, superannuants, investors, eg. Centro and other A-REIT stockholders) the opportunity to make informed decisions.
The investment community and general public also seems to be in denial on the issue of labour costs and minimum wages. You cannot have wages and rental income streams (as a fixed cost) continuing to rise as if there is a ratchet mechanism underpinning it, when all other markets can rise and fall. Your cost of capital can rise and fall (the share market you write about every day moves up and down), carrots, gold, lettuce, beef, copper, houses, currency all fluctuate. But shopping centre rents and wages go up, up, up! How and why? And this irrespective of new stores in a mall, changing consumer tastes, new technologies such as internet shopping, and a greater supply of retail floor space!
The risk on income streams underpinning the so-called valuations have gone up. Small business capital is taken through high rents.
For the consumer who is watching every dollar, Colorado was simply too expensive (See The death of the Colorado model, March 30). I bought some "you beaut" sandals there four years ago for $75 – now I go to Lowes or Big W and pay $15 for quite serviceable units. The top end markets are the first to go.
Maybe the cause of Colorado failure is simple (See The death of the Colorado model, March 30). Maybe the products they were selling were just not good value for money. It seems the boom is gone, and bargain hunting is back. Bye bye, Colorado.
At the time Solly Lew was lurking, I commented that Colorado was a poor company (See The death of the Colorado model, March 30). Before anyone looks at the books, they should walk into a store and see how it's performing. At any given time you can walk past a Williams, Mathers, Colorado or any other of their stores and see few customers and average stock.
There was no way that the revenue would support the debt. More fool the banks that believed it would. The only retail company that looks all that healthy to me is JB Hi-Fi. And even then, it seems to have given too much price discounting power to their floor staff. Only time will tell.