Observations & Conversations
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Life is good when in Vegas and the dealmaking was even better. |
The words I heard repeated again and again at the
show in Vegas were “life is good.” Yes, traffic was down and the convention hall
wasn’t filled to the brim with a frenzied crowd. There weren’t any new retail
concepts, beyond food concepts pitched at the show. Not many new centers were
being unveiled either, but I was quite surprised to see the number of lenders
that are desperate to part with their money. (That always spells trouble.) It
appeared that most meetings were worthwhile and no one really complained about
the slow down in traffic, since at the end of the day it was a profitable show.
It reminds me of the time I visited a center that we managed. I walked in to
talk to one of the tenants and found this poor store manager ringing up
customers with two buckets at her feet and a tarp thrown over the cash register
because of a roof leak. I asked her, “Why didn’t you call us to come fix this?”
She said “I’m too busy handling all these customers.” That kind of sums up this
year’s show. It was a little wet, but most of us will benefit and no one voiced
any major complaints. The observation of fewer bodies in attendance became just
that, an observation. The only big complaint I did hear - it sounds petty - is
that the badge holders were horrendous. The wind would blow it out or the tie
would break - but I’m certain the ICSC has heard this at least 1,000 times and
it was just one of those things that won’t happen again. We’re all human.
With the change in the schedule, more people are opting to come in on Friday
before the show to spend time socializing over the weekend, and they also seem
to be staying a few days after the show, too. We’ve had a Sunday brunch for
about 10 years now, and it’s getting better attended every year. I bumped into
quite a few people on Thursday and Friday that had plans to take clients out for
fun after the show. Thankfully, some companies understand the importance of
socializing outside of the workplace and are covering the expense of an extended
stay. The parties were good this year. I ate well at Capital Lease Funding’s
soiree, enjoyed a few drinks with Heritage, had a few more at the NY Developers
party and snagged a good CD at the Hendon party, too. But I have an annual event
every Thursday with my friends from The Breton Group and cohorts from Acadia
that always lives on in infamy. This year we dined alfresco with the Bellagio
fountains in the background and moved on to the Light nightclub, with our names
on the guest list so no waiting behind velvet ropes. Better yet, no cover charge
(I’m cheap). Life is good when in Vegas and the dealmaking was even better.
I had an interesting opportunity of being the fly on the wall during meetings at
the show. I use the show as a time to get a feel for what’s happening and a
pulse on the industry since most people just want a quick hello from me rather
than to sit down and talk about their marketing plans (we do that when they
don’t have meetings up the wazoo, but if you ever want to talk to me about
advertising I’m always available!).
At one meeting, a young guy with a decent size portfolio has a 40% vacancy
factor in his centers and virtually no debt. He hired what he thought was a big
gun, since he paid big money, to head up his leasing department and that was a
bust. Then he hired an exclusive broker, a company I know is competent. The
exclusive listing is coming up shortly, yet there hasn’t been any activity on
his 200,000 sq.ft. of vacancies. I suggested hiring a management company that
also has a powerhouse leasing department and he wasn’t wild about that because
he self manages. Ideally, he wants someone to take on the exclusive and the
broker to spend six months devoted solely to his sites. Plus, the broker should
spend $15,000 to $20,000 in marketing costs in the first three months of the
exclusive. He didn’t understand that when you hire a management company, whose
main goal is to lease up substantial vacancy, it at least can be reimbursed for
expenses and most importantly cut itself a check when the commission is due,
rather than hope its reputable client will pay it on time. More importantly, as
the management company it has all the necessary information such as site plans,
rent rolls, etc., which often are not made available to the broker. Sounds
stupid and illogical and it is, but it’s also reality for most exclusive
brokers. Taking on the management of this type of portfolio won’t generate much
in management fees until the portfolio gets leased, so I’m still confused about
why this guy doesn’t want someone to take on the day-to-day operations. On to
another meeting with a smaller but similar type portfolio to the guy mentioned
earlier. This one has 60,000 sq.ft. dark and deteriorating anchor positions in
towns that aren’t well known. If he could lease the anchor spots, his cash flow
would increase enough to show an NOI of $50,000 annually, if he could continue
his interest only mortgage payments. One minute, he wanted to sell the centers
or give them back to the lender (even though he’s currently seeing at least 10
grand in annual cash flow), the next he felt confident he could lease these four
vacancies and expected to sell them at well over the mortgage. After about 15
minutes, I decided that his biggest problem is that he doesn’t know what he
wants.
Next up was a mayor with a stadium and 50 acres of blight to be rejuvenated. Tif
money was burning in the city coffers and more consultants had poked, prodded
and speculated on this land than the sky has stars, but not a thing was getting
done. I had no political agenda and he wasn’t lining my wallet, so I told him
he’d never get that many land owners to agree to his plan and that he’d be
better off bringing in a developer to buy the land (this mayor wasn’t frightened
to implement imminent domain because of politics). He asked which developers
would do a good job and I gave him a few. It was a V8 moment, when he scratched
his head and said that developer is doing a similar project in his state only a
few hours from this site. Next thing he asked for was a floor plan of the ICSC
show so he could go directly to the developer’s booth. Smart mayor. Hopefully it
will work out for him.
The best conversation I had by far at the show was when a subscriber came up to
me and said “I made money off of your publication!” Music to my ears. That’s
what The Dealmakers is here for, so you get great leads and lease more space or
sell more centers. To all of those that stopped by our booth in Vegas, it was
great to see you. Make sure you see us at the ICSC New England Dealmaking show
next month in Boston. We’ll also be at the Florida show in August.
Until next month,
Ann O’Neal, Publisher