My Way by Ted Kraus
In my former life, I was a leasing agent for Arlen Shopping Centers, (the second cousin, on its mothers side, to CBL & Associates) who, at the time, was the world's largest shopping center developer. "We" (actually Arthur Cohen, the Chairman) were great when it came to financing and leasing, but "we" left a lot to be desired when it came to construction, management and long term planning. Arlen's real estate overall was excellent, but because of their decision to purchase Korvettes and Atlantic Department Stores (these were the great grand daddies in discounting to Kmart and Wal*Mart for all you youngsters out there), being so alien to shopping center development, it finally lead to the company's demise. After realizing they weren't retailers and never would be, Arlen decided to close numerous stores. The good/bad news was we did not liquidate the chains (in those days, there was no one to liquidate to anyway, and since the developer owned the retailer, what good would it be to go bankrupt and disavow the leases). We became pioneers in developing the concept of "converting" these "big boxes" into alternate uses. The better properties, of course, remained retail and were leased to Kmart (who was the super star of retailing at the time), WoolCo and Grant City (man am I old), but like the current state of chain liquidation, getting rid of the good stuff was never a problem (the top executives handled these leases), but the poorer locations were a pain to lease, so the lower echelon of leasing agents were given these assignments (that's where I came in).
Anyway, one thing I will give Arlen credit for was having some of the brightest people in retail real estate working for them (of course, since the shopping center industry was in its infancy at the time, they really didn't really know what they were doing, there were no "rules" to go by, but they were great at guessing and proved to be right more times than not). Top management in charge of the conversion program knew that some of the centers could never be leased as retail and alternate uses were the only way to go.
Since conversion/alternate uses was a brand new concept 20 years ago, they had renderings drawn up for prospective tenants on what could be done with the property; i.e. convert a vacant Spartan Atlantic store into a shopping center/mini mall, school, motel, etc. A picture/rendering is worth 1000 words and they wanted to expedite the program and make the properties easier to understand for prospective tenants.
All of the above brings me to why I'm writing. I received a call from Steve Felix, an old, old friend (almost as old as MaryAnn) telling me that while cleaning up his office recently he came across 16 or so of the original renderings depicting what Arlen had proposed. Steve had them because he used to be involved in "turn around" management and found Arlen's ideas useful when marketing his property.
I asked for a copy to be sent, since I hadn't seen 'em in two decades. Making a long story longer, I just received the package and they are as relevant today as they were 20 years ago (if you want us to fax you a few for review, fax us a note at 609-587-3511 along with your fax number). I think I'm going to have our art department update them and include them in our Alternate Use Program.
I guess the moral of the story is, if you want to know how to cure today's problems, just look at the past. It's been nearly 20 years and the need to convert poorly planned retail to alternate uses is still relevant; guess we never learn.
On a different subject, retailers are beginning to learn all the benefits of just saying no (but I bet most did inhale when they were younger). A friend of mine represents a retail chain and when we use to talk about his expansion program, he semi bragged about his great deals at $14-17 per ft., and what a great negotiator he was. Well, for various reasons, they won't be expanding as much this year, so he's saying "no" to developers more often. We just had lunch together and he was amazed at how much more TI, options and other "extras" were available if he would just say "yes" instead of "no." His "deals" have improved by 25%. The minimum rents are basically the same (developers have mortgage payments to meet), but the overall deal is a lot sweeter. If you're a retailer, give it a try. What do you have to lose?
I receive dozens of calls a week from developers wanting to know if I know of a tenant that might be interested in their vacancies. Most of the time they just want help and don't want me to play broker (which is fine) and I provide some ideas and phone numbers. Other times they say: "Why don't you earn a commission and make the deal?" To understand where I "come" from, most of the deals I work on are problemed properties, so we charge a retainer against a commission because we have to work twice as hard to produce half the rent/commission. In a few rare cases, if I think I can lease the property in a short period of time, I'm willing to play traditional broker, but that's the exception, not the rule. Anyway, a few days ago someone called wanting to know if I'd be interested in leasing their property. I did a little checking around, thought I had a fighting chance of producing a tenant, and sent our standard contract (which is very negotiable) that gives us a one year exclusive with the right for the client to cancel if we're not in active negotiation with a tenant within six months (which I think is fair.) I waited a few days after I sent the contract and followed up with a phone call.
I asked the potential client "what they wanted to do" and they said, "Why do we need a contract?, we'll pay you if you bring us a tenant. Can't we operate on trust?" This is the most common response when I send a contract to someone who wants me to lease their property. While I try to be somewhat diplomatic, my answer, is always "no." Unless I know someone extremely well, trust is not part of our relationship. I find the client to be much more untrustworthy than me. If they are not willing to sign a contract, the odds of them paying is really low and I'm only in this for the money.
Over the last few years, I find I'm being much more selective on which centers I work on. I may not be as busy, but I'm making more money and that's just fine. However, I can't understand the broker that's willing to work on leasing a property based solely on trust. That was great 10 years ago, but not in today's world. I speak to a dozen brokers a week who spent six months working on "trust" and then somehow get the shaft.
On an "interesting note," 30 developers in New Jersey are sponsoring legislation that would require brokers to disclose who they represent (are they representing a retailer/tenant or are they representing the best interests of the developer). If they represent the tenant, then that's who pays them, not the developer. If it's passed and then catches on with the rest of the nation, it will have a radical effect on our industry. In my humble opinion, the concept is good, but I am opposed to giving the "Evil Empire" anymore regulating authority, they'll just abuse it. If this law is passed however, we should pass another one that reads "if you don't pay the broker the full commission, on time, then you'll be flogged." I highly recommend you keep an eye on this situation.
FYI: In the last My Way, I talked about the Internet and how most of the "surfers" are brokers & developers, not retailers. Well, some retailers are learning to surf the Net to do deals. Payless Shoes is using the net, both by posting to the various user groups and having a Home Page (http://www.paylesshoesource.com) to market their surplus properties, so the Net is changing and growing rapidly. I suggest, highly you get on board, it's the future.
In my former life, I was a leasing agent for Arlen Shopping Centers, (the second cousin, on its mothers side, to CBL & Associates) who, at the time, was the world's largest shopping center developer. "We" (actually Arthur Cohen, the Chairman) were great when it came to financing and leasing, but "we" left a lot to be desired when it came to construction, management and long term planning. Arlen's real estate overall was excellent, but because of their decision to purchase Korvettes and Atlantic Department Stores (these were the great grand daddies in discounting to Kmart and Wal*Mart for all you youngsters out there), being so alien to shopping center development, it finally lead to the company's demise. After realizing they weren't retailers and never would be, Arlen decided to close numerous stores. The good/bad news was we did not liquidate the chains (in those days, there was no one to liquidate to anyway, and since the developer owned the retailer, what good would it be to go bankrupt and disavow the leases). We became pioneers in developing the concept of "converting" these "big boxes" into alternate uses. The better properties, of course, remained retail and were leased to Kmart (who was the super star of retailing at the time), WoolCo and Grant City (man am I old), but like the current state of chain liquidation, getting rid of the good stuff was never a problem (the top executives handled these leases), but the poorer locations were a pain to lease, so the lower echelon of leasing agents were given these assignments (that's where I came in).
Anyway, one thing I will give Arlen credit for was having some of the brightest people in retail real estate working for them (of course, since the shopping center industry was in its infancy at the time, they really didn't really know what they were doing, there were no "rules" to go by, but they were great at guessing and proved to be right more times than not). Top management in charge of the conversion program knew that some of the centers could never be leased as retail and alternate uses were the only way to go.
Since conversion/alternate uses was a brand new concept 20 years ago, they had renderings drawn up for prospective tenants on what could be done with the property; i.e. convert a vacant Spartan Atlantic store into a shopping center/mini mall, school, motel, etc. A picture/rendering is worth 1000 words and they wanted to expedite the program and make the properties easier to understand for prospective tenants.
All of the above brings me to why I'm writing. I received a call from Steve Felix, an old, old friend (almost as old as MaryAnn) telling me that while cleaning up his office recently he came across 16 or so of the original renderings depicting what Arlen had proposed. Steve had them because he used to be involved in "turn around" management and found Arlen's ideas useful when marketing his property.
I asked for a copy to be sent, since I hadn't seen 'em in two decades. Making a long story longer, I just received the package and they are as relevant today as they were 20 years ago (if you want us to fax you a few for review, fax us a note at 609-587-3511 along with your fax number). I think I'm going to have our art department update them and include them in our Alternate Use Program.
I guess the moral of the story is, if you want to know how to cure today's problems, just look at the past. It's been nearly 20 years and the need to convert poorly planned retail to alternate uses is still relevant; guess we never learn.
On a different subject, retailers are beginning to learn all the benefits of just saying no (but I bet most did inhale when they were younger). A friend of mine represents a retail chain and when we use to talk about his expansion program, he semi bragged about his great deals at $14-17 per ft., and what a great negotiator he was. Well, for various reasons, they won't be expanding as much this year, so he's saying "no" to developers more often. We just had lunch together and he was amazed at how much more TI, options and other "extras" were available if he would just say "yes" instead of "no." His "deals" have improved by 25%. The minimum rents are basically the same (developers have mortgage payments to meet), but the overall deal is a lot sweeter. If you're a retailer, give it a try. What do you have to lose?
I receive dozens of calls a week from developers wanting to know if I know of a tenant that might be interested in their vacancies. Most of the time they just want help and don't want me to play broker (which is fine) and I provide some ideas and phone numbers. Other times they say: "Why don't you earn a commission and make the deal?" To understand where I "come" from, most of the deals I work on are problemed properties, so we charge a retainer against a commission because we have to work twice as hard to produce half the rent/commission. In a few rare cases, if I think I can lease the property in a short period of time, I'm willing to play traditional broker, but that's the exception, not the rule. Anyway, a few days ago someone called wanting to know if I'd be interested in leasing their property. I did a little checking around, thought I had a fighting chance of producing a tenant, and sent our standard contract (which is very negotiable) that gives us a one year exclusive with the right for the client to cancel if we're not in active negotiation with a tenant within six months (which I think is fair.) I waited a few days after I sent the contract and followed up with a phone call.
I asked the potential client "what they wanted to do" and they said, "Why do we need a contract?, we'll pay you if you bring us a tenant. Can't we operate on trust?" This is the most common response when I send a contract to someone who wants me to lease their property. While I try to be somewhat diplomatic, my answer, is always "no." Unless I know someone extremely well, trust is not part of our relationship. I find the client to be much more untrustworthy than me. If they are not willing to sign a contract, the odds of them paying is really low and I'm only in this for the money.
Over the last few years, I find I'm being much more selective on which centers I work on. I may not be as busy, but I'm making more money and that's just fine. However, I can't understand the broker that's willing to work on leasing a property based solely on trust. That was great 10 years ago, but not in today's world. I speak to a dozen brokers a week who spent six months working on "trust" and then somehow get the shaft.
On an "interesting note," 30 developers in New Jersey are sponsoring legislation that would require brokers to disclose who they represent (are they representing a retailer/tenant or are they representing the best interests of the developer). If they represent the tenant, then that's who pays them, not the developer. If it's passed and then catches on with the rest of the nation, it will have a radical effect on our industry. In my humble opinion, the concept is good, but I am opposed to giving the "Evil Empire" anymore regulating authority, they'll just abuse it. If this law is passed however, we should pass another one that reads "if you don't pay the broker the full commission, on time, then you'll be flogged." I highly recommend you keep an eye on this situation.
FYI: In the last My Way, I talked about the Internet and how most of the "surfers" are brokers & developers, not retailers. Well, some retailers are learning to surf the Net to do deals. Payless Shoes is using the net, both by posting to the various user groups and having a Home Page (http://www.paylesshoesource.com) to market their surplus properties, so the Net is changing and growing rapidly. I suggest, highly you get on board, it's the future.
posted by tedkraus at 10:22 AM
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