Victor Jung

CEO, V Global Holdings

McDonald’s Profit Edges Lower

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Excerpt from Wall Street Journal
The burger giant has been struggling to maintain relevance among younger consumers and fill orders quickly in kitchens that have grown overwhelmed with menu items. AP
McDonald’s Corp. MCD +0.11% said its profit for the first three months of the year dropped 5.2% as the fast-food giant worked to revive its U.S. sales growth following a challenging 2013.

The results missed expectations.

Chief Executive Don Thompson has suggested that the company has lost relevance with some customers and needs to strengthen its menu offerings. He emphasized Tuesday that McDonald’s is focused on stabilizing key markets, including the U.S., Germany, Australia and Japan.

Comparable sales at U.S. restaurants open more than a year declined 1.7% for the quarter and 0.6% for March, the fifth straight month of declines.

The company pointed to weaker guest traffic amid challenging industry dynamics and severe winter weather. It also reiterated its commitment to improving U.S. results, in part through customer engagement and menu choices.

Global comparable sales edged up 0.5% for both the quarter and month, helped by higher average checks, despite weaker guest traffic in several key markets.

Looking to April, Mr. Thompson said global comparable sales are expected to be modestly positive.

Franchisees and executives have said the McDonald’s menu has become overly complicated, with the addition of more new items slowing service and turning off customers. Despite struggles in 2013, Mr. Thompson recently said he expects improvement this year.

Overall, McDonald’s reported a first-quarter profit of $1.2 billion, or $1.21 a share, down from $1.27 billion, or $1.26 a share, a year earlier. The company partly attributed the decline to the impact of prior-year income tax benefits.

Total revenue for the quarter edged up 1.4% to $6.7 billion, though costs rose faster, at 2.3%.

Analysts polled by Thomson Reuters forecast earnings of $1.24 a share on revenue of $6.72 billion.

In Europe, same-store sales grew 1.4%, as positive sales performance in the U.K., France and Russia was partially offset by ongoing weakness in Germany.

The Asia/Pacific, Middle East and Africa region’s same-store sales edged up 0.8%, reflecting strength in China offsetting weakness in Japan.

Write to Ben Fox Rubin at ben.rubin@wsj.com

The Education of the Luxury Buyer

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Excerpt from Wall Street Journal

Seasoned buyers and first-time buyers agree both cited views and chef kitchens as the most important luxury-home features, according to a survey. Getty Images

Seasoned home buyers—people who described themselves as owning a “high-end luxury home”—approach the purchasing process much differently than those venturing into the high-end market for the first time, according to an online survey conducted by Realtor.com in March. These experienced high-end buyers focus less on extra space and glitzy home features and more are willing to pay over their budget to get a sound investment.

Generally, seasoned luxury buyers look at the long-term prospects for a property, says Christian Benites, associate real-estate broker with Town Residential in New York.

Still, seasoned buyers and first-time buyers agree on some things. They both cited views and chef kitchens as the most important luxury-home features, according to the survey. Seasoned folks saw luxury pools as third most important, whereas other buyers cited outdoor living areas.

First-time buyers ranked square footage and extra bedrooms, as well as smart home and eco-friendly features, higher than did current luxury homeowners. Of those currently planning to purchase a luxury home, 20% of seasoned buyers marked privacy as a top feature, compared with 13% of first-time buyers.

“They are not looking for golf simulators and children’s playrooms and those kinds of amenities—they are looking for what the building has to offer and the reputation of the developer,” Emily Beare, a real-estate agent with Core in New York City, says of seasoned luxury condo buyers. These buyers are more concerned with features like windows and humidification systems that protect high-end furniture and art.

Well-known architects and developers with a reputation for building good quality buildings are appealing for these buyers, says Leslie Wilson, senior vice president of sales at Related Cos.

First-time buyers tend to prioritize finishes and layouts because they want to move in right away without having to gut the property or conduct a lengthy remodel, says Ms. Beare. “It’s a totally different mentality from a seasoned buyer. The seasoned buyer is more interested in purchasing a trophy property in the right building at the right address,” she says.

Of those planning to purchase a luxury home, 40% of current high-end homeowners said they would be willing to pay over budget, compared with only 29% of nonluxury homeowners, according to the Realtor.com data.

After purchasing a two-bedroom apartment in Brooklyn Heights a few months ago for roughly $2 million, Namek Zu’bi knocked down walls and changed the layout. Mr. Zu’bi, 27 years old and a managing partner at a venture-capital firm, has owned several properties in Jordan and approached the home-search process from an investor’s standpoint. He focused on price a square foot instead of the overall price and looked for a neighborhood that would likely generate a 30% to 50% return in the next five years.

The majority of Silicon Valley real-estate agent Mia Simon’s clients are young, first-time luxury buyers who have done well in the tech sphere. “They want to be close to a downtown area,” says Ms. Simon, of Redfin. “They want to walk to a farmer’s market on the weekend or to a restaurant. They place high, high value on that.”

 

Write to Sanette Tanaka at sanette.tanaka@wsj.com

Tax Refunds May Fuel Windfall for Retailers

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Accountants weren’t the only ones cheering this year’s record number of tax returns.

This past Tuesday’s dreaded tax deadline actually marked a pleasant occasion for most filers. Of the 100 million or so returns processed through April 4, nearly 80% resulted in a refund averaging $2,792. The total sum paid out was about $5 billion, or 2.5%, higher than a year earlier.

That bodes well for the nation’s retailers in the months ahead since many households treat returns as a windfall to be spent, not saved. Even better, Uncle Sam has been a lot quicker to whip out his checkbook than in 2013. Had that not been the case, retail-sales figures for the past two months might have looked different.

 

Sales for March recorded their biggest month-over-month gain in a year and a half, according to a report Monday from the Commerce Department. That came despite the fact that Easter, which fell earlier last year, in March, isn’t until this Sunday.

“I do believe that [tax refunds] were fuel for the consumer in the month of March,” said Jack Kleinheinz, the National Retail Federation’s chief economist.

And, although the dollar amounts were smaller, the impact of accelerated returns probably did much to offset the impact of frigid weather in February. An initial estimate of retail sales was revised higher for that month. For the week ended Feb. 7, for example, cumulative tax returns were $12.5 billion, or a whopping 24%, higher than at the same point a year earlier. By the end of February, that gain had fallen to 8.8%, and by the end of March, the difference was just 2.6%.

Last year was an entirely different story. At the end of February 2013, refunds were 14.3% lower than at the same point in 2012. That was mainly the result of administrative delays caused by the “fiscal cliff” standoff in Washington. The effect on spending was exacerbated by the expiration of the payroll-tax holiday.

The drag on spending early last year was particularly strong at retailers dependent on lower-middle-class customers, such as Wal-Mart Stores Inc. and Dollar General Corp. , or service providers such as no-contract cellphone carriers.

It seems a fair bet that they had a far less taxing start to this year.

Renters Flocking to Student Housing

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Excerpt By Jessica Fiur, News Editor, MHN Online

New York—In downtown Brooklyn, a former seven-story multifamily building is being converted to a 44-unit student housing community. The property, 902-908 Bedford Avenue, houses undergraduates and graduate students and their families, most of whom attend the Pratt Institute and Long Island University.

DelShah Capital LLC, a real estate management and CRE debt acquisition company, in charge of 902-908 Bedford Avenue’s rebranding, along with Distinct New York, a real estate marketing company, renovated the building in eight months. Currently, DelShah, having completed its value-enhancing program, is listing the building with Massey Knakal for sale at $17 million.

The units range from two-bedroom apartments with outdoor balconies to six-bedroom suites.

The apartments also have been given “student-friendly” upgrades, including a student lounge, a rear deck and monitored security cameras. According to Victor Jung, executive vice president of operations of Distinct New York, the apartments have green elements such as nozzles on the showerheads that promote water conservation, “green” paint, and energy efficient appliances.

Rents for 902-908 Bedford Avenue range from $900 per room to $4,500 for a four-bedroom apartment.

“The students seek larger units to share with classmates, are less price sensitive and desire a rental building that caters to their needs in close proximity to specific campus locations,” Michael Shah, principal and CEO of DelShah, said in a statement.
Though one would think that potential residents would be more price sensitive in this slowed economy, this is proving not to be the case for students.

Victor Jung believes this is because the general package of 902-908 Bedford Avenue is so appealing. “We offer stability to students and parents because it’s all inclusive,” he tells MHN.

According to Victor Jung, the appeal also lies in the fact that these off-campus apartments are cheaper than the on-campus ones, and the fact that students have “parent guarantors.”

“Bottom line, they need a place to live,” Victor Jung says.
This appears to be the case—the property is already 98 percent occupied.

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