Business Tourism Trends

8/13/2019 Business Tourism Trends

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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

2009 ICSC/MECSC John T. Riordan Global School for Professional Development


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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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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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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

Food Court 2009 ICSC/MECSC John T. Riordan Global School for Professional Development


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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


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