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Knowledge seen as key for center leasing

By Debra Hazel

In the early days of the shopping center industry, a lease could literally be written up on a napkin. Today, even the simplest agreement between a retailer and a developer can be an inch thick, and increasingly specialized skills are needed to pull it off.

"You don't need to be a lawyer, but you do need to understand the document, at least what your company uses," said Norman B. Krone, CLS, president of The Hausman Cos., Beachwood, Ohio.

Krone, among other leasing specialists, has grown concerned that today's increasingly complex deals require knowledge that many leasing reps simply don't have. Chief among them is a knowledge of the business, both from the development and the retail side. Knowledge of lease law also is increasingly important.

"They need to understand the business ramifications of the document, and that's what we're lacking. The big developers are good, but some of the smaller companies don't have a clue. And many of the retailers don't have a clue," Krone said. What may seem like a good financial deal for the landlord may in fact help put a smaller retailer out of business, leaving a space empty for months.

A member of ICSC's CLS committee, which develops the criteria for training and certifying leasing specialists, Krone noted that some leasing reps are not aware of important concepts such as exculpation, which relates to the personal liability of the landlord.

Another aspect often neglected today is understanding the other party's business, he added. Knowing the merchandise and how a retailer sells it can help marry a tenant with a good location, and a good deal.

Perhaps most important, dealmaking is not a contest in which one side must beat the other.

"If it's not a win/win, it's a bad deal," Krone said.

Another part of training that needs greater focus is the art of getting a deal done, says another broker. Again, the larger the firm, the more likely it is to have utilized some formal training for its leasing staff.

"There are two parts to leasing, two different categories," explained Howard Makler, chairman and COO of Excess Space Disposition, Huntington Beach, Calif. "One is the chains, the regional and national retailers who employ sophisticated real estate people to do the deals. If they don't do the deals, essentially they lose their jobs. They will represent their employer, but their job is to do deals."

Local retailers and service companies that take shopping center space may not have the same sophistication.

"You're no longer dealing with an environment where the party is motivated to do the deal. In fact, you have people who are nervous about the magnitude of the deal. It requires a completely different skill set," Makler said, noting more hand-holding is required.

Perhaps the biggest mistake is not to take potential tenants seriously from the beginning. Every retailer contact is a potential deal, Makler said.

"Do people go to a car dealer to browse? No. Do they go looking at shopping centers to browse for space? No. Yet I hear, 'There were tire-kickers,' all the time," Makler said. The attitude reflects a lack of interest in the teaching needed for the less experienced retailer.

One example is the tenants involved in specialty leasing, who often are mom-and-pop entrepreneurs requiring the nurturing Makler describes.

"Particularly if you're talking to a local person, we have to walk them through everything: the merchandising, the license agreement. We're educating them," said Joy Miller, director of specialty leasing for Crown American Realty Trust, Johnstown, Pa. Miller has retained Makler to work with her reps.

She also brings in other educators to work with her staff.

"A minimum of three times per year for sales and leasing, and sometimes for mall managers, we bring them together and bring in speakers," she said.

But training has benefits that go far beyond the bottom line of making more productive deals. Most important is creating a relationship that can last through several employers.

"The relationship side is the trust -- or the distrust -- that makes the deal," Krone said.

The institutionalization of the industry has changed relationships, he acknowledged, but with developing companies, a human touch is still critical.
"As we're becoming a REIT/Wall Street type industry, we forget these are relationships that are built over time," Makler said.

That extends from the very beginning of a relationship.

"To me, cold-calling is creating a business relationship with the owners. They're pulling leasing plans, I'm asking how business is," Makler said.

As Krone said, "Rent and space are not the end-all."