Q: You’ve got a stellar reputation for helping numerous retail centers revitalize, reinvent and get back on track.  Where should a center in this position start? 

JDF: Start small. You don’t need a big budget to dramatically improve the “curb appeal” of your property. A few hundred dollars’ worth of paint and a day or two of work by your maintenance staff can make your entrance look brand new. A small investment in landscaping can give a property an updated look and feel. Something as simple as repainting curb cuts with yellow paint or adding lighting to the “eyebrows” above the windows at a mall entrance can dramatically refresh your look. At one mall, we got positive customer comments for weeks by adding $50 of pink dye to one of the water fountains to promote breast cancer awareness month.

Q: If you gathered everyone together to discuss potential changes, who would you want at that table? 

JDF: The lead investors and other important stakeholders, of course, but you might also want to include more junior people as well. Once you have all the stakeholders around the table, make sure everyone – not just the lead investors – gets a chance to speak. This isn’t just about being polite. Sometimes the most junior person at the table has the best idea. Maybe it’s the part-timer in the food court who notices that young moms tend to leave when they find out your center lacks a family-friendly bathroom or a store specializing in gluten-free baby food. If they don’t speak up, you’ll never learn you need to do more to attract and keep this key customer segment.

Q: Do you need to re-staff in order to redevelop a property? 

JDF: No, the people you need to successfully redevelop your property are already all around you. Now is the time to get to know them – or to know them better. The trash collectors might tell you which tenant is tossing out the loose paper that makes your parking lot look like a dump. Someone on the zoning board might tell you about a new municipal parking garage the city would help pay for that could attract new and different types of customers to your mall. A congressman might alert you to a military recruiting center or post office that can drive traffic as well.

And, of course, don’t forget your merchants and customers. Too many center managers spend too much time in their offices. You need to get out and learn the strengths, weaknesses and future plans of every business under your roof. Knowing that your anchor department store underperforms others in its parent company gives you an early warning to line up a replacement in case they close. Finding out which of their departments performs the best (athletic gear or children’s clothes, for example) signals there may be room for another specialty tenant selling that merchandise.  To find out what shoppers want, consider posting an online customer service poll or having your service desk keep a log of customer requests, then pay attention to them: The unfilled requests tell you what customers want but aren’t getting.

Q: Who else should you talk to?

JDF: A great resource is the brokers who sell retail space. To cut costs during the last two recessions, many mall owners outsourced their real estate function to outside brokers. Because the same broker may now represent multiple centers, the best of those brokers has a stronger understanding of industry trends, the market climate in your area and the best practices in retail real estate management. Interview every retail brokerage company in your area and ask them to prepare merchandising plans and creative uses for your center. Challenge them to identify specific, measurable goals and objectives for their redevelopment plans, and press for details such as their fees and whether they are willing to do short-term or temporary tenant placements. Worst case, you’ve gotten an outside perspective. At best, you’ve found a real partner who can creatively and proactively locate quality tenants for you.

The post Revitalizing a Retail Property appeared first on PLACES.

Not quite.

No one ever expects it to be that easy, but many are surprised at just how complex the transition can be. With new ownership—or even a new property management company—taking over operations, there area a myriad of details to consider ranging from dealing with current center employees and human resources arrangements to combing through piles of lease agreements and vendor contracts.

Of course, each transition has its own unique set of challenges, but following these six essential steps can help ensure a smooth transition to operating a profitable shopping center.

1. Do your due diligence. Begin to lay the groundwork for a smooth transition before the purchase by fully investigating the property’s condition, interviewing existing tenants, and examining the financial statements of the shopping center. Carefully review any reciprocal easement agreements (REAs) that may be in place for use restrictions, no-build areas, parking ratios, operating covenants, and other restrictions. Analyze zoning regulations, and be sure to conduct a comprehensive market study including a competition analysis, demographic analysis, and marketplace needs analysis. Gathering as much information as possible at this stage will help you avoid future headaches and understand future development possibilities.

2. Examine lease agreements. One of the first things you want to do is carefully review lease agreements. Unlike developing your own shopping center where you might have 50 leases that are, for the most part, identical, when you acquire a center, you have to accept leases that someone else negotiated as long as a decade ago. Two or three different owners or property managers might have negotiated leases over the years, each with different language and a different way of organizing the various sections. It’s a good idea to have leases professionally abstracted to summarize the key information needed to monitor, review and update them easily, including tenants’ names, lease terms, square footage, address, base rent, and percentage rent. Lease abstracts allow you to start entering crucial information into your accounting system so that you can determine accurate billings. Pay particular attention to commencement and termination dates, information which also helps determine the timing of rent increases, as well as co-tenancy clauses and sales kick-outs.

3. Get the financial picture. The lease information should be added to the accounting system, along with any expenses, including administrative costs, that could/would be reimbursable by the tenants per the existing leases.  Understanding the current full comparative income statement for the property in detail will assist in understanding future profitability and valuation of the property.  Reviewing vendor contracts will help you figure out the expense side. Landscapers, janitorial services, security, maintenance, parking lot sweepers and plumbers—any kind of service that the shopping center outsources will have a vendor contract that spells out the specific terms of service and the costs. This information should be added to the accounting system, along with current payroll expenses, in order to assess the center’s current and future profitability. 

4. Transition employees. Unless the previous owner agreed to other arrangements, your purchase contract probably involved absorbing existing center employees, at least until the ideal long-term staffing levels can be determined. You will need to review paperwork to understand their current terms of employment including salaries and benefits packages. Among other human resources arrangements, be sure to interview each employee to ensure a good fit within your organization.

5. Identify new income opportunities. There’s just no such thing as a turnkey shopping center t hat you simply purchase, change nothing, and profit. That means you should be looking for ways to increase income and reduce expenses throughout the transition process and beyond. Depending on the type of center, your plans might involve redevelopment or simply more effective leasing. You might also want to consider some of the more innovative ways centers are creating additional income these days: Vending machines for products such as Coke and Pepsi, for example, offer prime advertising space as well as a venue for sales, and sponsorship and branding opportunities like the Rolex Court in The Forum Shops at Caesars Palace have become a big source of income for many centers.

6. Hire a property management company. Every owner prefers a different level of involvement with its properties, but most are seeking an investment opportunity, not a huge increase in their own daily responsibilities. That’s why the majority of shopping center owners hire a property management company early in the transition process. Look for a firm that specializes in the type of center you have purchased, understands the local market and its relation to national and regional markets, and has a track record of success consistent with your investment objectives. Beyond handling the day-to-day operations that will keep your mall humming, the property manager you hire should be able to assist in the transition by conducting due diligence, abstracting leases, onboarding employees, and strategizing merchandising and marketing approaches.

Hiring the right property management company is probably the single most important step you can take to ensure a smooth transition of ownership. A firm with comprehensive mall management capabilities—from repositioning and redevelopment to leasing and merchandising—will help your new property reach its fullest potential.

The post Buying a Mall? Six Essential Steps for a Smooth Transition appeared first on PLACES.

Creative office spaces have long been popular within the technology and innovation sectors. Companies like Google, Facebook, and Apple occupy notoriously sprawling campuses featuring open floor plans, creative design, and on-site amenities like gyms, game rooms and catering services for employees. In fact, the creative office has become synonymous with the culture of the growing technology/innovation world: laid-back, open and consistently modern.

So it’s is no surprise that the creative office concept is now branching far beyond Silicon Valley. Technology companies and smaller technology-based startups are moving into city centers across the country with an especially strong presence in Seattle, Los Angeles, San Francisco, Austin and New York. In these cities (and others), technology entrepreneurs attract hoards of young, urban employees, many of whom enjoy significant disposable incomes. Incorporating creative office space into a mixed-use retail property can create significant buzz around a center and also attract high-value tenants who understand that convenient retail, dining and entertainment options increase their space’s desirability. As a further sign of creative office popularity, The New York Times recently estimated that “virtually all American workers now spend time on teams and some 70 percent inhabit open-plan offices, in which no one has a room of one’s own.”

One of Madison Marquette’s most recent acquisitions, the Bellevue Galleria, exemplifies a synergy between office and retail offerings. Located just outside Seattle, the Bellevue Galleria features 30,000 square feet of creative office space. This space has been leased to gaming company Bungie, once a Microsoft-owned start-up, now independent and the creator of the popular video game Halo. Other anchors include LA Fitness, Gene Juarez Salon, Men’s Wearhouse and Rock Bottom Brewery. These businesses provide appealing amenities and entertainment options for not only the creative office tenants but also for scores of other young professionals in the area.

The Bellevue Galleria plays to the Seattle changing demographics. According to a 2013 Forbes article, the Seattle metro area has experienced a 45 percent growth in technology employment over the past decade – a trend that shows no sign of slowing. Bellevue itself is already home to several internet and gaming companies, friendly competitors of Halo, not to mention branches of HTC and Microsoft. The area is fostering larger numbers of start-up technology companies while established companies like Amazon, Groupon and eBay are expanding their presence in the area.

Creative office-centered projects can also help revitalize waterfront neighborhoods or energize urban infill projects. In Brooklyn, previously empty “warehouse” space on the Hudson River has been transformed into loft offices, condominiums and street front retail with extraordinary success. Creative office projects such as 1000 Dean, the Domino Sugar Factory and Industry Warehouse have made the previously sleepy borough into one of the hottest real estate markets in the country. Brooklyn has 2.5 million residents and is increasingly pulling tenants from surrounding boroughs as it provides innovative shopping, working and entertainment space.

The same is true for San Francisco’s Mid-Market neighborhood. In 2012, Twitter announced it was leasing office space in the dormant Market Square. Other companies soon flocked to the area, including music-streaming service Spotify and popular mobile payment company Square. In addition, a flurry of retailers signed on to Twitter’s HQ and the adjacent buildings to capitalize on the sudden influx of young employees. This once-dormant section of San Francisco is now home to numerous technology companies, as well as over 30 mixed-use construction projects. Projects include apartment buildings, fitness chains, art groups, grocery stores and more – all anchored by the boom in technology companies leasing creative office space.

As the profile of companies who tout the advantages of creative offices rises, so too does the demand – from employers and employees alike. Today, creative office leases are no longer limited to an elite group of technology and digital brands. Companies from more conventional industries have begun to embrace the benefits of a creative office, including financial services, real estate and even law firms. A unique office can be seen as a statement of a company’s singular culture and can help companies remain competitive in recruiting.

In addition to the appealing environment required by these tenants, the utilization of space is much greater than for a traditional office. A typical open plan office will pack employees into 100 to 200 square feet, less than half the space typical 15 years ago. This increased density creates greater demands on restrooms, heating and ventilation systems, exiting and parking.

Many arts and publishing organizations have also embraced the creative office. In addition to open floor plans, these companies may focus increasingly on striking design and artistic elements. As an added bonus, historic or unorthodox buildings have recently become popular among industries seeking alternative headquarters. Repurposed buildings such as railcar terminals, manufacturing buildings or postal facilities can give a distinct look and a prized historic feel to an office.

Madison Marquette’s own La Brea project, which is located on the popular Los Angeles shopping thoroughfare, contains creative office space in restored buildings with eclectic and emerging local retailers. Thirty-thousand square feet of La Brea’s office space was leased to creative brand consulting agency Troika. The remainder of the building is leased primarily by hip, emerging retailers like Steven Alan, A+R home design, Gant, Bonobos, and SugarFish Sushi. The office and retail space capitalizes on the building’s natural properties, such as exposed brick and ceiling timbers.

The La Brea project reflects the neighborhood surrounding it, an area heavily influenced by fashion and film. A mural by Shepard Fairey creates an outside aesthetic that reflects the modern and creative nature of the retailers, and events such as block parties and an annual Fashion’s Night Out event serve to further integrate the property into the community. Overall, the project’s many elements combine to create a unique destination that is much more than the sum of its parts.

Clearly, we have entered a time when companies across multiple disciplines – from art and design to technology, research and blue chip professional services – are seeking competitive advantages to maximize efficiencies and quality of life. Creative office spaces provide optimal opportunities for businesses to thrive, for workforce collaboration and innovation to occur and for success in mixed-use environments where retail, dining and entertainment become an essential offshoot of the holistic work experience

The post Rise of the Creative Office – Creative Office Space Helps Mixed-Use Properties Target Millennials, Tech and Design appeared first on PLACES.

Many center owners and managers have developed crisis communications manuals that spell out specific response protocols in the event of a disaster or incident. Such a response is prudent given the vast array of eventualities that centers need to anticipate. Hurricane Sandy, for instance, knocked many East Coast centers out of business for days – and by keeping customers and local media informed on re-opening details, centers that communicated often and well with the public were able to minimize lost shopping and restaurant traffic. A Madison Marquette managed center, Marketfair was impacted by Hurricane Sandy but managed to stay partially open — allowing area shoppers and visitors to access a facility that offered electricity, clean restrooms, well-lit and comfortable seating areas and Wi-Fi when much of the surrounding community was adversely affected. Marketfair reached out to its customer base via a range of onsite announcements and social media — a tool that has become increasingly important to centers across the country.

While centers today have superb security personnel in place, there are many communities where crime has unfortunately been on the rise. Thefts, assaults and gang violence occur more often than in years past — and centers must be equipped to communicate with the public (and to cooperate with local law enforcement) when bad things happen. Because crime can occur at any time, it is prudent for centers to have a clearly delineated chain of command for who can be a designated spokesperson, who can return calls to media and who will be the face of the center in a crisis. In addition, many centers have developed “holding statements” that have been approved ahead of time and can be adapted depending on the circumstances. Having these statements archived can allow centers to be proactive with up-to-date reactive information.

Most centers in the United States encourage their leadership staff to work closely with local media. For the most part, this allows centers to enjoy strong relationships with press covering their properties — while nurturing these relationships in case of crisis. However, dealing with media when the news is good can be significantly different than dealing with media when an emergency occurs. Thus, it is useful for any center staff that may work with press to undergo media training. This process helps strengthen the management’s comfort level in speaking with media — it provides management with a list of dos and don’ts in media interactions and reinforces the need to keep communications open even when it is most difficult or counterintuitive.

Recent studies have also shown centers that maintain close relationships with local law enforcement and first responders emerge from crises with less damage than centers that do not. Inviting local police and fire crews to tour center premises, study entrance and exit points and familiarize themselves with center layouts vastly improves their abilities to locate and disable assailants expeditiously. Most police and fire personnel are grateful for invitational walk-throughs with center management and to be informed of special events or promotions that may attract large crowds.

In our variegated society, many points of view exist on subjects as diverse as religion, politics and our natural environment. While freedom of expression is a critical pillar of our nation, it is also an opportunity for activists to take on almost any cause — including ones that may embroil a shopping center. Holiday displays, ecologic deficiencies, funding (or lack thereof) for center-based community events can bring out picketers and protesters. Center management needs to be trained to deal with such groups with courtesy and firmness while upholding private property rights and public safety.

Having touched upon the many ways in which centers may be called on to respond to crises, it is critical for centers to have their “crisis checklist” available in advance.

• Establish a clear chain of command on who is empowered to speak with the public and with the media
• Media-train spokespeople
• Maintain close and cordial working relationships with media, local law enforcement and emergency responders
• Prepare holding statements and ensure they can be adapted quickly and effectively
• Identify satellite locations where, if necessary, center staff and corporate executives can meet with press and emergency responders
• Keep copies of all crisis-related materials (emergency preparedness guides, holding statements, contact sheets, etc.) outside the office to ensure you always have access
• In the event of a major crisis, make certain that center staff instantaneously notify and consult with corporate leadership
• Be ready to update public and media audiences via all communication channels, including social media

While it is unfortunate that centers must arm themselves to deal with accidents, crime and natural disasters, the art of preparation ensures that collateral damage from any untoward event is held to a minimum. Taking proactive steps before disaster strikes is an important part of owning and managing a shopping center in this postmillennial world.

Social Media During a Crisis

It would be impossible to touch on crisis response in 2014 and not address social media as a crucial part of the Crisis Management Toolbox.

Social media allows centers to quickly disseminate information directly to the general public and key audiences. It can be incorporated into the communication strategy during crises when a center needs to provide the public with timely updates and wants to demonstrate its response to and handling of a situation. However, there are a few basic “dos” and “don’ts” when considering social media posts during crises:

 Do

• Coordinate with property and corporate communications teams to ensure social media messaging aligns with overall corporate or business communications plan
• Identify any social media policies held by mall ownership and ensure that there is full compliance with such policies and procedures
• Use social media channels to keep customers and the community updated on the center’s status during crises involving closures, damage, traffic or parking reconfigurations
• Turn off pre-scheduled or auto posts as they could relay incorrect information or be seen as insensitive during the crisis
• Delete any recent posts that may be insensitive in light of the crisis situation

Don’t

• Post any information without ensuring its absolute accuracy
• Post reactively–while center management is encouraged to respond quickly during normal operations, response during a crisis situation should be carefully considered
• Use slang or abbreviations
• Use stock photos or photos taken from other websites
• Use religious or politically oriented language

It is always important to recognize the power of social media and its related ability to become immediately viral. Because of this omni-channel reality, social media outreach should be approached with measure and focus during times of crisis.

The post Crisis Response: Getting Ahead of the Bad News Curve appeared first on PLACES.

In addition to this generational transfer, the recession introduced many new shopping center owners. While the titans of retail real estate investment held off on new purchases and offloaded assets following the economic collapse in 2008, new players saw an investment opportunity to buy when the market was low. There are a number of factors that can dictate the success or failure of retail real estate assets. Below are five key factors all mall owners should understand as they enter the evolving and challenging retail investment market.

#1. Know what your land is worth

Most opportunities to acquire malls for smaller, independent mall owners fall into the regional mall category, including older enclosed malls. Accordingly, knowing what your land is worth can help you make tough choices when it comes to your investment. The question of what to do with these malls is one the entire industry is facing and knowing the value of the land your mall sits on can help you answer that question. Owners should determine what the land is worth and what is permitted to exist on the land and may even consider what alternatives could exist on the property. Such questions may lead you to realize the value the mall has and reinforce its potential, regardless of its class. However, you may also find — coupled with a thorough review of the financial health of the asset and the local economy — that it would be more beneficial to transform the enclosed mall for another use. This could include redevelopment to create an open-air lifestyle center or adding more out-facing shops. You may also find the land is more valuable without the mall. Either way, this is an important determination to make at the start.

#2. Interview your tenants

Getting to know all tenants and understanding their performance, needs and deficiencies is crucial to understanding the property and maximizing its potential. Tenant interviews should start with the anchor store managers and should be conducted in a one-on-one, in-person basis. This will not only aid in building a relationship with your tenant constituency, but is the best way to learn about the center — straight from the people on the ground.

Gathering information on a tenant’s performance both regionally and nationally, and what products and departments are their best and worst selling, is key to evaluating the health of the center. For department store anchors, it is critical to identify their best performing departments as this most often reflects a deficiency in them merchandising mix throughout the center. For example, if the anchor’s best performing department is women’s shoes, you will most likely notice that you are lacking adequate shoe retailers in the rest of the mall and that presents a great opportunity for the leasing team.

While these discussions can help identify opportunities, it is also important to listen to the tenants’ needs. You need to be prepared, as tenants will see this as an opportunity to share complaints that they may have been harboring for years. However, those complaints can be just as valuable as the performance insights. This feedback can help identify issues that are hindering the success of the center, including parking issues, maintenance concerns, signage needs, etc. Whether hearing positive or negative fee.

#3. Review your leases

While the information gathering sessions described above are invaluable, you will need to review all current leases for a complete picture of the center’s operations and finances. This review should determine your current tenants’ lease terms, clauses and cash flow. It should also track and chart tenant renewal dates. Carefully reviewing leases, or having them professionally abstracted, can help identify disconcerting trends so that you can be prepared with a strategy to keep vacancy low and your merchandise mix on target.

#4. Reach out to your representatives

As a new mall owner, you are also now a major employer, taxpayer and economic driver in your municipality and therefore you should develop relationships with your local, state and federal representatives. Request an in-person meeting to introduce yourself and share details on your center, encourage partnerships, and highlight its impact on the local economy. Creating a fact sheet that includes background on the center, including employment numbers, can be useful. You’ll also want to educate the representative on any center needs and how various policies impact the center (and in turn the local economy). Moving forward, it is also a good idea to invite the mayor and any other relevant municipal employees to significant mall events such as ribbon-cuttings or ground-breakings. This reinforces the relationship and demonstrates the importance of the center to the local community.

#5. When in doubt, bring in the experts

Those who are completely new to the retail real estate industry, or have been primarily focused on the investment side with minimal property management experience, should consider seeking expert services. Shopping center management, particularly in today’s environment, is complex. Understanding the intricacies of leasing, property management, accounting and marketing – and how they are all integrated– is vital to success. If you don’t have the right background, bringing in a third-party service provider can help you move up the learning curve at your own pace, while adding value to your investment from the start.

The post 5 Tips for New Mall Owners appeared first on PLACES.