In April, I saw how many national retailers were declaring bankruptcy and thought,
“There must be an upside to this.”
I explored opportunities on behalf of two of my clients and discovered that landlords were not seeing any new deal flows. This resulted in a willingness, by landlords, to set asking rents far below their pre-COVID rates. I asked my research team to do a more analytical investigation and what they came back with was that retail rents were plunging fast and in some cases retail store rents were 30% to 50% below their February market rate.
As my team and I compiled this information, we also learned there were growing vacancies in most of the top shopping centers in America. Centers that were historically 100% occupied were now 10%-20% vacant. After sharing our findings with our client Travis Mathew, they authorized us to find them the best real estate at below-market rents. Top performing centers in South Florida, Dallas, DC, Chicago, Miami, Nashville, as well as others, were identified and we began negotiations. With the uncertainty of COVID-19 and the consumers’ reaction to getting back to shopping, I structured deals that began with several years where Travis Mathew would only pay Percentage Rent and no fixed rent or extra charges. After several years a low base rent, against a Percentage Rent, would begin. In each of the deals, I also negotiated Tenant Allowances far greater than pre-COVID. These low rents and large tenant allowances took much of the risk out of the equation and allowed Travis Mathew to secure a healthy return on investment and four wall profit from the onset. Additionally, all of the deals included a tenant-only unilateral kick out, so we can leave if our sales do not hit our projection. We have been working diligently since we discovered these opportunities and currently have eight stores projected to open in 2021.
I am working on multiple deals for our other clients that are structured similarly. I’m finding that as more companies like GAP, Zales, Brooks Brothers, and other brands consolidate AND close their brick and mortar stores, more premium locations are becoming available at a fraction of the cost. We feel this is an ideal time for a well-financed retail company to take advantage of this opportunity; however, the companies must fiercely negotiate the terms of any new deal and ensure the terms protect any downside or risk from the retailer. You can read about what I’ve experienced in negotiations with landlords in this article.
For over 33 years, The Greenberg Group has led the expansion of global and iconic brands like Lacoste, Gucci, Puma, Travis Mathew, Drybar, Crocs, Eddie Bauer, Roche Bobois, and many others. Using our proprietary method of analytics and research, we place our clients in locations that maximize THEIR store profits. If you’re interested in learning more about how The Greenberg Group can help your company in its retail expansion, call Steven Greenberg at 516-295-0406 x 204 or our Chief Marketing Officer, George Damanis at extension 203 or visit thegreenberggroup.com.