Curing Tenant Fever Developers Lure New Retailers In High-Stakes Game Of Chance

A leasing agent from the Northeast could not contain his excitement after meeting with representatives from Sears at the International Council of Shopping Centers spring convention.

“I love this convention,” he kept saying, “I just love it.”

He loves it so much he postponed surgery on his spinal column to attend the convention.

That kind of sacrifice, though perhaps not typical, is representative of the effort it takes to broker deals between shopping centers and potential tenants.

Tenant fever reaches epidemic proportions at the ICSC convention, where developers, retailers, brokers and vendors converge on the Las Vegas strip in search of the perfect retail marriage.

When the doors to the convention opened earlier this month, 22,000 potential dealmakers poured in, bottlenecking as they crushed through the double-doored entranceway.

In their midst were at least two dozen delegates from Spokane, including Tom Barbieri, of Goodale and Barbieri Group of Cos.; Joe Ward, of Pinnacle Realty; Robert Robideaux, of R.W. Robideaux and Co.; and Dave Black of Tomlinson Black Group of Cos.

For a midsized city, Spokane had a lot at stake. It will take dozens of new tenants to make all of the proposed projects here a success.

River Park Square is planning an $80 million redevelopment and hopes to bring numerous upscale retail tenants to the downtown shopping core. The Spokane Valley Mall has begun construction with only anchor tenants announced, and needs 100 more stores by the time it opens on Aug. 20, 1997.

G&B plans a dramatic remodel of University City Shopping Center, with discount retailers in several categories. Tomlinson Black envisions renovating Shadle Center in strip fashion, and will have thousands of square feet available for lease.

All the developers had a full “dance card of meetings” as Barbieri described it, with meetings scheduled with retailers on the half hour, every day, for five days.

All the meetings, from black-tie dinners to evenings shooting craps at famous casinos, are directed toward a singular goal - attracting strong retailers to developments.

Developers will offer everything from low rents to prime locations to attract the retailers they want.

Millions of dollars are on the line, and odds in the shopping center business aren’t that much better than those at the gaming tables. About 11 percent of the nation’s shopping space comes up for renewal every year, both due to tenants leaving and leases expiring, said Mark Schoifet, director of communications for the ICSC.

If you roll a seven and get a plum tenant that’s new to the market - say, the first Dillard’s in Spokane - you can substantially boost your customer traffic, said Leonard Berry, a marketing professor at the Center for Retailing Studies at Texas A&M University.

“The anchor store, by virtue of it being fresh, will generate a lot of extra mall traffic - for a short time,” Berry said. “It will continue if it does a good job.”

Deal-driven tension was visible at the convention, but developers hold their cards pretty close to their chests. They don’t want to reveal trade secrets. Nor do they want to ruin a deal by letting word of it slip out before the lease is signed.

“The tactics of what you use are pretty proprietary,” said Barbieri.

In Spokane, the numerous big projects planned only make competition more intense.

Consider these recent struggles to keep and attract retailers:

In a deal that put a feather in NorthTown Mall’s cap, Eddie Bauer, a Seattle-based purveyor of upscale outdoorsy clothing decided recently to open a full-line store in NorthTown Mall. The retailer also has an outlet location in downtown Spokane’s River Park Square. Developers there have made it clear they’d prefer a full-line store over an outlet.

With the announcement of the opening of the Spokane Valley Mall, numerous retailers from both Silver Lake Mall in Coeur d’Alene and University City Shopping Center in the Valley have said they’re trying to either move to the new mall or open an additional store there.

In a smaller scale project, two developers battled for the right to build a neighborhood shopping center in the Latah Creek neighborhood, which only would allow one such development. When Dave Black, of Tomlinson Black, signed Tidyman’s grocery store as his anchor, it tipped the scales in his favor. He won the struggle and plans were approved for Tomlinson Black’s project.

The intense competition, along with problems with surrounding property owners and a maze of state and local regulations, made the deal the hardest one Black had ever worked. “It’s been like a gauntlet,” he said.

Among the factors that figure into attracting a retailer are tenant mix, location, and the economics of the deal, Barbieri said. Also, the financial strength of a retailer will make the company more or less attractive.

“The customer votes with their pocket book and their feet,” said Laurent Poole, executive vice president of Sabey Corp., the Seattle-based company that owns NorthTown Mall.

Being in a position to score when a major retailer decides to locate in a certain city takes years of preparation. First, the developer has to find out which retailers, from a nationwide list of hundreds, are interested in the area.

The only time developers are not competing is when they’re trying - collectively - to convince retailers to locate in their area. Competition sets in when the retailer is won over and proceeds to look for a suitable location.

Poole said NorthTown, as the largest mall in the Spokane area, is in a position to attract most major retailers that come to town. That could change when the Valley Mall opens in August of 1997. Poole played down the new mall’s potential impact, saying it would hurt U-City and downtown more than NorthTown.

Serious retailers, Poole continued, will choose two Spokane locations in the future. He added, of course, that NorthTown would be one of those two locations, along with the Valley.

Most developers agreed that Spokane will continue to attract new retailers.

“You can tell when a retailer is interested in the area by their growth in the region,” Barbieri said. Retailers that eventually come to Spokane will grow toward the area from Seattle, Portland or westward across the country’s northern tier.

Many developers also keep a database that includes every major retailer in the country and details the company’s personnel, sales, locations and other vital information.

They scrutinize traffic count maps that show how many people travel daily on roads considered for development. They pore over demographic charts that show the numbers of people living within three, five and seven miles of proposed projects.

All those figures are manipulated to prove that their site is, indisputably, the best.

“They want a lot of rooftops,” Black said of retailers. “You might be able to give a retailer the best deal in the world, but if you don’t have the demographics …”

Poole agreed. “Retailers are very risk-averse these days,” he said. “The pendulum still hasn’t swung back in favor of developers.”

It’s a full-time job to keep tabs on all the retailers interested in this area, especially as development heats up. At Tomlinson Black, it’s actually eight full-time jobs. That’s the number of people devoted solely to commercial development.

Still, developers have to be careful to keep tabs on retailers in financial trouble, Barbieri said. This year, he said, an extraordinarily high number of companies declared bankruptcy or were bought out. Those companies could spell difficulty for a development in the long run.

On the North Side, at Shadle Center, two of the anchors, Newberry’s and Lamonts, are in bankruptcy, which creates uncertainty for developer Tomlinson Black when planning the neighborhood mall’s redevelopment.

What follows from other companies’ financial woes is that strong retailers are in a position to be picky about the locations they want.

“We must have 10,000 deals on the table,” said Bernard Marcus, chief executive officer of Home Depot, the nation’s leading hardware discounter. Home Depot, whose share of the market leapt from 2.5 percent in 1989 to 11.6 percent in 1995, plans to enter the Spokane market with a store in the Valley.

No one knows for sure who the next discount retail tenant in Spokane will be, but it certainly won’t be a long wait to find out.

At least one Spokane businessman came close to completing a deal at the Las Vegas convention for a new retail center on the east side of Division, just north of Francis.

Pinnacle Realty’s Ward wouldn’t be specific about the site, but said three “major anchors” will locate in that spot, already home to power houses such as Kmart, Eagle Hardware and Garden, and Petco.

, DataTimes ILLUSTRATION: Staff illustration by Charles Waltmire