| It's All Over With, But the Shouting -- | | | | don't believe 'em, they've made too much |
| and There's a Lot of That to Come | | | | money off of it). The Chicago show, more |
| The second largest gathering of retail | | | | than most dealmaking events, attracts |
| real estate professionals of the year is | | | | small developers (other shows that |
| coming together in New York and there's | | | | attract these entrepreneurs are Atlanta |
| a lot to celebrate. With 2006 ending up | | | | and Charlotte), in addition to the |
| as being a great year (We can debate | | | | Simons and Kimcos. I'm more at home with |
| which was better, 2005 or 2006, but what | | | | the "little guy" than the "Simons" of |
| difference does it make?), the big | | | | the world. They move quickly, know what |
| question is, "What will 2007 be like?" | | | | they want and understand that if they |
| and that's a question that no one really | | | | don't produce they die. And above all, |
| knows the answer to. If they claim they | | | | since most are self made millionaire$ |
| do, they're either lying or insane, but | | | | they're not too conceited or arrogant. |
| that won't stop "the experts" from | | | | The large companies have one major |
| making predictions anyway. My answer? I | | | | advantage over 'em, MONEY, lots of it, |
| have no clue. Right now, my money is on | | | | which usually covers their butt on some |
| 2007 being decent but not as good as | | | | of their dumber moves. Because the |
| 2006. But, there are too many outside | | | | larger companies have been doing so well |
| factors that can make 2007 a disaster | | | | lately, they can afford numerous |
| (more can go wrong than right), so all | | | | blunders before they're in real trouble. |
| we can do at the show is meet and greet | | | | The little guy doesn't have that luxury. |
| old and new friends, go out and party in | | | | Now I'm not saying the big guys are |
| one of the greatest cities in the world | | | | dumb, I just believe their size prevents |
| and do a lot of dealmaking and praying. | | | | them from making the most logical and |
| (Oh, before I forget, Alyson went to the | | | | efficient decisions (bureaucracies are a |
| ICSC show in Sacramento. It was a small | | | | bummer). For example, larger companies |
| show, with 350 in attendance (last year | | | | add to their layers of leasing personnel |
| was 295), but she said the size made it | | | | by having individuals that specialize in |
| "intimate" and very entrepreneurial. | | | | "Big Box," medium box and small shop |
| Right now, the show is marginal, but | | | | leasing. I'm waiting for them to add a |
| give it three or four years and it could | | | | specialist for Chinese buffets. Makes no |
| be another winner.) | | | | sense to me; can't their people handle |
| For good or bad, the change in Congress | | | | the whole gamut of retailers wanting to |
| after the last election will have an | | | | lease space in a particular center? It |
| impact on our industry and my "gut" says | | | | really isn't that hard. Anyway, rambling |
| the Fed will raise interest rates in | | | | on, I read an article in SCT Xtra that |
| January or February. (Hopefully, I'm | | | | lifestyle centers will represent 65% of |
| wrong) So, be prepared to live in | | | | all new developments over the next three |
| "interesting times" for the next year. | | | | years. If that's true, a lot of "poor" |
| There's no doubt in my mind -- short of | | | | performing centers will be built, as |
| a blizzard (God forbid) hitting the show | | | | lifestyle centers, by their nature, are |
| the day before or the day it starts -- | | | | not meant to be located at every street |
| New York will set another attendance | | | | corner (it's not the concept I have |
| record and, candidly, the Hilton can't | | | | problems with; it's the execution). The |
| handle the crowd, but somehow we'll all | | | | economics of these centers don't work |
| make it through the event and be better | | | | for Middle America and the "upscale" |
| off because of it. What makes me feel | | | | consumer represents only 15% to 20% of |
| old and sometimes not as successful as I | | | | the population, so there's limited |
| thought I might be is when I speak to | | | | markets they make sense in. Plus, a lot |
| some friends of 20 or 30 years and I ask | | | | of these "lifestyle" centers are really |
| where they're staying in New York. Many | | | | power centers in disguise, using |
| of 'em reply, "I'm not going, I'm | | | | lifestyle as a name because it |
| getting too old and tired for it; I'm | | | | represents today's "vanilla." |
| sending 'my people' instead." I guess | | | | Every mall developer is converting their |
| I'm not important, because I still have | | | | "C, D and F" centers to mixed-use and |
| to attend, along with "my people." But | | | | lifestyle centers, and I contend that in |
| then, I'll be in good company. | | | | 60% of the cases these redeveloped |
| Talking about ICSC shows, several of the | | | | projects will fail. It's a little like |
| dealmaking conferences in other towns | | | | 25 years ago when all the failed malls |
| are being relocated because "we've" | | | | were being converted to outlet centers. |
| outgrown the old facilities. | | | | The developers believed they found the |
| Unfortunately, the Hilton (short of the | | | | magic cure, but five years later the |
| Javits Center) is the largest conference | | | | failed center was still a bummer. Then |
| facility in the city and I personally | | | | they believe their "salvation" was |
| don't want to go to the Javits Center or | | | | entertainment centers and that also |
| move outside of New York, so we're stuck | | | | failed. To prove I'm old, I remember my |
| with the problem, a great problem, but a | | | | grandmother living over retail stores in |
| problem. | | | | Newark, NJ in the 1940s and saving up |
| Changing subjects, we're an industry | | | | money so she could move into an |
| where you don't have to be a rocket | | | | apartment, which was considered more |
| scientist to succeed and make a good | | | | prestigious. Today, the condo over the |
| buck, BUT I sometimes wonder if some | | | | retail is considered upscale, proving my |
| (not all) of those in the business have | | | | grandmother was a smart lady. |
| any idea what they're doing. I got a | | | | Rambling on...Ann, Alyson, Terry, Rich, |
| call last week on a building we're | | | | Josh and myself attended the Philly show |
| leasing from another broker who inquired | | | | the following week after Chicago and |
| about the lease rates. I told 'em we had | | | | another winner in attendance was posted; |
| a lease out on the property, but leave | | | | Philly was smaller than Chicago (the |
| me your number and if the deal dies, | | | | East Coast considers the Philly and the |
| I'll call. He then asked what it would | | | | New York shows as "theirs," so many wait |
| take to get his client the deal over the | | | | for December to attend a show instead of |
| current prospective tenant and I said | | | | attending both. I disagree, but that's |
| $13.50 psf, net. He then explained I was | | | | what makes horse racing. Attendance was |
| nuts, the market rent is only $10 to $11 | | | | up about 400 to 2,300 this year over |
| psf and I agreed and said that's what | | | | 1,900 last year. The cocktail party the |
| the current tenant is willing to pay BUT | | | | night before was jammed with everyone |
| if the owner is going to be a whore, | | | | upbeat. After the cocktail party, most |
| they want to be a well-paid one. We got | | | | attended private parties such as |
| into a major debate and I ended the | | | | Fameco's event at the Hard Rock (which |
| conversation saying, "Why don't I call | | | | was the busiest). Legend Properties' |
| you if this one doesn't work out. I'd be | | | | party was packed also and they announced |
| a lot more cooperative." He then called | | | | Maria Aristone was appointed president |
| me a thief and hung up. Now don't get me | | | | of the company; they bumped Jim Depetris |
| wrong, I have no pride. If my current | | | | to chairman. Smart move on their behalf. |
| deals dies, I'll call him BUT I would | | | | Also, Marcus and Millichap and Metro |
| have been less offended with being | | | | Commercial had parties, which were |
| called a whore than a thief. I tried | | | | packed. One thing our industry does well |
| explaining that with a tenant "in-hand," | | | | is eat, drink and party. |
| why would I even try to be "fair?" (Oh, | | | | The Philly show got off to a slow start |
| both tenants have similar financial | | | | on Thursday morning, but by 10 a.m. it |
| statements.) He wanted to me to do a | | | | was hectic and stayed busy until the end |
| deal with him for 25 cents-per-foot | | | | at 3 p.m., which is good. It used to be |
| more; fortunately my client works 5th | | | | this show ended right after lunch, so |
| Avenue, not 42nd Street. | | | | its value over time is improving. The |
| Anyway, changing topics again, retail | | | | best comment I heard at the show was |
| seems to be dividing our industry like | | | | from Rene Daniels, who said: "Lot's of |
| politics, but instead of blue and red | | | | people present, but few decision |
| states, we have high and low end | | | | makers." Cute, but unfortunately true. |
| retailers with the ones in the middle | | | | As our industry expands we gain |
| struggling. The Nordstroms of the world | | | | membership, but the ability for these |
| are doing great (department stores are | | | | dealmakers to make decisions is lacking, |
| "back in" with the consumer) but it | | | | which is why every deal takes forever to |
| seems that even the almighty Wal*Mart is | | | | be finalized. Oh, I read an interesting |
| having some problems. The middle class | | | | article last week; the author contends |
| in America finds their purchasing power | | | | that if we don't have a good Christmas |
| diminishing and they're having | | | | (guesses are between 2.5% to 5% in sales |
| difficulty surviving and when they hurt, | | | | increases) then Sears will start selling |
| so will our industry. | | | | off underperforming Kmart and Sears |
| I've heard a dozen reports on what type | | | | stores, just what our industry needs, |
| of Christmas we'll have this year, | | | | more available real estate.posted by |
| anything from setting records to down | | | | tedkraus at 6:10 AM 0 comments links to |
| 3%. So, it's a wait-and-see to find out | | | | this post |
| how 2007 will start off. But what really | | | | Friday, September 01, 2006 |
| confuses me is Wall Street. I'm the | | | | Mickey Hits Another Home Run |
| first to admit that finance is not my | | | | Ann, Alyson, Terry and myself attended |
| strong point but as I write this, the | | | | the Orlando ICSC dealmaking convention, |
| Dow is climbing because the Fed has | | | | which proved to be another home run. |
| indicated they won't be raising rates in | | | | Lots of busy and happy dealmakers |
| December. That in itself I understand | | | | gathering for three days to wheel and |
| but the other news that Wall Street | | | | deal, a task they were all equipped to |
| seems to be ignoring is that sales and, | | | | do and do well. |
| for many companies, profits, are | | | | The cocktail party on Sunday, while |
| dropping. To my way of thinking, I | | | | active, seemed (but I'm not sure) to |
| rather have higher interest rates along | | | | have a little less in attendance than in |
| with good profits than lower rates and | | | | the past, and I have two theories why |
| lower profits. I think there's trouble | | | | (the third is I'm wrong) 1) Airfare and |
| brewing in Dodge. | | | | hotel costs have gone up, so some |
| When it comes to stupidity, right now, I | | | | elected to come for one day less to save |
| feel like the king. A couple of months | | | | some expenses; 2) There was confusion on |
| ago, we got a shopping center to sell | | | | which day the cocktail party was, many |
| and through a MAJOR miscommunication on | | | | thinking it was on Monday, not Sunday |
| my behalf, we underestimated the income | | | | night. Either way, the show itself ended |
| by $150,000. During this period we | | | | up with nearly 5,000 attending over last |
| received several offers for about $1 | | | | year's 4,300 and the cocktail party was |
| million less than the owner wanted and | | | | a success with all attendees being in an |
| I, by pure luck, convinced the seller to | | | | upbeat mood. We can't ask for more than |
| lower his price substantially. Long | | | | that. |
| story short, we finally got an | | | | The reoccurring complaint I heard was on |
| interested party that, before going into | | | | the increasing costs of construction and |
| a LOI, wanted more information than what | | | | insurance in the Florida market since |
| we had. So, I requested it from the | | | | last year's hurricanes. The details have |
| seller and after reviewing the numbers, | | | | been reported everywhere, but I'm told |
| realized my screw-up and before sending | | | | some insurance costs have gotten close |
| the info out to the potential buyer, I | | | | to the $3 psf mark and construction |
| called the owner and confessed to my | | | | costs are up 25% to 30%. Some claimed |
| stupidity. He asked how long it would | | | | that it marks the beginning of the end |
| take to "repackage" and get new offers | | | | of Florida's great retail market, but I |
| and I said 60 to 90 days, whereby he | | | | doubt that. It will make dealmaking more |
| responded, "No, close faster at the | | | | difficult, as more secondary sites are |
| lower price." (Thank you, thank you, | | | | rejected and greater "discussions" on |
| thank you.) | | | | acceptable rents than in the past occur. |
| I then sent the info to the buyer and | | | | The great curse of life. May you live in |
| told him of my screw-up. To say the | | | | interesting times. |
| least, he was a happy camper but wanted | | | | Ann and Alyson attended the Ladies in |
| to know if he was competing with anyone | | | | the Biz cocktail party on Sunday and |
| else. I said, "Yes and no." No one else | | | | they seemed happy with the networking |
| had received the updated information BUT | | | | opportunity and the excellent turnout. |
| I will be resending the new numbers to | | | | From what I could see, the booths at the |
| companies that made unacceptable offers | | | | actual dealmaking show were sold out |
| in the past, explaining my screw-up and | | | | with just a few no-shows, so by every |
| seeing if there was new interest. It was | | | | definition, Orlando was a winner, as has |
| then that the conversation got nasty; he | | | | become tradition with this event. Every |
| contended I was being unfair (at least | | | | exhibitor I spoke to expressed |
| he wasn't calling me a thief) and should | | | | satisfaction with the show, so even with |
| not provide the income statement to | | | | some problems on the economic horizon, |
| anyone else. | | | | the Florida market is still hot. Of |
| I asked if he was prepared to go into | | | | course, trying to figure out the economy |
| contract and he replied, "Not for | | | | is impossible; One day inflation is |
| another week." I said that I therefore | | | | down, the next up. One day consumer |
| HAD TO keep marketing the property. | | | | spending is up, the next down. One week, |
| We're still talking and I do believe | | | | unemployment figures are up, the next |
| he'll make an offer, but we're not as | | | | down. It's totally confusing, and anyone |
| friendly as we were in the past. No deal | | | | claiming to understand what's happening |
| ever seems to go smoothly. | | | | is a fool or a liar. |
| Speaking of whores, I was talking to the | | | | I'm writing this during the last week of |
| VP of acquisitions for a decent-sized | | | | August and, to say the least, business |
| company and he was explaining how he | | | | is slow, at least from the brokerage |
| "beats" the competition out on deals. | | | | end; publishing is busy preparing for |
| Say the seller wants $12 million and | | | | all the upcoming ICSC dealmaking events. |
| they only want to pay $11.2 million. | | | | Phone calls have slowed to a trickle, |
| They enter into a contract for $12 | | | | most people I call are on vacation or |
| million, do their due diligence and | | | | getting ready to go on one and 99% of |
| then, about 10 days before closing, call | | | | the deals scheduled to open for this |
| the seller and say they can't close at | | | | coming Xmas season are finalized, so no |
| $12 million but can at $11. Take it or | | | | one is under pressure to do a deal; they |
| leave it. Ninety percent of the time, | | | | want to enjoy what's left of the summer. |
| the seller gets upset and calls off the | | | | Hopefully, as has been true in the past, |
| deal but calls back in a day or two and | | | | this changes after Labor Day and |
| after much negotiation, agrees to $11.2 | | | | business becomes hectic once again. |
| or $11.3 million. There was nothing | | | | The hunt to find centers for sale is as |
| found in the due diligence period that | | | | strong as ever, with most of the brokers |
| could justify the lower price, the buyer | | | | and buyers confused and frustrated on |
| just plays the game. | | | | why CAP rates aren't going up as |
| In a conversation with another director | | | | interest rates have (In theory, they |
| of acquisitions, we were talking about | | | | have; in realty, they haven't). I guess |
| their latest purchase and I asked how | | | | the only logical answer is "If they can |
| they could justify a 6.5% CAP on a | | | | get their asking price, whether it makes |
| 360,000 sq.ft. center and he said part | | | | sense or not, why not." The single |
| of it is that they jack up CAM and make | | | | largest complaint I constantly heard was |
| it into a profit center, which makes the | | | | where/how to acquire property that makes |
| numbers work -- what a business. | | | | economic sense, and there is no answer. |
| Overall, we're a great industry, but we | | | | Where I'm really confused is all the |
| do have our share of a-holes. | | | | reports that I've read contend there's a |
| Anyway, here's wishing you a great show | | | | slowdown in leasing and retail sales, |
| and holiday.posted by tedkraus at 7:33 | | | | but in the majority of markets, rents |
| AM 0 comments links to this post | | | | are still increasing and a retailer has |
| Monday, October 30, 2006 | | | | to be a real fool to pay higher rents on |
| The South Not Only Rise Again, It Won, | | | | declining sales. I must be the exception |
| Oh and More About Josh..Almost | | | | to the rule because every property we're |
| Ann and I attended the Texas Dealmaking | | | | leasing I'm finding it harder to get |
| show and over 3,000 "Tall hats"showed up | | | | decent rents and tenants are fighting |
| to wheel and deal, nearly a 20% increase | | | | harder on renewals. Of course, some of |
| compared with last year'sshow. You can't | | | | it is sticker shock, when after 10 years |
| ask for more than that, especially | | | | a tenant's rent goes from $7.50 psf |
| considering it was onlyfive or six years | | | | gross to $18.25 psf net, it can be |
| ago that the show attracted only 750 or | | | | difficult to accept. Of course, the |
| so dealmakers. | | | | retailer's gross has increased |
| High energy is the only way to describe | | | | substantially over the years and that |
| this event. Texans love dealmakingand | | | | they have no problem accepting higher |
| socializing, and they do it well. Here's | | | | sales volumes and the incoming profits. |
| another market in which smalldevelopers | | | | Another change in the sale of properties |
| excel. The South seems to be an area | | | | is that, while CAP rates have not risen, |
| that smaller developerslove; they've | | | | it is taking longer to make a deal and |
| found a niche that the REITs can't | | | | I've noticed more deals are coming back |
| touch. They may never be | | | | onto the market after a LOI was signed. |
| Kimco or DDR, but they live the good | | | | Deals seem to be dying more often; it |
| life and have fun -- a great way tomake | | | | now often takes several acceptable |
| a living. The only real complaint we | | | | offers from different buyers before an |
| heard at the show was the lack of | | | | actual deal is finalized. If the due |
| "real" retailers, and that seems to be | | | | diligence doesn't come through perfectly |
| the rule at most events, so get overit. | | | | the buyer wants to renegotiate. |
| The broker has become the mainstay of | | | | Switching subjects, Josh, as I mentioned |
| dealmaking for many, if not | | | | attended the ICSC's University in |
| most,retailers and you're going to pay | | | | Lansing, MI and they appear to have done |
| that commission, like it or not. | | | | a decent job of teaching him the basics |
| Another change I noticed at this and | | | | and providing lots of networking |
| most shows is that the actualdealmaking | | | | opportunities, many of which will |
| is lasting longer. In the "old days," if | | | | probably last him a lifetime. The reason |
| the dealmaking startedat 8 a.m., for all | | | | I think they did a decent job is that he |
| practical purposes, it was over by 1 | | | | came back with lots of buzz words and |
| p.m., even if theofficial closing time | | | | sat down with Ann and myself and |
| was 3 p.m. or 4 p.m. Now, the activity | | | | explained all the things we've done |
| goes on 'til 2p.m. or 3 p.m. So, people | | | | wrong over the last 30 years. God, I |
| are staying longer and hopefully making | | | | never realized how ignorant I've been. I |
| moredeals. I had one interesting | | | | guess that's what children are for, to |
| conversation with a developer who had | | | | point out all your mistakes. Forgetting |
| justfinished building a Starbucks. He | | | | the sarcasm for a moment, the University |
| wanted to know what I thought the CAP | | | | was well worth the time and money |
| ratecould be. I responded with a 6.2% to | | | | involved. Josh said the "teachers" were |
| 6.5% rate. He said that's what | | | | great and over the five days he had 10 |
| hisfriends are telling him, he just | | | | or 11 teachers covering all aspects of |
| didn't think anyone was that dumb. I | | | | leasing and management. It reminds me a |
| agreedwith his outlook but said there's | | | | little of talking to him after his first |
| a lot of dumb buyers out there. | | | | day of kindergarten; I was more excited |
| Anyway,moving on, Josh and I went to the | | | | than him. |
| Atlanta show, which was larger than | | | | On a different note, we're marketing a |
| Texaswith about 4,000 dealmakers | | | | center for sale that, to say the least, |
| compared to last year's count of 3,500. | | | | is problemed and we're having trouble |
| (It'salmost getting boring to announce | | | | generating any interest. I called a few |
| all these increases in attendance. | | | | brokers I know who specialize in sales |
| I'mwarning you in advance: The New York | | | | and said we should co-broker and then |
| show in December will be a | | | | sent out a complete package. A week or |
| nightmare;there will be way too many | | | | two later one of the brokers called, |
| people.) | | | | saying very apologetically that one of |
| The energy level of the Texas show was | | | | his clients made an offer but he was |
| higher than Atlanta's, but theattendees | | | | ashamed to make the offer. I used a line |
| still did their share of "dealmaking." | | | | from Lee Cherney of Kin Properties; "As |
| Like Texas, Atlanta has alot of smaller | | | | long as you don't insult my kids or |
| developers and, like Texas, their | | | | wife, I won't take it personally. So |
| biggest complaint was thelack of real | | | | give me the offer." He was right, it was |
| retailers. Atlanta has their "Retailers" | | | | low ($10 psf to buy) and I promptly |
| show the day beforethe actual dealmaking | | | | turned it down, BUT I did call the |
| and I'd guess they had 40 to 50 | | | | seller and tell him of the offer. The |
| retailers exhibitingat this busy event. | | | | good news is that, even though he didn't |
| But, my gut tells me that the amount of | | | | accept the offer, he didn't get uptight |
| retailersexhibiting was less this year | | | | and came back with a counter offer, |
| than last. BUT, that didn't stop the | | | | which the buyer turned down, but at |
| wave ofdevelopers/brokers stopping by | | | | least I got him an offer. The other |
| each booth hoping to do a deal. The | | | | brokers reluctant to present a low-ball |
| cocktailparty in Atlanta was jammed and | | | | offer reminded me of a trend I've |
| most people in attendance had | | | | noticed over the last few years. The |
| dinnerinvitations for various gatherings | | | | amount of real "horse traders" in our |
| right after the show. So, there were | | | | industry is declining. I'm not talking |
| alot of tired people the next day, which | | | | the typical deal between a landlord and |
| explains why the show got off to aslow | | | | tenant where the rent starts out at an |
| start on Wednesday. BUT, by 10:30 that | | | | asking price of $25 psf and ends up at |
| morning, the trade floor washopping and | | | | $19 psf, but on marginal properties for |
| stayed that way until 30 minutes before | | | | lease or sale. It used to be that |
| closing. | | | | companies and individuals would make an |
| I did hear one interesting tidbit: It | | | | offer on marginal centers IF the deal |
| seems that the government of Puerto | | | | could be bought "right" (and there are |
| Rico has sent letters to the major | | | | still companies that only want marginal |
| retailer developers on the island | | | | properties where they can get in cheap), |
| sayingthey are about to start an | | | | but I guess that secondary centers are |
| investigation into the possibility that | | | | either too much of a risk or too much |
| theselandlords are gouging the tenants | | | | work for most of the "next generation" |
| on CAM and electrical charges. Talk | | | | to be bothered with. Nickel and dime |
| abouta disaster looking for a place to | | | | negotiations aren't popular anymore to |
| happen. Now, I'm totally opposed to | | | | many (not all) companies and too many |
| ownersmaking more than nominal amounts | | | | people seem ashamed to make a low ball |
| of money on CAM, taxes, etc.; their | | | | offer; a big mistake in my |
| profitcenter should be the rents. BUT, | | | | opinion.posted by tedkraus at 8:19 AM 0 |
| I'm also a great believer in, | | | | comments links to this post |
| "Thegovernment that governs least, | | | | Thursday, August 24, 2006 |
| governs best." Let's hope the developers | | | | Another Josh Story...well almost |
| dosomething before the government does. | | | | I was speaking to a friend of mine who's |
| Otherwise, it might give some ideas | | | | VP of leasing for a decent sized |
| tostates in the U.S., and then we all | | | | shopping center company. As many people |
| lose. | | | | do (since I first mentioned that Josh |
| Changing subjects, as you are aware, | | | | started working for us) he asked how |
| I've been chronicling the "Adventuresof | | | | Josh was doing and I responded with my |
| Josh" since he joined the company going | | | | typical line: "Great on Monday, |
| on 5 months ago, and I have toadmit, | | | | Wednesday and Friday but I'm thinking of |
| it's becoming LESS frustrating (but | | | | firing him on Tuesday and Thursday |
| still frustrating) while tryingto teach | | | | (three out of five ain't bad). He |
| him the business. Well, I guess my | | | | replied: "No really, I want to know for |
| remarks struck home to a lot ofpeople, | | | | personal reasons since we're having |
| since we received LOTS of e-mail on | | | | trouble finding decent people at a |
| those MyWay's. Here's two, whichare | | | | salary we can justify and our Chairman |
| typical of the rest: | | | | wants me to hire young, aggressive, |
| Ted, | | | | recent college graduates to train how to |
| I just started in the real estate | | | | lease." |
| business a few months ago and | | | | "Don't do it, quit first," I replied, |
| enjoyreading your articles. I am in the | | | | "it's a full time job that requires the |
| same boat as Josh and can understand | | | | patience of a saint. You'll accomplish |
| whathe is going through. (Cold calling, | | | | none of your other work if you have to |
| asking what seem to be logical | | | | deal every day with the untrained and |
| questionsto a higher authority.) I, | | | | some days the untrainable. Your job will |
| however, disagree with the statement | | | | go downhill." |
| that we haveto be taught EVERYTHING. | | | | Now don't get me wrong, young people are |
| It's not that we don't know how to fax | | | | the future of our industry and they can |
| or pick upbusiness cards, it's that we | | | | add a lot to what we've already |
| understand that our superiors are | | | | accomplished, BUT man are they a pain to |
| succeeding atwhat they do and we want to | | | | deal with. Their inexperience in retail |
| learn their style to emulate them. I | | | | real estate and life in general requires |
| think it'sa good thing that you have new | | | | a commitment of substantial time and the |
| workers craving to learn more and more | | | | ability to deal with their mishigosh |
| eachand every day. You should see that | | | | which too many of us "old timers" (Ann |
| and be excited to teach them. This | | | | asked me not to call people old farts) |
| isyour passion, isn't it? As for me, I | | | | don't have. |
| guess I am getting the best of | | | | They have to be taught EVERYTHING, from |
| bothworlds. I am starting out like | | | | how to fax, to picking up business cards |
| everyone else does, however, I think | | | | from every retailer they canvass, to NOT |
| mybosses have a different view, one | | | | to canvass a regional square foot mall |
| tailored more to getting me to their | | | | for tenants for a 100,000 sq.ft. |
| leveland watching me succeed. I think | | | | supermarket-anchored strip, to "forcing |
| their reply to your friend would be, | | | | 'em to call 60 to 80 retailers a day so |
| "Doit, and find new possibilities." We | | | | as to start to get a "feel" on how to |
| are not embarrassed. If we were, wewould | | | | talk to retailers, and to making 'em |
| sit at our desk waiting for you to come | | | | canvass two or three times a week even |
| to us. We are seekers, readyand willing | | | | if they're tired. They KNOW NOTHING and |
| to combat new things each day. I for | | | | they're always worried about |
| sure know that if I don'task questions, | | | | embarrassing themselves. |
| I won't succeed. For you it's "Location, | | | | Now they can be an asset also, as they |
| Location, Location." | | | | often are, since most of the time they |
| For me, it's "Questions, Questions, | | | | think outside the box. They come up with |
| Questions." Shouldn't you always | | | | unusual ideas and some are good. Because |
| askquestions before you worry about a | | | | they're new to the industry, they have |
| location? In closing, I think we are | | | | no preconceived ideas and that's great, |
| anasset and need to be accepted. All | | | | so I'm not opposed to hiring the |
| those VPs who are training | | | | uninformed, I just realize it requires a |
| shouldunderstand and be willing to teach | | | | structure and commitment of time to do |
| because I am sure, back in the day, | | | | it right. Otherwise, the newbie quits |
| thosewere the guys bugging their bosses | | | | out of frustration or is fired because |
| up the wall. | | | | the supervisor becomes too frustrated. |
| Tom DiCicco | | | | It's a "lose-lose" for everyone. |
| Database Manager | | | | There are many development and brokerage |
| Ted, | | | | companies that have a formal training |
| I read your articles in every issue of | | | | program with supervision from full time |
| Dealmakers and, typically, | | | | trainers, and that can work great. These |
| they'reperfectly written and have humor | | | | companies are educating our future |
| to them. This is something I appreciate | | | | leaders. But to tell a VP of a company |
| andlike, since sometimes I feel this | | | | to be the trainer is a problem looking |
| industry lacks some comic relief and | | | | for a place to happen. The good news |
| tendsto be too serious too often. Having | | | | when it comes to these newbies is that |
| said all that, your article about | | | | they are perfect for telemarketing to |
| Josh,while well taken and a point | | | | retailers and canvassing, something that |
| probably shared by many seasonedbrokers | | | | is hard to justify when you're paying a |
| retailers, has some "holes" to it. I | | | | leasing guy $100,000 to $150,000. |
| started in this business justover six | | | | Josh's trials and tribulations must be |
| years ago, when I was 22. Now, my story | | | | common for most young folks, as I |
| is somewhat different inthat my father | | | | recently received this e-mail: "Hi, I am |
| has been in this industry since 1981. | | | | 24 and new in Retail after just |
| Because of that, I hada very small and | | | | finishing school in Southern California. |
| limited knowledge of this business when | | | | I was reading your Real Estate 101 |
| I started. I, too,however, needed that | | | | article today about your son Josh and I |
| training to get the necessary knowledge | | | | couldn't help to chuckle at the |
| to besuccessful. Here was the key that | | | | similarities between him and I when it |
| helped me become successful: | | | | comes to being optimistic about deals |
| Our company is a very small company in | | | | that will never get done. I am currently |
| terms of number of employees. | | | | cold calling like crazy to fill my |
| However, we compete on a larger scale | | | | listings in Northern Utah. Anyway, I |
| with the likes of the Mid America'sand | | | | wanted to further my education as a new |
| CB Richard Ellis's of the world. Our | | | | "optimist" in the industry and wanted to |
| inventory is massive compared tothe | | | | speak to Josh about his experience at |
| amount of people we have that work the | | | | the ICSC University in Michigan. Would |
| brokerage end of this business. | | | | you be able to give me his contact info |
| Currently, we only have three brokers | | | | when he gets back?" |
| here, including myself. When I | | | | I give him credit, he knows he doesn't |
| startedhere, there were only four: The | | | | know and wants to talk to another newbie |
| three principals of the company and | | | | to reassure himself that he's not alone. |
| oneother broker. Since my father is the | | | | And he not. Josh just left for the |
| President and principal of thiscompany, | | | | University and I'm extremely anxious to |
| he certainly had no time to train me | | | | hear his thoughts and see what he |
| each and every day. Hispartner was and | | | | learned. |
| still is equally as busy as my father. | | | | Changing subjects, I recently came |
| The third principal,too, was busy doing | | | | across an article saying: "Wal*Mart |
| her own thing. | | | | Builds, Waits for Communities to Catch |
| My job was simple. I began as Database | | | | Up." In essence, it says Wal*Mart |
| Manager here. I took an "old school" | | | | started out in mostly rural areas where |
| 3-ring binder crammed full of years and | | | | other large retailers chose not to build |
| years of contacts (both locally | | | | and now is saturating urban and suburban |
| andnationally) and computerized them. | | | | areas. Now, the retailer is looking to |
| Now I didn't just type them in | | | | add stores in communities "in the |
| acomputer, I called each and every one | | | | making." In other words, they're store |
| of them. Some were long gone and | | | | "banking." opening up in areas that are |
| nolonger in business, but most were | | | | not quite ready for a Wal*Mart but will |
| still active. Throughout my life, | | | | be in the near future. They buy and |
| myfather has always preached to me about | | | | build now, banking on future growth to |
| work ethic and striving to be | | | | make the store profitable, which it |
| "moresuccessful than he is." Obviously, | | | | isn't now but will be in the near |
| that is a typical statement and wish | | | | future. I give Wal*Mart credit for being |
| froma father to his child. So, for as | | | | forward thinking but it's nothing new, |
| busy as my father was, he always took | | | | since Sears, Kmart and JCPenney were |
| thetime to tutor me because, not only | | | | doing that 30 to 40 years ago. But as |
| was I an investment to him personally | | | | the costs of acquiring land and then |
| ashis child, I was and still am an | | | | operating these non-profitable stores |
| investment to his company. | | | | grew, they stopped expanding based on |
| Additionally,this was his way of | | | | future growth. Wal*Mart has the money to |
| training me. He put me on the phones | | | | wait and they are. Smart and long-term |
| making calls,getting to know who people | | | | thinking, something most retailers don't |
| were, learning terms of the business and | | | | do. |
| gettingmy own name out there. | | | | Ranting on...I recently had a meeting to |
| See, that is what the "elders" of this | | | | try and get the leasing for a decent |
| industry need to realize: Youngnewcomers | | | | sized, well-anchored center in an |
| in this business are not a pain in the | | | | affluent market that has about a 5% |
| neck. We're an investmentto the | | | | vacancy rate. The owner had called me to |
| companies we work for. We're not just | | | | set up a meeting saying they desperately |
| around to bug busy brokers toask | | | | needed help. I hadn't been to the center |
| questions. We're here to soak in the | | | | for several years, so I arrived early to |
| knowledge from them. The one thing | | | | walk the property and see what was |
| I will always do is, when someone young | | | | happening. Except for being a little |
| enters into this business, whetherit be | | | | tired, the center was in good shape, |
| a friend or just someone coming to work | | | | well leased with a mixture of regional, |
| at our company, I will alwaystake the | | | | national and local tenants. Candidly, I |
| time to talk to them and give them as | | | | couldn't see what the problem was and |
| much help and information asthey need. I | | | | I'm used to seeing problems. My first |
| needed it when I started, so will they. | | | | question when the meeting began was: |
| Remember this, at some point or another, | | | | "What's the problem. You have a 5% |
| we (meaning all of us in the realestate | | | | vacancy and the center looks decent, |
| business) were all in the same boat. I'm | | | | just needs a facelift." |
| sure you were when youstarted in real | | | | The owner explained that they will be |
| estate, and I'm sure there was someone | | | | undergoing a major rehab shortly and |
| there to tutor andmentor you along the | | | | will be replacing most of the facade, so |
| road. That's why CB Richard Ellis is as | | | | they knew that problem without my help |
| successful asit is today. It seems as | | | | His concern is that the center's traffic |
| though the majority of seasoned brokers | | | | has been off over the last few years |
| from the | | | | (FYI: over 500,000 sq.ft. of new |
| Baby Boomer era all started at CB | | | | developments have opened within five |
| (formerly, just Coldwell Banker). They | | | | miles in the last three years and, while |
| hadit down perfectly. Each new entrant | | | | the market is good, it's not that good) |
| into the business "ran" for someone | | | | and about 10% of the tenants are |
| whowas seasoned. My father happened to | | | | complaining and asking for a rent |
| get his first real estate job with | | | | reduction. I asked what they currently |
| CB,and the man he "ran" for taught him | | | | do to market the center to tenants and |
| some valuable lessons, which were | | | | was told they wait for brokers to call. |
| passeddown to me. | | | | Not exactly a pro-active approach. I |
| All in all, let's take it easy on the | | | | asked why they were not doing more and |
| young newcomers because one day, wewill | | | | was told they never had to, enough |
| be the generation that is the majority | | | | people called in the past to keep the |
| within this industry. And again, | | | | center leased. I explained that they |
| I know for sure that when the next wave | | | | were no longer that cute, little |
| of young sales people come throughwhen I | | | | 18-year-old girl; they're now a mature |
| am old and have many years under my | | | | woman who, before going out on a date |
| belt, I'll be sure to fill themup with | | | | has to put on makeup, spend time on |
| as much knowledge as I can! | | | | their hair and dress right. Their body |
| Jason R. Lenhoff | | | | appeal ain't what it used to be, but |
| Horizon Realty Services, Inc. | | | | that doesn't mean no one wants to date |
| Nick D'Amoreposted by tedkraus at 12:21 | | | | 'em. |
| PM 0 comments links to this post | | | | I think this problem is too common |
| Friday, October 06, 2006 | | | | today; we've all gotten a little fat and |
| 2006, Not As Great As 2005 But Still | | | | lazy after a decade of expanding |
| Great | | | | retailers, tons of new developments and |
| Alyson just got back from the Palm | | | | easy money. We, as an industry, don't |
| Springs show (next year it will be in | | | | pay attention to our existing centers. |
| San Diego, one of my favorite areas in | | | | We're too busy planning the next center |
| the country. Actually it's La Jolla that | | | | to be developed or acquired. Long term |
| I love, the town north. But either way | | | | planning is not part of the gameplan and |
| it's a great place to bum. The reason | | | | that's a problem. Back in "the good old |
| for the change is the hotel in Palm | | | | days," it was a leasing agent's job to |
| Springs can't handle the increasing size | | | | market a center even if it was 100% |
| of the ICSC show, a problem we might | | | | leased; replacing weaker tenants with |
| have in New York). She said that the | | | | more aggressive ones and having a tenant |
| show was active, with a possibility of | | | | in their "back pocket" if and when an |
| nearly 6,000 attending this year | | | | existing tenant defaults. It ties into a |
| compared to last year's 5,240, so | | | | conversation Ann had recently with one |
| California dealmakers are a happy lot. | | | | of the ICSC's people. They were talking |
| The cocktail party was active, with | | | | about the ICSC's "University" and Ann |
| everyone upbeat, and meetings were being | | | | asked why they didn't teach a course on |
| held at every available table. Lee | | | | "marketing" a property from a leasing |
| Cherney, a friend and VP of Kin | | | | aspect. She was told that business has |
| Properties, was there trying to find | | | | been so good for the last 10 years |
| property for sale. He contends that | | | | there's no need, and that's true |
| acquisitions have gotten so tough that | | | | unfortunately. |
| one broker didn't want to deal with him | | | | Parting thoughts: I'm trying to do a |
| because his company knows what they're | | | | deal for a big box retailer I'm |
| doing and therefore makes the deal more | | | | representing and, of course we're |
| difficult (a dumb buyer is the best kind | | | | fighting over rent. After I made my |
| of buyer). Another developer told Lee | | | | "final and best" offer, I was told it |
| he's currently building shopping centers | | | | wasn't enough and that they'd lose money |
| and then immediately flipping 'em at a | | | | on the deal. Now I don't claim to be |
| 5.25% CAP in California. I'm getting 5% | | | | bright or an expert on redevelopment, |
| on my CDs. Something is wrong here. | | | | but "we" are taking a portion of a |
| Ann and I are going next week to the | | | | former "superstore" and I know the cost |
| Texas dealmaking, and the following week | | | | of TI for us, have an idea what the |
| Josh and I are attending the Atlanta | | | | property costs, brokerage commission, |
| show. And in two months, the | | | | etc. And my offer provides cash flow to |
| "mother-in-law of all mothers-in-law," | | | | the owner above all these expenses. When |
| the New York show will be here (God, the | | | | I explained this to the owner I was |
| year is going fast). Every indication is | | | | told; "What about the vacancies?" I |
| that the next three shows will also be | | | | replied "What do you mean?" and was told |
| good, and in all probability New York | | | | that there was a substantial amount of |
| will set another record, so 2006 appears | | | | vacancies after doing the deal with us |
| to be ending with another banner year | | | | and if we don't pay more rent, they have |
| for the retail real estate industry; | | | | a negative cash flow. Huh? You want me |
| maybe not as good as 2005, but what's | | | | to guarantee the entire project is |
| the difference between an "A" and | | | | profitable even if I'm only taking a |
| "A-minus"? | | | | portion of it? No way. I tried to |
| The great unknown is Christmas 2006 and | | | | explain they had to add to their |
| how good or bad it will be. If it's | | | | acquisition costs the cost of carrying |
| good, we're in for a great start in | | | | the property for two or three years |
| 2007. If not, lots of retailers will be | | | | while looking for additional retailers, |
| re-evaluating their expansion plans and | | | | but they didn't seem to understand that |
| a couple of the weaker chains will go | | | | concept. We have too many novices in the |
| bankrupt. Standard operating procedure | | | | business. If, and when, the recession |
| for a weak Christmas. So far, | | | | "hits," we'll eliminate many of them and |
| indications are that while some of the | | | | that's good.posted by tedkraus at 7:49 |
| economy is slowing, retail is holding | | | | AM 0 comments links to this post |
| its own; don't understand how or why, | | | | Tuesday, August 08, 2006 |
| but it is. Of course, the ongoing wars, | | | | The Slowdown Is Here...Now What? |
| who wins the elections in November, | | | | Well, the slowdown in the economy |
| which way interest rates go and the | | | | appears to be taking hold, getting |
| price of oil will all have an impact on | | | | stronger or weaker every day depending |
| us, but right now we appear to be in | | | | on how you look at it. But the downturn |
| decent shape. But the smart money, I | | | | is still having a minimal effect on |
| don't believe, is betting either way. | | | | retail real estate (thank God, I need |
| They're as confused as I am. Oh, and the | | | | the money). Two observations I've |
| Federal Reserve is saying there will be | | | | noticed in the last month. First, as |
| more defaults on commercial real estate | | | | many of you know, we manage eight forums |
| loans. We live in confusing times. | | | | on the sale, leasing and finance of |
| On a different note, I read that Kimco | | | | commercial real estate (to join, go to |
| bought 19 centers from GE, which in | | | | The amount of condos and conversions |
| itself is not significant (they're | | | | being offered on the forum for sale have |
| buying all the time), but the article | | | | tripled in the last month, mostly for |
| goes on to say they're in the process of | | | | Florida and Vegas properties, and I have |
| flipping these centers to an investment | | | | to assume the reason for the vast |
| group, which is now part of their | | | | increase in these offerings is that the |
| operating philosophy. Buy, Sell, Flip. | | | | speculators, who were developing or |
| If anyone did an analysis of Kimco's | | | | buying condos on the spec, are trying to |
| sales, I'd be willing to bet that from a | | | | get out now before they get massacred. |
| sales aspect, they are among the largest | | | | Also, while not a scientific approach, |
| brokers of retail real estate in the | | | | we recently ran a help wanted ad for an |
| country. I have to give Milton Cooper | | | | administrative assistant and probably |
| credit, he's probably the smartest man | | | | 25% of those applying were/are real |
| in our industry. He JVs, manages, buys, | | | | estate agents wanting the security of a |
| sells, loans and anything else that can | | | | weekly paycheck instead of counting on |
| make a buck. He not only sells the pig, | | | | commissions. Again, I have to assume the |
| but also the oink. No one does it | | | | residential real estate market is |
| better. The only thing that scares me is | | | | becoming weaker and the tertiary players |
| that one company controls nearly 5% of | | | | are not making money. However, to really |
| all the centers in the country. Big | | | | complicate matters, every report I read |
| always bothers me; That's why I hate the | | | | says that leasing is up nationwide in |
| government. | | | | almost every segment except industrial. |
| Oh well, ranting on. A trend I've | | | | Of course, to further complicate the |
| noticed since Josh joined the company | | | | matter, I was speaking to a friend of |
| (he has several freestanding buildings | | | | mine who represents a big box tenant |
| for lease and has gotten involved in | | | | that demands great deals. Long story |
| leasing smaller space than I'm usually | | | | short, he contends that in the last five |
| involved in). Because of his canvassing, | | | | months, the number and quality of 70,000 |
| he's dealing with the smaller chains | | | | sq.ft. to 100,000 sq.ft. boxes being |
| (under 20 stores) many who want to buy | | | | offered to them has quadrupled and the |
| their real estate instead of leasing, | | | | asking rent has dropped, and if leasing |
| wanting the benefit of appreciation or | | | | is strong, why are so many properties |
| to take advantage of the full value they | | | | being offered to him? I'm confused. |
| bring to a location when they open and | | | | I also see a "little" more resistance to |
| bring additional traffic to a center. | | | | low CAP deals, especially if you can get |
| Besides his properties, I'm leasing | | | | CDs paying 5.5%. And, most importantly, |
| selling some vacant big box stores and I | | | | consumer spending was weak for a fourth |
| must get five to 10 calls a month from | | | | straight month in June as rising |
| brokers representing "big box" retailers | | | | gasoline prices left Americans with |
| (over 50,000 sq.ft., but small chains) | | | | little to spend on other items (but |
| wanting to buy distressed centers with | | | | July's sales numbers were good). A key |
| large vacancies that their client can | | | | measure of inflation rose at the fastest |
| open and operate in. (Oh, I also noticed | | | | pace in more than a decade, not a good |
| in the last few months an interest from | | | | sign to keep the Fed from raising |
| some entrepreneurs to open flea markets | | | | interest rates. The good news is that |
| in closed big boxes. I haven't gotten | | | | retail sales are still decent, but |
| these types of calls in years). Half of | | | | middle class and blue-collar oriented |
| the tenants Josh is canvassing for on | | | | retailers seem to be slowing down their |
| his freestanding buildings expressed | | | | expansion plans. And to make matters |
| interest, but only want to buy and won't | | | | even more interesting, is it's becoming |
| lease. | | | | "in" for non-retailers to acquire |
| On the same note, we're marketing a | | | | retailers, such as Lord & Taylor being |
| 200,000 sq.ft. center with a vacant | | | | acquired by NRDC Equity Partners and |
| 100,000 sq.ft. store and I've been | | | | National Realty & Development Corp. The |
| approached by several retailers wanting | | | | trend started 35 years ago when Arlen |
| to buy (which the owner is willing to do | | | | Shopping Centers bought E.J. Korvettes, |
| and the asking price is low at $15 psf, | | | | which later went bankrupt and every |
| but the buyers want it even lower). One | | | | developer since who has acquired a |
| retailer offered our asking price, but | | | | retail chain has filed either "11" or |
| wanted "us" to take back paper for the | | | | "7" after the acquisition. It's one |
| entire amount, pay interest of 6% and | | | | thing to acquire a chain for it's real |
| provide no real guarantee. They couldn't | | | | estate and then sell it off piecemeal |
| understand why their offer was rejected. | | | | (that makes some sense) BUT developers |
| I also noticed that there's lots of | | | | can't retail and retailers can't |
| bottom fishers in the smaller chain | | | | develop; totally different skills are |
| market (the big boys aren't the only | | | | required. |
| ones), offering to move fast if we did a | | | | Now some good news: in conversations |
| deal 20% to 30% below market. I guess | | | | with smaller retailers (we call 500 to |
| they're all hoping to find a desperate | | | | 750 retailers a week because of |
| owner. Now, I understand lowballing if | | | | TenantSearch). We're hearing that the |
| you're buying and intend to be the | | | | smaller chains (under 25 stores) are |
| landlord, BUT if you're going to operate | | | | doing well and want to expand, a |
| a store in the center, it should be | | | | substantially higher percentage than we |
| location, location, location and | | | | hear when talking to the "big boys." I |
| demographics being the most important | | | | guess the philosophy that smaller chains |
| part of the deal, not the cheapest deal | | | | can respond to their customers quicker |
| that determines if they proceed. Their | | | | and more efficiently than the larger |
| main business should be retailing, not | | | | chains is correct. |
| real estate (on the same philosophy, I | | | | All that being said, I've also spoken |
| think it's crazy when a developer buys a | | | | with a dozen buyers of low CAP centers |
| retailer). If, and when, the recession | | | | and, while the CAPS are slowly rising, |
| hits, we could be in deep trouble. Few | | | | they still don't make sense. What's |
| buyers or retailers seem to be concerned | | | | worse is that the only decent centers |
| about the fundamentals of retailing or | | | | they're finding available are still |
| real estate anymore. | | | | being offered at a 6.5% CAP, about what |
| On a similar note, while we're | | | | they are paying for money, so they can't |
| encountering tough negotiations with the | | | | justify the deal. Also, in conversations |
| smaller chains, I noticed some of the | | | | with numerous developers and brokers, |
| larger developers, brokers and retailers | | | | they say they're busier this summer than |
| are taking a totally different approach. | | | | usual, so all the news is mixed with |
| I know I spoke about this before, but | | | | good news coming Monday, Wednesday and |
| we're an industry of horse traders (and | | | | Friday and bad news on Tuesday, Thursday |
| I'm proud of that fact) and I don't | | | | and Saturday. If you understand the |
| understand this change, the reluctance | | | | economy please let me know 'cause I'm |
| NOT to horse trade (there's nothing | | | | confused. |
| wrong with tough negotiations, but being | | | | On a different topic, we're working on a |
| a tough negotiator and NOT making the | | | | center that, being polite, I could call |
| deal is NOT an attribute. Being a tough | | | | "problemed" but being honest it's a |
| negotiator AND making the deal is a mark | | | | disaster. Anyway, we got a "big box" |
| of success). I gave a proposal on an | | | | tenant to make an offer, a rotten one |
| outparcel to a developer of "dollar | | | | but an offer. The center is 80% vacant |
| stores," and they came back saying it's | | | | and they're willing to anchor 60,000 |
| too high and then I practically have to | | | | sq.ft. at terms extremely favorable to |
| beg to get 'em to make a counter | | | | them. I made the offer to the owners and |
| proposal. When I asked why they can't | | | | had my head handed to me (Oh, no cash |
| come back with a counter proposal, they | | | | outlay is required by the owner, just |
| claimed that the difference is too big. | | | | cheap, cheap, cheap rent). |
| He contended that a million was too | | | | Yes, I understand that the deal stinks |
| much. It took me a month to get him to | | | | BUT the center is in a high-crime area, |
| counter offer at $500,000 and we finally | | | | low income and the last deal made there |
| agreed, but why was it so difficult? | | | | was two years ago with a beauty salon of |
| Speaking of Josh (remember he's my only | | | | 1,200 sq.ft. at $8 per sq.ft. and their |
| begotten child; that I know of). He's | | | | rent is always late. The owner's |
| proving what I've always knew, but have | | | | argument is IF the tenant believes in |
| to be reminded of, canvassing pays, and | | | | the property, they should make a |
| pays big. Thanks to several friends who | | | | "respectable" offer. Huh? Just because |
| gave him centers to work on, he's been | | | | the landlord owns a dog doesn't mean the |
| doing a decent job of canvassing and in | | | | retailer wants to be stuck (oh, besides |
| the last three weeks brought in seven or | | | | low rent, they want kickouts) with their |
| eight proposals. Only one was acceptable | | | | problems. They're willing to give it a |
| but seven or eight proposals ain't bad. | | | | try and if they succeed, the landlord |
| The ma&pas are still expanding, but they | | | | can succeed by being able to lease the |
| need someone to call on 'em to get their | | | | satellite space (that's the philosophy |
| interest going. | | | | of the '80s but the economy has been so |
| Talking about deals, I also noticed most | | | | good for so long, the newbies don't know |
| of the big box users are beginning to | | | | and the old farts have forgotten the |
| become easier (not easy, just easier) to | | | | basic rules. FYI, I'm one of the old |
| deal with than in the past. I have to | | | | farts. Hell, I still use DOS software |
| assume the reason for this change is not | | | | occasionally. |
| that I've become a better negotiator, | | | | When you have a "winner" center, charge |
| but it's getting harder for them to find | | | | high rents since retailers can and will |
| sites and the amount of vacant big boxes | | | | pay for proven success. The retailer may |
| in decent locations is minuscule. | | | | bitch but you can justify the extra |
| However, Real Estate Research Corp. just | | | | money BUT when you're stuck with a dog |
| came out with a report saying that | | | | the risk is on you and NEVER, never kill |
| because of the low CAP rates, retail has | | | | the messenger (the broker) because you |
| the lowest interest of buyers of | | | | don't like the deal. At least an offer |
| commercial real estate. In addition, | | | | was made, which is better than no offer |
| second quarter vacancies rose from 7.6% | | | | at all. |
| to 8.5%. Maybe too much of a good thing | | | | Going on with a personal rant for the |
| is bad.posted by tedkraus at 2:01 PM 0 | | | | moment, I recently went to Best Buy to |
| comments links to this post | | | | get another computer and monitor for the |
| Monday, September 25, 2006 | | | | office. I spent about 20 minutes looking |
| Chicago Was Hot and So Was The | | | | at their selection and finally decided |
| Cheesesteak | | | | on what I wanted but there was no |
| Alyson and I attended the Chicago (oh, | | | | inventory for the two items in sight, so |
| congratulate her, she's now our vice | | | | I looked around for a salesperson, which |
| president) ICSC dealmaking event and, | | | | took another 10 minutes to find. He was |
| besides the beautiful weather, the show | | | | waiting on another customer and, after a |
| was "hot," with some 3,400 dealmakers in | | | | moment of me standing nearby, said there |
| attendance, setting another record, | | | | was another customer he'd have to help |
| which all the shows seem to be doing for | | | | after this customer, so it would be |
| the last few years. And while I'm | | | | awhile. I asked if there were any other |
| hopeful, I doubt this trend can | | | | salespeople around and he said no, so I |
| continue, especially with all the mixed | | | | left and went to CompUSA and almost the |
| economic reports that have been coming | | | | identical scenario occurred. I became |
| out for the last few months (I know I | | | | extremely frustrated and left, went back |
| keep saying this but eventually I'll be | | | | to the office and spent 10 minutes |
| right). | | | | online with Dell Computers where I |
| There were two major complaints I heard | | | | placed a $1,300 order for a monitor and |
| at the show: 1) the 45 minute to hour | | | | computer. Three days later it was |
| and a quarter wait to get your photo and | | | | delivered to our office. I understand |
| badge IF you didn't pre-register and | | | | that $1,300 won't make or break Best Buy |
| send in your photograph on time. About | | | | or CompUSA, but I have to believe I'm |
| 25% of the attendees had not mailed in | | | | not the only customer that storms out of |
| their photo, which caused the long | | | | their stores because of incompetency. |
| waits. I recommend to anyone planning on | | | | I'm willing to bet they lose million$ |
| attending future shows that they e-mail | | | | every year because of a lack of help. In |
| their photos to the ICSC NOW so they're | | | | the "pre-Internet" days, stores might be |
| not stuck in these lines, especially for | | | | able to get away with poor service, but |
| Vegas where the wait might be hours. The | | | | with such a convenient, easy to use |
| good news is that at the New York show | | | | competitor called the Internet, more |
| photos won't be required because they | | | | retail store sales will be lost to the |
| don't have the space in which to take | | | | Net because so few retailers believe in |
| 'em. BUT most of the other shows and | | | | service. They're more concerned about |
| Vegas will require it, so don't stall, | | | | keeping payroll costs low than keeping |
| just do it; 2) was the lack of "real" | | | | the consumer happy and therefore force |
| retailers. There were lots of brokers | | | | the consumer to shop online. The |
| representing retailers but few actual | | | | Internet will not cause the demise of |
| ones. The only large group of retailers | | | | physical retail locations, but it will |
| represented was fast food-oriented and | | | | cause the end of marginal stores for |
| some banks. While the Philly show didn't | | | | retailers that can't get their act |
| have a problem with registration, the | | | | together. |
| complaint about the lack of retailers | | | | Parting thoughts...In addition to the |
| was the same. | | | | troubled center I've described above, |
| Anyway, back to Chicago. I attended the | | | | we're working on another problem |
| Harold Eisenberg Memorial Dinner the | | | | property that's for sale. We spent about |
| night before the show and it was a | | | | a month marketing it and couldn't |
| sellout with 550 in attendance. It pays | | | | generate any interest or offers, so I |
| to attend this event; not only are you | | | | called the owner and suggested he try |
| supporting a good cause, but you're also | | | | another brokerage company. He asked what |
| getting a great networking opportunity | | | | I thought of auctions to get rid of the |
| at the same time; two for the price of | | | | property. I said the good news is that |
| one (Oh, and the food at the dinner was | | | | they can generate high interest in a |
| fantastic). | | | | short time period (but you need a good |
| The ICSC cocktail party the following | | | | auction company that knows how to |
| day was jammed and what was really | | | | market), but it's my experience they |
| surprising was that the food was decent | | | | don't generate a sale, but do generate |
| (no, I don't have a food fetish). | | | | "leads." After the auction is over, you |
| Everyone was upbeat but concerned that | | | | contact everyone that bids and see if |
| the good times can't last much longer (I | | | | there's a way to structure a deal, and |
| am not alone). Once again, I heard | | | | in 50% of the time, a deal is done. Of |
| complaints about the price of acquiring | | | | course, to make this work, you have to |
| centers and how they're getting a 10% | | | | have a reserve, and with a reserve many |
| return when they purchase industrial, | | | | potential buyers won't bid. No system is |
| which a lot are now doing since they | | | | perfect, but it's worth a try. |
| "say" they've given up on retail (I | | | | Personally, I'm not an auction believer. |