| Recently we (TKO) received a call requesting a | | | | how useful it is. The center itself is over 20 years old |
| proposal for leasing a "turnaround" for a mall of a | | | | and there's no doubt in my mind that 99% of all the |
| million sq.ft. that is 65% vacant. Turnarounds like this | | | | mall-oriented retailers within 50 miles knows of the |
| are extremely difficult, and often the buyers of | | | | project and has a negative view of the center's |
| these centers have no idea what they are doing, but | | | | future. Yes, there are many mall-oriented retailers I'd |
| because they acquired the project for $10 psf or | | | | love to have and some of 'em might be willing to be |
| less, they think they're getting a bargain (which they | | | | "bought" in order to entice them in, but besides |
| never are). So before going into our services and | | | | requiring lot's of TI money and kickouts I don't think |
| costs, I asked some questions on what its owner | | | | they would have an immediate impact on traffic |
| thought could be done, what type of money he had | | | | because they are in every mall.(there are three |
| for TI, how long the owner anticipated waiting | | | | competing malls within 15 miles). Anyway, the new |
| before seeing results, etc. (why waste both of our | | | | buyer asked that I put together a proposal and list |
| time if we can't do the job) The good news was | | | | of tenants I'd go after and that got me thinking of |
| that the new owner recently did a Steve&Barry's | | | | my "dream team of mall tenants" and guess what, |
| deal, which in my opinion makes sense, since they're | | | | most are not mall-oriented. I want tenants that build |
| so unique that they'll draw from a larger radius than a | | | | traffic and draw on their own, not needing their |
| typical JCPenneys, Sears, Wal*Mart, etc. So our | | | | neighbors traffic to survive, at least at the beginning. |
| conversation started off on the right track. (Oh, the | | | | Rent considerations were secondary, since the |
| center can't be demalled). | | | | center was bought "right," so we could make it work. |
| The owner also built into his proforma a substantial | | | | So here's the type of retailers I'd want to start a |
| TI budget; is prepared to do "sweetheart" deals and | | | | turnaround with: (not in any order of importance) |
| wait 18 months before seeing any real results. A rare | | | | Five Below (if I couldn't get them, then Dollar Tree), |
| and knowledgeable buyer of distressed enclosed | | | | MJM Shoes or DSW would be excellent draws; While |
| malls compared to most I meet. Our conversations | | | | I'd love a Barnes & Noble or Borders, realistically I can |
| went well, but there were two areas I disagreed | | | | probably do a Book Warehouse or Books-A-Million |
| with him on. First, when we take over a center of | | | | deal. Stein Mart would also be an excellent draw, as |
| this size with problems we want to also manage it, | | | | would Guitar City. Add to the list Children's Place, Ann |
| not for the money (you never make real money off | | | | Taylor Loft, Radio Shack, Causal Male, Dress Barn, |
| managing) but because it provides us with the | | | | Fashion Barn, Mandees, HomeGoods, Sleepy's, |
| degree of control we need to make a turnaround | | | | Verizon and in a rear, outside location, the Post |
| work. The owner felt that currently the amount of | | | | Office (a great draw from 9-to-5), Hancock Fabrics |
| tenants in the center is small enough where he could | | | | JoAnn's, David's Bridal, Cato Fashion, Deb Shops, K&G |
| manage it until the project begins to lease. Yes, he's | | | | Men's Center, Hobby Lobby, Party City, Shoe |
| right, it's small enough for him to manage as a | | | | Carnival, Famous Brand Shoes, Petland, Wood |
| one-man show BUT you have to treat a turnaround | | | | Workers Warehouse, Sally Beauty, Dot's, Eastern |
| not only as a leasing situation but also have to "turn" | | | | Mountain Sports and I could go on and on. As far as |
| the marketing and management around at the same | | | | food, I'd want a 10,000 sq.ft. Chinese restaurant or |
| time so not only are new tenants being solicited but | | | | Old Time Buffet, they'll cater to my immediate |
| the few existing retailers are kept somewhat happy. | | | | customers and are in the right price points. I can |
| And keeping existing tenants happy and getting new | | | | afford to do a deal with the Chinese restaurant, but |
| ones interested means that there has to be traffic in | | | | can't afford a "Friday's" deal. I'd also want a large and |
| the center and centers with this low of vacancy | | | | well merchandised nursery somewhere on the |
| usually have no traffic to speak of, which is why the | | | | outside of the property. |
| center is in trouble (Which came first, the chicken or | | | | What I chose are both strip and mall tenants (in |
| the egg?). | | | | today's world, most retailers are bi-center...(the |
| I've written this before but I'll say it again, traditional | | | | political correct way of saying it. Ann corrected me; |
| advertising doesn't work for a "C" or lower center. | | | | they go either way) and few of the retailers I |
| You have to do "event marketing" in order to have | | | | mentioned are high rent payers. I picked the retailer |
| an impact. Event marketing means having | | | | based on tenant mix and their ability to draw |
| traffic-generating events that bring people in for that | | | | customers into the center on their own. Neither |
| specific show but then hopefully they shop the rest | | | | JoAnn Fabrics nor Hancock are high-volume retailers, |
| of the center. In traditional advertising, you promote | | | | but they are "unique," not usually found at every |
| the center, the consumer comes, but if the center | | | | street corner and command a high degree of loyalty |
| has few retailers, the shopper is disappointed | | | | from their customers. All are destination-oriented |
| because of the lack of merchants and they never | | | | tenants, which in the long run will strengthen the |
| return (you only have one chance to make a first | | | | entire center. Few of these retailers are considered |
| impression). We've promoted gun shows, arcade | | | | "trophy" tenants, but they can all do a lot of good |
| auctions, book events, etc, sometimes bringing in as | | | | for the right center. |
| many as 25,000 consumers over a weekend. We | | | | Non-category killers, such as a Petland, are good |
| gave space for free to hold comedy clubs on | | | | traffic builders for a center. Parents bring in their |
| alternate Fridays and allowed Yoga teachers use of | | | | children to show the "mini-zoo" to their children and |
| stores during the week to help increase traffic. All | | | | animal lovers of all types can't resist the cute rabbits |
| our food and many of the other stores benefit from | | | | in the front window. The buzz word of our industry |
| this increased traffic. They did enough volume to | | | | today is Lifestyle Centers, but isn't a pet shop part |
| keep the existing retailer's spirits "up." That's why | | | | of a "lifestyle," as is a fabric store or hobby shop or |
| marketing goes hand in hand with leasing. | | | | a "Guitar City," a well-merchandised nursery definitely |
| We also want to have enough control that we can | | | | adds to my center's "lifestyle" and we've dont it on |
| minimize the number of retailers closing every month, | | | | the "cheap." Maybe they're not all high end merchants |
| and in a problem center there's always a high | | | | but they bring in a dedicated customer willing to |
| turnaround. I'm a great believer in temporary tenants, | | | | spend time and money. |
| but they have an extremely high failure rate since | | | | Now in all probability, we won't get the account since |
| most are startups with limited capital and with no | | | | I'm taking an unorthodox approach, and all owners |
| walk-bye traffic, they usually fail. Therefore, you | | | | would rather hear that we're going after the Limited |
| have to be extremely selective on who/what you | | | | instead of Dots. And in the perfect world I agree, |
| put into the center. Also, we've learned that we | | | | but we don't live in a perfect world. First, the Limited |
| have to keep cash flow as high as possible or at | | | | builds-out costs a fortune and second they are |
| least keep the losses low, which means working hard | | | | already in every mall within 10 miles. So, while we are |
| on lowering CAM costs. Anyway, that's why we | | | | making it more convenient for some customers to |
| "need" the management. | | | | come to "our" center, the drawing power is probably |
| The next point I disagreed on is that the buyer put | | | | limited to three miles, while a "Guitar City" will draw |
| together an elaborate and well-documented report on | | | | customers from a larger radius. Problem centers can't |
| every mall-oriented retailer operating within 20 miles | | | | compete with their successful neighbors, they have |
| of his project. You could tell there was a lot of time | | | | to complement and that's why leasing and marketing |
| and effort researching this info, BUT I'm not sure | | | | have to take a non-traditional approach. |