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Shopping Centre LeasingThe Planned Approach
Phil McArthur, SCSM
Senior Vice President, India
Ivanhoe Cambridge India
Past Trustee
International Council of
Shopping Centres
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The importance of Leasing
Leasing provides 100% of therevenues each and every year
Shop rents Anchor Shop rents
Specialty Leasing
Karts, Kiosks, Sales Promoters
Advertising Revenues Car Parking Revenue (sales
high in Centre, parking lot full)
Percentage Rent fromsuccessful shops.
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The Importance of Leasing
Bank and Financial Partners willnot lend money unless they arecomfortable with the LeasingProgramme
Global Financial Markets cannot afford to take risk.
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The Importance of Leasing
Leasing will be responsible to
deliver brands that are
compatible with the
development vision and with
the trade areas lifestyle and
socio-economic characteristics
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The Importance of Leasing
Leasing can create magic or amessdepends on theexperience and passion of theleasing professional andteam.
The Owners leasing teammust manage the brokers.
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Importance of Leasing
The best leasing usually is
done by the team that works for
the Owner, as everyone has to
live with the deals.
Working with Brokers is also
key, manage the broker like you
manage your best teammember
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Selling the Vision
The Development Teamsvision must be reflected in theLeasing plan and overalldevelopment direction
Look and feel,
Market segment,
Target audience
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Know Your Product
100% familiar with the lease,location size, depth, all physicalcharacteristics of the shoppingcentre and the locations within
the Centre. Must know themarket and the competition nowand future.
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Know what The People.want!
Must be a passionate student of
human behavior and pop
culture trends.
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READ THE LEASE
The Lease is the Rule Book ofthe game and the Legal
agreement between the Mall
Owner and the Retailers.
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Team Approach
Architect. the direction on
how to best feature the brands
for the consumer
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The Team Approach
The Owner can be Private funds,Family funds, Private or Public
Funds and Institutional Investors
and all Shareholders.
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Team Approach
The Developer and his team of
professional assistants -
Investment, Design,
Construction, Leasing andOperations.
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Team Approach
Operations and MarketingTeam. they have a say asthey live with all leasingdealsThe Mall BusinessStarts when the building isopened and the handoff takesplace to Mall Management.
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Great Malls are Entertaining!
Designing, Leasing and
Opening a Shopping Centre is
like making a Movie
The Owner of the Mall is theProducer
Development Team make
the movie with key people
Directing the Movie.
Cast is the Mix
Actors are the Brands
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Retail Mix Planning(Merchandising Your Centre)
Retail Plan is the layout of the
MallLeasing and Architects
need to closely coordinatefor
zoning, design criteria, base-building provisions.
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Retail Mix Planning(Merchandising your Centre)
The Mix is really a recipe/formula
that is constantly being revised
during the Leasing Programme
and after opening. it neverstays fixednew brands,
expansion of existing brands,
failures, releasing.
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Retail Mix Planning(Merchandising your Centre)
Mix ideasmust create a
complete mix of categories.
Depending on size and target
of the Centre
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Its whats inside thatcounts.the shops!
Neighbourhood
CentreSupermarket,
Pharmacy, Caf, Convenience
shops
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Its all about the Shops
Communityadd a Fashion
anchor (usually promotional
department storeValue for
Money)
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Regional and Super RegionalMalls
Regional and Super Regional.
Wide variety of Fashion,Comparison, Convenience and
Entertainment
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Lifestyle centres and Hybrids
Lifestyle, Entertainment,
Waterfront, Resort Retailall
require unique mix solutions
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Target Mix Ideas - RegionalMalls
ANCHORS (35-50%)
Fashion Anchors-Department
Stores
Food Anchors-Supermarket or
Hypermarket
Category Dominantfurniture,toys, books, electronics etc.
Entertainment. Cinema,
Family Entertainment Centre
Other Anchors. Big Box(IKEA, Home Depot)
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Fashion is the backbone of theRegional Mall mix
FASION (25-40%)
Ladies Wear
Mens Wear
Ladies & Mens Wear (unisex)
Fashion Accessories
Children Maternity
Lingerie
Shoes
Hand Bags, Luggage andLeather
Tradition Fashion
Jewellery real and fashion
Optical & Sunglasses
Watches Gold & Silver
Cosmetics 2009 ICSC/MECSC John T. Riordan Global School for Professional Development
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Everyday goods andservices HOME (5-10%)
House warestableware,flatware, kitchen
Electronics and Mobile Phone Art and Collectables
Bedding and Linens
Books, Cards, Games
SERVICES (2-5%) Health, Beauty Banks and Money Exchange
Pharmacy
ServicesTravel Agent,
Barber, Printing, Key Cutting,Dry Cleaner, Photo Finishing,Florist
FOOD + BEVERAGE (5-15%)
Restaurants
Cafes
Nightspots
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The Art & Science of ShoppingCentre Leasing
Art is in the vision and your
ability to create a place where
people want to visit and shop.
Science is the planning and
execution of the mix and the
most suitable brands in strategiclocations.
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Multiple Levels andNeighbourhoods
How to Mix levels? Key is to get Footfall on each level
Parking feeding each level is perfect Position of vertical transport andbridges important
Multi levels Level 1-2 Primarily Fashionconsider price
point adjacenices
Level 3Avoid having your worse retailers onyour weakest level
Consider a focus to level 3..focusvaluefor money with focus on family?
Level 4 Entertainment/Food
May consider mixing Food andBeverage on each leveltoincrease dwell t ime andtraffic..price point F+B
How to Create Neighbourhoods inyour Mall?
Clustering, adjacenciestent story, keep
it interesting and also appealing to theneeds on the Neighbourhoodscustomer.
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The Lease Contract
Basics of the Lease
The shopping centre Lease in
the Global/Regional
Understanding the leasing
terms & conditions
Know the Federal/Local Laws
Drafting your own Leaseuse
best samples
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The 5 Ps
Proper planning prevents poor
performance!
Merchandising a good mall is a
performance that must last for
years
PLAN Your Leasing the same
as any Quality Business Plan
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Professional Leasing Plan
Pre-conditions to SuccessfulLeasing
Planning (Style, Mix, %, depth
charts)
Good planning techniques Workshops (TEAM)
Anchor Buy In
Developing a successful
merchandising program Importance of Corner
locations/Adjacencies/Anchor
frontages
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Leasing is Marketing and Sales
Putting together the leasingprogramplans, brochures,team, coordination withmarketing
Managing the leasingprocessdaily/weekly/monthlymeeting
Leasing and releasing strategy
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Plan to get the best Retailers,always. Getting ready (have your kit)
Understanding the type ofretailers
Effectively prospecting for
retailer
How to research for prospects Dont take the first brand in the
door (heartbeat/cheque book
leasing)
Burn shoe leather 3 choices for each location.
you ALWAYS need a back up
brand
Evaluate the shops (F.E.D)function/economics/design
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Market Your Centre to theRetail Community!
Creating Demandfeeding
frenzy
Events, Newsletters, Dinners,
Corporate Communications and
e-mail blasts
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Lifeblood of centre
Merchandise mix - personality
Rent revenues Income (P&L)
& Value Combination Sustainability
Asset appreciation
Leasing Does Not Start WithVacancy
Leasing is thelifeblood
of theCentre
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Successful Leasing=GreatCentres
In the Right Location, at theRight Time
Leasing is about the consumerswants, needs and desires
Successful centres have theright tenant mix that customerswant in a unique &differentiated manner to thecompetition
The consumer ALWAYSdetermines a Centres ultimatesuccess.
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Get Organised for the Leasing
Campaign
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Leasing is Specific to eachCentre
Shopping Center Analysis Merchandising Mix Match offer to local expenditure
pool
Physical Design
Match offer to environment
Market Study
Match offer to trading areas
customer expectations
Competition
Enhance differentiation
competitive advantage
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Follow the Money
Records
Files
Summaries
ERP system Sales Audits
Expirations
Sales Analysis
Exclusives/Restrictions
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Know your Centre and yourcompetition
Knowledge of Shopping Centre
Strengths
Weakness
Prospect Files
Trading Levels
Anchor and Chain deals
Market rents/practices
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Profiles of each Shop
Research Prospect
Visit Prospects Store
Evaluate Advertising Program
Investigate Store Reputation
Evaluate Financial Capability
Evaluate Merchandise For Fit
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Extra Incentives
Tenant Improvement
Allowances, and/or
Incentives
Frontage Allowance,
Key Money
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Before the Lease
Letter of Intent (LoI)
Memorandum of Understanding
(MoU)
Agreement to Lease
Basis For Formal Lease
Defines Business Terms
Generally - Legal Status is
limited
Consideration for
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The Lease
Basic Terms of the Lease
Parties
Landlord (Lessor)
Tenant (Lessee) & TradeName
Description of Leased Premises
Use clause
Lease Term
Commencement and Ending
Dates
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The Lease
Other Terms of the lease
Renewal options & conditions
Other covenants > exclusivity >co tenancy > operating
Delayed openingconsiderations (new centre)
Payment guarantee / securitydeposit
Boiler plate clauses but
increasingly important
Execution
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Rent Structures
Rental
Minimum Rents
Step Up Rent
Step Down Rent
Free Rent
Consumer Price Index (CPI)
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Percentage Rents
Based on Merchants ProfitMargins
Synergism Created By Landlord
Natural Breakpoint Artificial Breakpoint
Decreasing Percentages
Deductions from PercentageRent
Reporting and PayingPercentage Rent
Auditing Tenant Sales
Gross Sales Basis ofPercentage
Mall Owners benefit in theShops sales
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Recharge Formulas for CAMand Taxes
Pro Rata - Leasable
Pro Rata - Leased
Pro Rata - With Maximum
Fixed Amount - Negotiated
Pro Rata With Exclusions
Percentage of Tenants Sales
Monthly Estimate - AnnualAdjustment
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Common Area Maintenance(CAM) Clauses
Good Lease Language
Supervision/ Management Fees
Repair/Replace
Safe and Legal Operation of the
Shopping Centre
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Marketing Fund or MerchantsAssociation
Merchants Association
Marketing Fund
Advertising Contribution
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Real Estate Taxes
How the Property is Assessed
Determines How Tenant is
Billed for Pro Rata share oftaxes.
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Insurance
Liability For Entire Centre
Fire And Extended Coverage
Buildings (Property
Insurance)
Self Insured Tenant
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Performance Clauses
Tenants Right To Get Out of
Lease
Failure to open by date
Failure to secure anchor tenant Major default under the lease
Landlords Right To Terminate
Sales Threshold
Serious Default
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Default Provisions
Rent Due Date
Date of Delinquency
Penalties
Non Monetary Defaults
Active
Passive
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Miscellaneous Clauses
Relocation Clause
Landlord ConstructionAllowances
Operating Covenants (Hours,Stock, Etc.)
Insurance Protections
Compliance with Laws
Exclusives
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Secure your deal!
Security Deposits
Assignment and Subletting
Be very careful
Personal Guarantees
Co-Tenancy Clauses
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Lease Exhibits
Site Plan - Landlord Has Right
to Change
Construction Exhibit(Exhibit C)
Sign Control
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Many moves to make a LeaseDeal
Retailer Owned Store Agreement
REA (Reciprocal Easement
Agreement)
Landlord Vs. Tenant Lease
License Agreement
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Thank You
ICSC Book Shop
Shopping Centre Study Lease
Other great publications
www.icsc.org
Phil McArthur, SCSM
pmcarthur@ivanhoecambridge.
com
2009 ICSC/MECSC John T. Riordan Global School for Professional Development