Locals Play ICSC Hand

LAS VEGAS ??” Maybe retailers will bet their chips on Arkansas.

At least thats what 200 people from The Natural State were hoping.

They accounted for a fraction of the estimated 40,300 in attendance at the International Council of Shopping Centers Spring 2005 convention in Las Vegas. But being a player at the high-stakes retail table means being in Vegas the last week of May.

Local big timers, or in gambling parlance, whales, such as delegates from Rogers upscale Pinnacle Hills Promenade and Pleasant Crossing developments ??” with 2 million combined SF of planned retail place ??” made a splash.

So did scores of smaller local professionals from tenant representatives to developers, contractors to brokers. Northwest Arkansas has about 10 SF of retail space per resident. The nationwide average, according to the ICSC consensus, is 18 SF per person, meaning even with its booming economy the local market has about 6.6 million SF of catching up to do.

And everyone wants in on the action.

Location, Location

Paul Esterer, CEO of First Security Vanadis Capital LLC of Searcy, said there is a reason folks from Arkansas go to the ICSC convention.

Because you are there pitching your projects, working your tenants, Esterer said. Its where things happen When you are out there, you get a better audience.

The group of 200 probably spent more than $100,000 altogether just to get to the three-day convention and tread through a sea of French blue shirts and navy-blue suits. Dealmakers sprinted through 1 million SF of leasing mall space clutching paper-baton site plans in a massive relay race for retailers.

Bob Butler, senior vice president of marketing for May Construction Co., said about 50 percent of his firms annual billings come from retail. May has offices in Little Rock and Fayetteville.

We are maintaining our client relationships that are already there, and we also use it as an opportunity to introduce our company to other potential clients, Butler said.

The company has attended the ICSC convention for four years. It also attends an ICSC-sponsored meeting in December called CenterBuild in Scottsdale, Ariz. It is geared more toward contractors and construction issues.

Dixie Development of Fayetteville rented its own leasing suite to meet with tenants this year. Whitley Dunn, Dixies property manager, said the firm rented space because it learned from two conventions worth of trying to elbow for room at one of the common area tables or eateries.

Dixie also decided to focus on selling space in two of its properties this year: the five-acre Nelsons Crossing off College Avenue and Joyce Boulevard in Fayetteville, and the 23-acre commercial center off U.S. Highway 412 and Jones Road in Springdale.

Dixie rented the 144-SF space for $900. That didnt include the $500 spent for a table, chairs and a tiny refrigerator.

Doing it Right

Steve Lane and Alan Cole of Colliers Dickson Flake Partners in Bentonville met with potential tenants in the Colliers International booth. Lane said since his firm became affiliated with the global partnership of commercial real estate firms, he worked with a coordinator for several months to book ICSC appointments.

Lane said one coordinator could be in charge of booking about 200 appointments. He has been attending the convention for about 12 years and has worked for the realty division of Wal-Mart Stores Inc., among other firms.

Holding plans up against a wall is not an effective way to have a meeting, Lane said. You spend less time walking back and forth and more time in meetings.

Lane said that over the years, his ICSC expectations have become more realistic.

You get out of it what you put into it, Lane said. It can be a social event or it can be a business event and for most people its both. Its an excellent opportunity to get a lot of business done and strengthen relationships.

Alan Oakley, a representative for Raving Brands of Atlanta, met with Lane to discuss locations in Arkansas. He said he had at least 50 meetings at ICSC, and out of those 50, he will probably accumulate 70 deals. Oakley said hes able to do that because his company has eight different concept restaurants, ranging from fast-casual Mexican to smoothies to Chinese food.

David Dallas, principal broker and co-owner of Dallas Real Estate Services Inc. in Fayetteville, said dropping off a business card with a particular retailer or developer is fine. But a handshake and a 30-second conversation might make a person more likely to look at a site plan.

Dallas, who has worked for Gap Inc. and for Wal-Mart in their respective real estate divisions, said back in his corporate days he used to come home from the ICSC with 100 business cards. Of those, he said, hed remember 10 actual faces.

Large retailers are all over-worked and they just dont have time to waste for things that arent going to work for them, said Dallas, who attended for the tenth time this year.

Dallas, along with Dallas leasing agent Clinton Bennett, canvassed the convention on foot to represent different leasing projects in both Arkansas and other states.

Bennett estimates the firm is working on about 10 projects outside Arkansas and it oversaw at least 12 land acquisitions in 2004. He estimates Dallas had 12 to 14 appointments with retailers and developers.

The Northwest Arkansas Business Journal caught up with Dallas and Bennett while they sat on the convention center floor. All of the chairs were occupied at the time.

One of the local projects Dallas represented is Tuscany Square, a 10-acre, 40,000-SF retail center off Pleasant Grove Road and 26th Street in Rogers

John Alford and Charles Palmer of Wally Properties in Fort Smith are the developers of the Tuscany Square. Alford said his firm normally develops shadow anchors to Wal-Mart stores. Wally Properties has about 15 shadow out-parcel buildings that they are working on now.

Alford said he met with at least 100 different people and has been coming to the convention for the last four years.

The Dance

The Business Journal shadowed David Dallas during his meeting with Jason Puig, a tenant representative for Staubach Retail of Dallas, Texas ??” a firm founded by Roger Staubach, the NFL Hall of Fame quarterback for the Dallas Cowboys from 1969-79.

Puig was at the convention to scout several new locations in Arkansas and the Southwest for a retail client he represents.

Dallas and Bennett gave Puig a glossy, bound notebook full of individual information sheets on some of the properties the company represents. The sheets included past, present and projected population estimates within a one-, five- and 10-mile radius of each site.

The information also included household income and average number of households within each zone. Dallas Real Estate used an outside data service called STDB Online to prepare its packet.

Bennett said the firm uses the service through Dallas certified commercial investment member (CCIM) designation.

As he flipped through the book, Puig called the packet excellent.

He will take the information back to his retail clients committee, where the final decision on locations will be made for stores mostly opening in 2006-2007. Puig said he has a checklist of information his clients want him to have. Information such as site plans, rent structure, delivery date of the property and demographics are all things the client considers. During the meeting, Puig also seemed concerned with the positioning of the store within the property. For example, being able to secure an exclusive end-cap location in a strip center could be a deciding factor.

Having the right puzzle pieces enables Puig to put together multiple deals with one developer, he said.

Puig said he met with representatives of more than 20 sites at ICSC.

The Business Journal also sat in on a meeting between Dixie Development and a prospective retail tenant at Dixies leasing suite. Dunn and co-worker Pam Jones walked the tenant through the sites they are leasing for Dixie, which is also the owner of the properties.

An aerial map of the retail landscape around Dixies Fayetteville development, Nelsons Crossing, flagged every store and restaurant.

In addition, Dunn and Jones showed the retailer a 23-acre commercial center off U.S. Highway 412 and Jones Road in west Springdale.

The Joyce Boulevard intersection seemed an easier sell than the Highway 412 site. Jones and Dunn told him about the new Springdale High School opening up and the new residential activity blossoming that way.

The retailer was interested in traffic patterns and what the median income would be of neighboring residents, citing that his store goes after the blue collar demographic.

Since his brand is a latecomer to the market, he repeatedly stressed the importance of prime locations.

The retailer said he would need 30 days for his firm to perform its own in-house research on the viability of a store at the 412 location. He also wanted corner space.

Radius of Return

Bill Schwyhart is a principal with the Pinnacle Group, which is partnering with General Growth Properties on the Pinnacle Hills Promenade lifestyle center. He said GGP looks at the retail opportunity at the Pinnacle Hills Promenade from a population radius of 100 miles.

Mark Lichtman, principal with BOS Group LLC of Washington, D.C., is one of the developers of the competing Pleasant Crossing project (along with Charles Reaves, Greenhat Partners of Memphis and First Security VanadisCapital of Searcy). Lichtman said hes telling potential retailers that Pleasant Crossing is a project that will pull people from different distances at different times of the day.

We are very confident that it will draw people from 100 miles, Lichtman said. Retailers recognize that this is a different type of market. The consumer is used to driving the distance for things.

He said the development is going to target the daily, weekly and monthly shopper.

Where you would typically see a primary trade area of three to five to seven miles, we are looking at a 10- to 20-mile radius, he said.

Lichtman said he is telling out-of-town retailers that there are more than 11,000 people moving to the area annually.

I am telling them that Wal-Mart is bringing in thousands of white-collar workers and they dont have anywhere to spend their money, Lichtman said.

Paul Justus, a planner with the Northwest Arkansas Regional Planning Commission, said the population within a 70-mile radius of Tontitown ??” the center point of Benton and Washington counties ??” was about 1.2 million in the 2000 Census. Justus said the population of Benton and Washington counties (a smaller radius) is estimated at 369,000 as of the third quarter of 2004.

Seth Parker, a real estate representative for Starbucks Corp., said that every area is different in terms of population needed to open a Starbucks. The coffee king typically researches in terms of a one-mile radius, and the things it looks for are population and daytime population.

Some areas of the country, there is a store for every 10,000 people [like in Seattle], Parker said. He covers a region around Bakersfield, Calif.

Dan Moran, director of franchising for Pollo Campero, said the flavor-injected chicken chain that was founded in Guatemala in 1971, has plans to put in many U.S. stores in the next five years.

He said Pollo Campero looks for populations of 30,000 to 40,000 within a three-mile radius.

Moran worked for Dunkin Brands Inc. for 11 years and was with McDonalds Corp. for 10 years before that.

Pollo Campero has opened 19 U.S. stores so far, with half of those being in the Los Angeles area. The company also has locations in Dallas, Houston and New York. Stores in Chicago and Inglewood, Calif., are slated to open this summer.

The Whales

Robert Michaels, president and chief operating officer of GGP, said he estimates his firm probably met with most of the major retailers at ICSC.

GGP has been attending ICSC for 25 years.

He said it usually takes about 60 days for a retailer to say yes or no to a GGP property, especially if the retailer has to send out in-house real estate representatives to look at an unfamiliar market.

He said retailers usually conduct their own sales projections, and that the retail environment has changed.

I think retailers are sensitive to cannibalization today, Michaels said. There was a time in the mid to late 90s where people like The Gap and The Limited were opening numerous stores very close to one another. Today I think they are much more sensitive to protecting their existing stores.

When asked if GGP leveraged one property with another to get retailers to sign with multiple locations, Michaels adamantly denied it.

We dont do that, Michaels said. Its not good business. It doesnt work. It would be poor judgment on our part to force someone to do something they dont think they can do.

Michaels said, at the end of the day, the retailer is looking at the market and determining what kind of margins it can achieve.

All we can do is present the opportunity, he said.

GGP spent at least $108,000 to have its 18,000-SF booth space in the leasing mall. Michaels estimated it had about 130 GGP employees at the convention.

The waiting list for space runs several years long, said Patrice Duker, manager of media relations for ICSC. About 95 percent of the space gets renewed each year, she said, so thats why it takes so long to get space.

Duker said space rents for $6 per SF. The price includes carpet and walls, but thats about it. The average booth space is 1,200-SF, she said.

Michaels wouldnt disclose what else General Growth spends on its booth.

Lichtman estimates his group had 45 of its 60 meetings with retailers.

Some retailers will be signing letters of intent and some leases will be signed, Lichtman said about what BOS Group would achieve at ICSC.

In this type of environment, its hard to get anyones focus for a certain amount of time to bring the deal to full completion, Lichtman said.

The Pleasant Crossing developers used the Jones Lang LaSalle booth for meetings, which was complete with cascading water walls at its entrance. Jones Lang LaSalle, an international real estate services and investment management firm, will be the property manager once Pleasant Crossing opens. Philip Kroskin, principal of BOS Group LLC, said another entity will serve as leasing agent.

In the interim, Kroskin said Jones Lang LaSalle is providing consulting services to the development.

Kroskin said BOS Group has been working with Jones Lang LaSalle for about eight months.

Within the next few weeks, site construction will begin on the 250,000-SF power center at Pleasant Crossing. Lichtman said about 500,000 SF of retail at the lifestyle center should begin vertical construction by the fall. Pleasant Crossing is slated to have 1.2 million SF of retail, which includes the newly opened Wal-Mart Supercenter and plans for a 100,000-SF Parisian store and a 14-screen Malco movie theater.

Esterer said that when the Pleasant Crossing Partners went to ICSC, it was a group effort.

It think it is very important that we were able to be out there together in front of tenants and telling a compelling story, Esterer said.

Esterer said his firms particular project strength lies in financing.

Our specific strength is to make sure the money is there when the project is ready to start, he said.

Rogers Courts Retail Prospects

LAS VEGAS ??” The International Council of Shopping Centers Convention was a first for Raymond Burns, president and CEO of the Rogers-Lowell Area Chamber of Commerce, but Rogers Mayor Steve Womack has attended for the past three years.

The Business Journal caught up with Womack, Burns, Bill Schwyhart and John George in the General Growth food court, which was at least the size of a small sit-down restaurant.

Womack said that Northwest Arkansas is at 50 percent of the national average of retail SF per capita.

He said he thinks the fact that Rogers was so well represented at ICSC makes the city the retail pace-setter for Northwest Arkansas.

When the Chamber and the city are out here representing development and the community, it brings credence to the project, Womack said.

Womack said he sat in on some of the General Growth meetings with tenants, answering questions about things like infrastructure. He also spent time with the Pleasant Crossing development crew.

He said cities rely on retail to generate sales to fund services, which is why he thinks his mayoral interest in retail is important.

I dont think enough has been done in the last decade to make sure that Arkansas is properly served in retail, Womack said. By having been that way, weve missed out on significant financial benefits.

As he sipped his orange juice, Schwyhart said he didnt see the Pinnacle Hills Promenade development competing with other regional shopping destinations but rather with other major shopping destinations nationwide.

Most of the growth at Pinnacle Hills is from folks from other places, Schwyhart said. He called the Pinnacle area an oasis of urbanization.

Everyone is from somewhere else and they are looking for something several cuts above. We are trying to compete with all of the other cities.

Womack chimed in: It needs to stand the test of time. This convention will teach you quickly that what we are trying to do in Northwest Arkansas is very challenging. You are asking people to make a serious commitment from a state that hasnt been known as a retail mecca.

Schwyhart said that the Pinnacle Hills area has an entrepreneurial heritage.

When I came to Arkansas 25 years ago, it said land of opportunity on the license plates, Schwyhart said. It doesnt say that anymore but, it should in Northwest Arkansas.

Wal-Mart Realty Crew Finds ICSC Spotlight

LAS VEGAS ??” Many property owners and developers hovered around the Wal-Mart Realty booth, which was tucked in the far corner of the leasing mall at the International Council of Shopping Centers Convention.

The Business Journal picked up on just one of probably thousands of conversations that went on during the three days of the ICSC convention in late May.

Ive got a property Id like to show you, a developer said, unrolling the paper site plans hes had stored under his arm, ready for battle, as he attempted to get through the front lines to the tables in the back.

A member of the Wal-Mart Realty team listened.

Its 50-acres, the developer said.

The Wal-Mart Realty team member responded with a laugh: Now you are talking my language.

And so it began for so many hopefuls.

Wal-Mart Realty, a division of retailer Wal-Mart Stores Inc., represented the largest single-group of folks from Arkansas with 75 attending the ICSC Spring Convention. The real estate part of Wal-Mart handles both new store sites and redevelopment sites.

Kim Lane, an assistant vice president with Wal-Mart Realty, said ICSC is an un-matched meeting opportunity for her group.

We can meet with a number of different developers and city officials in one place, Lane said.

Wal-Mart Realty has more than 14 million SF of space to lease or sell right now and had a total of 130 stores available at the beginning of 2005.

One of the major functions of Wal-Mart Realty is to redevelop former spaces that have housed Wal-Mart Stores, Sams Clubs or Neighborhood Markets. The realty division also leases empty space within functioning Wal-Mart stores to retailers and sells remaining outlots from Wal-Mart properties. Tenants such as Hobby Lobby, Sears, Lowes, Big Lots and Home Depot have all leased former Wal-Mart spaces.

We are sitting today with less product to redevelop than we have in 10 years, Anthony Fuller, vice president of Wal-Mart Realty, said to a room full of attendees at the Retail Trends panel discussion.

The presentation, which was sponsored by Marcus & Millichap National Retail Group, was free to all those registered at the convention.

When asked how developers can work with Wal-Mart on new stores, Fuller said, Our key strategy is simple: we have to grow.

When asked if Wal-Mart has had to battle increased land costs, Fuller said that Wal-Marts encountered land costs are a function of who is looking in the market for that size of real estate.