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Observations & Conversations
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Observations & Conversations Deals don’t come fast or easy
It’s here, the shopping center industry’s annual pilgrimage to Las Vegas in search of fortune or at least another deal. This is my 25th Vegas convention and it’s morphed considerably over the past two decades. Not only the physical box, but down to how exhibitors market their product at the show. I think most of the changes are for the better, and next year’s show will change dramatically with the expansion of the convention center accommodating more exhibitors.
New blood is always a good thing, sometimes tumultuous in the short-term, but well worth it. Talking about new blood, my son, Joshua, is his father’s new “right-hand man” in the brokerage/management arm of TKO. This will be the first show that he’s expected to actually work the floor and talk to people about leasing in-line space and a few outparcels. If your mother can’t give you a plug, then who can... if you’re interested in sites throughout Pennsylvania or Chicago then stop by and see Josh Kraus at 667 Sixth Avenue. One thing that stands out about our industry is the huge number of companies that are family-owned, with the children active in day-to-day operations and now more and more the children are steering the companies’ course. Just off the top of my head, I can think of dozens of companies with generations of family minding “the store” from Cafaro, DLC, Breslin, Paster, Noddle, Legend, Garrick-Aug, Basser-Kaufman, Dress Barn, Gibraltar Management, Kin Properties, Mall Properties, etc. Hopefully, that will continue because I do think an entrepreneurial spirit or “yiddisha cup” can’t be taught; either it’s in your DNA or not.
While on the topic of entrepreneurs and great business minds, I had the chance to talk with some of New York’s heavyweights for the NY Developer’s Journal. It was interesting, and I came away having a better understanding of the challenges of turning dirt for new projects in the metro New York area, from the cost of concrete to the lengthy process of getting approvals. I also got a better feel for how much money is out there for funding acquisitions and developing new projects. It’s an obscene figure and I was talking with another developer from the south about how much mortgage money is on the market. He had a good line; “if your mortgage broker isn’t making huge bucks right now, he needs to find another line of work.” I agree partially with his statement. I think if most mortgage brokers aren’t doing huge volumes of transactions right now, they’re missing the boat, but I would bet they’re getting beaten to a pulp over commissions and shaving slivers off the rate. Nobody makes easy money fast, at least legally.
Talking about legalities, there’s lots of stuff hitting the fan in our industry requiring legal council beyond negotiating deals with The Mills Co. restating its finances, Albertsons dueling with Grocery Outlet, JCPenney just lost a court battle and their lease rights by the use of eminent domain, (of course they’re appealing or asking for more money to settle) and talk of immigration laws are peaking the interest of retailers that do big volumes in the border states. It’ll be interesting to see how these legal maneuvers play out and affect us down the road, but everybody in our business knows lawyers and politicians have to be dealt with in order to get any project off the ground.
Speaking of politicians, I bet the ICSC Sunday luncheon will be incredible with Clinton as the keynote speaker. I have to give the ICSC credit, they usually come up with interesting if not controversial speakers from Newt Gingrich to Al Franken. The annual ICSC cocktail party has been revamped a bit this year, with the Next Generation setting off the show with their party on Sunday, starting at 10:00 pm at the Hard Rock. Geez, it’s gonna be hard making it to my Monday morning breakfast meeting after hanging out with this crowd the night before!
I expect opening day of the Leasing Mall to be total chaos as most people will try to jam as much as they can into Monday and Tuesday, so they can either fly home on Wednesday or spend the day at the pool and the tables. We’ll be there until the closing bell rings on Wednesday and that’s the day when we usually have someone we’ve never met walk into the booth. Nine times out of ten, we eventually end up doing business with them. Sometimes it’s years from our first encounter that money actually changes hands, but like I already said deals don’t come fast or easy. As our front cover of this issue depicts, there’s lots of steps to getting any deal done.
This issue has some phenomenal leads, it’s filled with apparel chains, supermarkets, electronics stores, shoe retailers, home improvement and furnishing companies, and lots more retailers aggressively looking for sites. The Dealmakers is also reporting in this week’s issue on the leasing availability or recent commitments from tenants for about 80 million sq.ft. of retail space. Plus, there are leads on companies looking to acquire or sell retail sites representing around $1 billion in future deals, along with close to $2 billion in financing funds looking for transactions to close. Also, we’ve included a leasing plan of the main convention floor to make it easier to maneuver the Leasing Mall along with the booth numbers for most of our advertisers highlighted; you should definitely make an effort to visit them at the show. This issue features some of the industry’s brokerage companies that have a strong focus on tenant representation, so be sure to read those too to find more potential tenants for your projects. Another feature is on Moonlight Graham, an interesting specialty concept selling retro kitsch merchandise. Be sure to check out that article too. I’ll be so bold to say, if you can’t make a deal with at least one of The Dealmakers’ leads then maybe you’re not working hard or smart enough.
Talk of working smart, I’ve recently heard of two companies that set up an internal system to help their leasing departments know exactly what’s within their portfolio. The system shows each vacancy, how long its been on the market, the amount of unearned rent that’s accumulated since the space went dark, market rent, rent of the last tenant and asking rent. The part I like best, and think more companies should address on a monthly basis with their leasing team, is unearned rent that’s accumulated since the space went dark... it puts the urgency of finding a tenant and generating income into perspective. I also think it would be beneficial for owners to send this type of information to their exclusive brokers on a regular basis, too.
Here are a few new concepts and growing chains that I’ve come across in the past few weeks: Pacific Sunwear is rolling out a new concept called One Thousand Steps, with up to ten store openings planned. The concept carries branded footwear and opened its first, three stores last month. A little less sexy, but none the less a potential tenant, is Floor & Decor Outlets of America’s recent opening of a 50,000 sq.ft. location in Brandon, FL. The Georgia-based company operates 13 units in major metros of AZ, FL, GA and TX, offering hard-flooring products at deep discounts. After the convention, I’ll let you know about any interesting concepts I find at the show. Stop by TKO’s booth at 667 Sixth Avenue, we’ll be serving lemonade all day long. And on Monday around 4:30 we’ll tap a keg and uncork a bottle or two, so drop in and relax for a while. I also wanted to take a few lines to thank our advertisers and the
Ann O’Neal, Publisher |