Observations & Conversations
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A stroll down memory lane ... remembering Vegas Conventions of years past |
It’s that time of year again, when the shopping
center industry takes over Vegas with high aspirations of making a fortune,
either at the convention or the tables. I always get nostalgic the week or so
before the show. Remembering the old days, when the convention hall was much
smaller, the crowds not as big, and I knew most of the people in attendance. I
was about 20 at my first show and even though it was a simpler time, the show
was still overwhelming. A lot of the twenty-something crowd I hung with then are
now running their families’ companies (the fathers just show up at the office
and on occasion do battle with their sons or daughters about philosophical
differences, but for the most part the kids are running things from day to day).
Back then, we could stay out until 6:00 a.m. playing, then race back to the
hotel to shower, dress and still make it to a 7:30 a.m. breakfast meeting and do
it three days in a row with little or no sleep. We looked forward to Vegas as
much as a place to have fun as we hoped it to be an opportunity to make a deal.
Hopefully, we all still expect to have a good time, but for most of us staying
out all night isn’t humanly possible three days in a row. Of course, back then
none of us really knew what we were doing and although no one likes to admit it,
we took our share of dress downs from our fathers and mentors as we made
mistakes along the way, in exchange for a chance to play hard.
I started out as the gopher at Ted’s company. He didn’t call me a gopher, but
that’s what I did for my first year. Then I exalted to the position of selling
ad space for his start up (now called The Dealmakers and in our 22nd year). Next
I moved on to leasing distressed shopping centers and I loved it. Everyday was a
new ball game, I flew all over the country, earned my masters degree in the
school of hard knocks and watched some of the most intriguing negotiations. At
one lease negotiation, I saw a grown man pull down his pants and show his
backside to the leasing agent and say “if you kiss this, I’ll do the deal at
your numbers.” (I can’t remember if the deal got done, but I assure you no one
was puckering up). These weren’t really negotiations, it was a room full of
crazy people on a rant. (Now, if a guy did that in a meeting today, someone
would be filing a sexual harassment suit.) Back then, often women were hired
based on the size of their assets, rather than their business acumen. I remember
at one meeting with a retailer, Ted and I were trying to lease a huge space and
the real estate guy for a 200,000 sq.ft. department-store chain put his hand on
my knee and said something to the effect of “and do you come with the deal,” (a
common attitude in those days), but I have to give Ted credit, he got up from
his chair and said the meeting was over. Less of this kind of nonsense goes on
now, thank goodness. Then, I moved on to the sale of centers, another extremely
interesting side of the business. The first account I ever worked on in the sale
of a center was for a bank in desperate need of moving some REOs off their
balance sheet. That’s when I learned about dotting every “I” and crossing every
“T” with the presentation and paperwork. This bank eventually hired us to manage
some of their more difficult centers, so having face-to-face meetings with
bitter tenants that hadn’t seen a profit in a while became part of my job.
Collecting rent in a problem project isn’t much fun, but my skin got thicker.
Then I took over as publisher for The Dealmakers. My latest career choice
definitely gives me a better ability to look at what’s happening in the industry
from a more objective point of view.
The shopping center industry has become influenced by many more factors now.
Back then Wall Street wasn’t a major concern, since financing usually was done
with a local bank. Proformas were flexible and towns didn’t tell you how to
build a center, since the methodology to creating cash flow was to get as much
as you can and cities needed rateables. Retailers didn’t have committee meetings
once a month. When the real estate guy found a good deal he just walked down the
hall and discussed it with the owner of the chain. Often, stores were opened
before the lease was signed and built out from drawings on a stained napkin. It
was fairly easy to get a loan, especially if you signed personally and it didn’t
matter that your net worth was less than a $1.98. Retailers made deals based on
projected sales volumes, not because of a quota to open a certain number of
stores. Landlords really cared about tenant mix and would rather miss a mortgage
payment than put two nail salons in their center. Decisions got made quickly,
people returned phone calls and the industry grew.
Today, the number of companies serving the shopping center industry is at an all
time high. Sometimes, I wonder if we really do make more deals industry-wide
today than we did two decades ago, or is it just that we have so many more
layers and hurdles to jump through than ever before. In 2002, it is more
difficult to get approvals from towns on new centers, retailers are moving
slower in signing leases, financial institutions aren’t madly in love with the
retail sector and builders, lawyers, architects, engineers and disposition
specialists are getting more active in the shopping center side of real estate.
Brokers are prolific, but not enough have the heart of a developer or the head
of a retailer. There are still some old fashioned deal junkie brokers, retailers
and developers around. I call them deal junkies because they relish negotiations
and like to prove “it’s their way or the highway.” Management companies have
changed a lot in the past years. They used to make their money off of leasing
commissions and earned a low management fee in exchange for the exclusive to
lease or sell the center. Today, quite often management companies make their
revenue stream off of fees for processing paperwork rather than their leasing
abilities. Wall Street’s influence on our industry is becoming more obvious
everyday. The good of it being, some retailers were allowed to grow rapidly and
maintained course, while on the flip side others foundered or are teetering due
to over growth and customer fatigue.
We haven’t seen a surge in new concepts since the inception of the power center,
super store and big-box tenant. The industry has seen its spin-offs, such as
outlet, value, off-price, entertainment and tourist centers, home and
auto-themed tenant mixes and that ever popular mini mall. Unfortunately, none of
these concepts really took off in a major way. Most of the
entertainment-anchored centers have taken a beating and had to shore up the
tenant mix with more traditional retail stores. Retailers are having a hard time
coming up with new formats. Gap came out with Old Navy, and now neither are
looking too sweet. Target hasn’t really grown its Greatland concept. Wal*Mart
hasn’t cannibalized the supermarket business, yet. Home Depot hasn’t mastered
its Expo Design for a rapid rollout. However, TJX still seems to be pushing its
new concepts.
There are new concepts, you just have to look harder. In this issue, we’ve
reported on several new chains sprouting up serving the preteen and teen girls
market. Plus, there are retailers wanting thousands of new sites in this week’s
edition. I’m certain, if you look hard, talk to every Joe you see on the
convention floor in Vegas and read this issue from cover to cover that you’ll
find that lead to make the convention worth more than you ever dreamed. Make
sure you stop by and see us in Vegas, we’re at 667 Sixth Avenue. Come to our
Beer Blast too. It’s on Monday in our booth at 4:30 p.m. Hopefully, in 20 years
I’ll be writing that this year’s convention was the best. Until next month,
Ann O’Neal, Publisher