Business Tourism Trends

Shopping Centre Leasing
The 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
The importance of Leasing
Leasing provides 100% of the
revenues 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 from
successful shops.
The Importance of Leasing
Bank and Financial Partners will
not lend money unless they are
comfortable with the Leasing
Programme
Global Financial Markets can
not afford to take risk.
Leasing will be responsible to
deliver brands that are
compatible with the
development vision and with
the trade areas lifestyle and
socio-economic characteristics
Leasing can create magic or a
messdepends on the
experience and passion of the
leasing professional and
team.
The Owners leasing team
must manage the brokers.
Leasing can make or break the
success of a property.
A new leasing strategy that is
correct will greatly improve
THE VALUE OF THE CENTRE
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 team
member
Selling the Vision
The Development Teams
vision must be reflected in the
Leasing plan and overall
development direction
Look and feel,
Market segment,
Target audience
Know Your Product
100% familiar with the lease,
location size, depth, all physical
characteristics of the shopping
centre and the locations within
the Centre. Must know the
market and the competition now
and future.
Know what The People.want!
Must be a passionate student of
human behavior and pop
culturetrends.
READ THE LEASE
The Lease is the Rule Bookof
the game and the Legal
agreement between the Mall
Owner and the Retailers.
Team Approach
Architect. the direction on
how to best feature the brands
for the consumer
The Team Approach
The Owner can be Private funds,
Family funds, Private or Public
Funds and Institutional Investors
and all Shareholders.
Team Approach
The Developer and his team of
professional assistants -
Investment, Design,
Construction, Leasing and
Operations.
Team Approach
Operations and Marketing
Team. they have a say as
they live with all leasing
dealsThe Mall Business
Starts when the building is
opened and the handofftakes
place to Mall Management.
Great Malls are Entertaining!
Designing, Leasing and
Opening a Shopping Centre is
like making a Movie
The Owner of the Mall is the
Producer
Development Team make
the movie with key people
Directing the Movie.
Cast is the Mix
Actors are the Brands
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.
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 never
stays fixednew brands,
expansion of existing brands,
failures, releasing.
Retail Mix Planning
Mix must match the demographics
of the target audience and perhaps
some of their aspirations. if you
are near a tourist attraction you
need to modify your mix
accordingly
Retail Mix Planning
Mix ideasmust create a
complete mix of categories.
Depending on size and target
of the Centre
Its whats inside that
counts.the shops!
Neighbourhood
CentreSupermarket,
Pharmacy, Caf, Convenience
shops
Its all about the Shops
Communityadd a Fashion
anchor (usually promotional
department storeValue for
Money)
Regional and Super Regional
Malls
Regional and Super Regional.
Wide variety of Fashion,
Comparison, Convenience and
Entertainment
Lifestyle centres and Hybrids
Lifestyle, Entertainment,
Waterfront, Resort Retailall
require unique mix solutions
Target Mix Ideas - Regional
Malls
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)
Fashion is the backbone of the
Regional Mall mix
FASION (25-40%)
Ladies Wear
Mens Wear
Ladies & Mens Wear (unisex)
Fashion Accessories
Children
Maternity
Lingerie
Shoes
Hand Bags, Luggage and
Leather
Tradition Fashion
J ewellery real and fashion
Optical & Sunglasses
Watches
Gold & Silver
Cosmetics
Everyday goods and
services
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
The Art & Science of Shopping
Centre 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 strategic
locations.
Multiple Levels and
Neighbourhoods
How to Mix levels?
Key is to get Footfall on each level
Parking feeding each level is perfect
Position of vertical transport and
bridges important
Multi levels
Level 1-2 Primarily Fashionconsider price
point adjacenices
Level 3Avoid having your worse retailers on
your weakest level
Consider a focus to level 3..focusvalue
for money with focus on family?
Level 4 Entertainment/Food
May consider mixing Food and
Beverage on each levelto
increase dwell time and
traffic..price point F+B
How to Create Neighbourhoods in
your Mall?
Clustering, adjacenciestent story, keep
it interesting and also appealing to the
needs on the Neighbourhoods
customer.
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
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
Professional Leasing Plan
Pre-conditions to Successful
Leasing
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
Leasing is Marketing and Sales
Putting together the leasing
programplans, brochures,
team, coordination with
marketing
Managing the leasing
processdaily/weekly/monthly
meeting
Leasing and releasing strategy
Plan to get the best Retailers,
always.
Getting ready (have your kit)
Understanding the type of
retailers
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
Market Your Centre to the
Retail Community!
Creating Demandfeeding
frenzy
Events, Newsletters, Dinners,
Corporate Communications and
e-mail blasts
Lifeblood of centre
Merchandise mix - personality
Rent revenues Income (P&L)
& Value
Combination
Sustainability
Asset appreciation
Leasing Does Not Start With
Vacancy
Leasing is the lifeblood of the
Centre
Successful Leasing=Great
Centres
In the Right Location, at the
Right Time
Leasing is about the consumers
wants, needs and desires
Successful centres have the
right tenant mix that customers
want in a unique &
differentiatedmanner to the
competition
The consumer ALWAYS
determines a Centres ultimate
success.
Get Organised for the Leasing
Campaign
Leasing is Specific to each
Centre
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
Follow the Money
Records
Files
Summaries
ERP system
Sales Audits
Expirations
Sales Analysis
Exclusives/Restrictions
Know your Centre and your
competition
Knowledge of Shopping Centre
Strengths
Weakness
Prospect Files
Trading Levels
Anchor and Chain deals
Market rents/practices
Profiles of each Shop
Research Prospect
Visit Prospects Store
Evaluate Advertising Program
Investigate Store Reputation
Evaluate Financial Capability
Evaluate Merchandise For Fit
Extra Incentives
Tenant Improvement
Allowances, and/or
Incentives
Frontage Allowance,
Key Money
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
The Lease
Basic Terms of the Lease
Parties
Landlord (Lessor)
Tenant (Lessee) & Trade
Name
Description of Leased Premises
Use clause
Lease Term
Commencement and Ending
Dates
The Lease
Other Terms of the lease
Renewal options & conditions
Other covenants > exclusivity >
co tenancy > operating
Delayed opening
considerations (new centre)
Payment guarantee / security
deposit
Boiler plate clauses but
increasingly important
Execution
Rent Structures
Rental
Minimum Rents
Step Up Rent
Step Down Rent
Free Rent
Consumer Price Index (CPI)
Percentage Rents
Based on Merchants Profit
Margins
Synergism Created By Landlord
Natural Breakpoint
Artificial Breakpoint
Decreasing Percentages
Deductions from Percentage
Rent
Reporting and Paying
Percentage Rent
Auditing Tenant Sales
Gross Sales Basis of
Percentage
Mall Owners benefit in the
Shops sales
Recharge Formulas for CAM
and Taxes
Pro Rata - Leasable
Pro Rata - Leased
Pro Rata - With Maximum
Fixed Amount - Negotiated
Pro Rata With Exclusions
Percentage of Tenants Sales
Monthly Estimate - Annual
Adjustment
Common Area Maintenance
(CAM) Clauses
Good Lease Language
Supervision/ Management Fees
Repair/Replace
Safe and Legal Operation of the
Shopping Centre
Marketing Fund or Merchants
Association
Merchants Association
Marketing Fund
Advertising Contribution
Real Estate Taxes
How the Property is Assessed
Determines How Tenant is
Billed for Pro Rata share of
taxes.
Insurance
Liability For Entire Centre
Fire And Extended Coverage
Buildings (Property
Insurance)
Self Insured Tenant
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
Default Provisions
Rent Due Date
Date of Delinquency
Penalties
Non Monetary Defaults
Active
Passive
Miscellaneous Clauses
Relocation Clause
Landlord Construction
Allowances
Operating Covenants (Hours,
Stock, Etc.)
Insurance Protections
Compliance with Laws
Exclusives
Secure your deal!
Security Deposits
Assignment and Subletting
Be very careful
Personal Guarantees
Co-Tenancy Clauses
Lease Exhibits
Site Plan - Landlord Has Right
to Change
Construction Exhibit(Exhibit C)
Sign Control
Many moves to make a Lease
Deal
Retailer Owned Store Agreement
REA (Reciprocal Easement
Agreement)
Landlord Vs. Tenant Lease
License Agreement
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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The Planned Approach

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