Centers Business Management (CBM) Valley Division Director, Dave O’Connell, and leasing agent, Brett Mero, recently completed a lease transaction representing landlord and tenant, Western Dental, on a 3,500 SQFT dental clinic. The unit is in an El Super (grocery store) anchored community center at the intersection of Azusa Avenue and Arrow Hwy in prime Covina. The busy center’s co-tenants include Ross Dress for Less (discount store), Fashion Q (clothing retailer), WaBa Grill and El Pollo Loco. The property is situated across from an AMC Theater anchored center whose co-tenants include Shakey’s Pizza, Outback Steakhouse, Staples, JoAnn Fabrics and more.
The ramp up to the legalized sale of marijuana is on in California, and local municipalities are under pressure to fashion workable rules and regulations.
In November of 2016, California voters passed Proposition 64, which legalized the recreational use of Marijuana. And the state is poised to begin issuing sales licenses as soon as January 2, 2018 – which is literally days away.
But regardless of state legislation and licensing, local municipalities still have a big say in the cultivation and distribution of recreational marijuana. Local ordinances will largely determine how pot manufacturing and sales are conducted
In this regard, all eyes are on the City of Los Angeles as California’s biggest and most powerful municipality is likely to set the tone for guidelines governing legal marijuana businesses throughout Southern California.
And Los Angeles city government has been hard at work on this task. In a unanimous, 12-0 vote, the LA City Council recently approved regulations for recreational marijuana manufacturing and sales within the borders of the City of Angels.
Here are 6 of the key highlights of this coming legislation…
1. Zoning Restrictions – Marijuana retailers are only allowed in specifically defined commercial and industrial zones.
2. Location Restrictions – Marijuana shops must be at least 700 feet from schools, public parks and libraries, child care facilities, alcohol and drug treatment centers, and the same distance from other pot retailers.
3. Additional Location Restrictions – Marijuana growers and manufacturers are strictly confined to industrial zones and banned within 600 feet of schools. Also, marijuana manufacturers that use volatile solvents are prohibited within 200 feet of residential neighborhoods.
4. Marijuana-Related Business Caps – The City of Los Angeles will issue licenses for no more than 390 retail shops, 336 growers, and 520 marijuana manufacturers.
5. Social Equity Program – In an effort to empower communities hardest hit by the so-called “war on drugs,” the city will give priority to applicants who live (or have lived) in areas heavily impacted by cannabis arrests. Or persons that were previously convicted of certain marijuana-related crimes.
6. Converting From Medical to Recreational Marijuana – Licensed medical marijuana businesses currently operating in accordance with Proposition D (in other words, the operation was granted a business license by the city of LA prior to November 2007) will be first in line to receive new recreational sales licenses.
What Does This Mean For Shopping Center Landlords?
Here are 3 key points retail landlords should consider when entertaining a “pot tenant.”
1. Federal law still prohibits marijuana sales – Despite state level approval, marijuana remains a schedule 1 drug, according to federal statutes. As such, the DEA could, at any time, decided to raid your center, shut down your tenants’ businesses, and seize and sell your property (under federal drug-related property forfeiture laws). And though the current Presidential administration has given no indication they plan to crack down on “legalized marijuana sales,” this regime if anything, is unpredictable.
2. Tenant qualification is more critical than ever – The City is only issuing 390 retail shop licenses. And 140 officially licensed medical marijuana businesses currently in operation already have preference to receive recreational sales licenses. That means the number of legitimately licensed operators seeking to open new locations is likely to be small. So, it’s EXTREMELY important you confirm prospective tenants have the proper licensing documentation.
3. Confirming your property meets location criteria is a KEY consideration – Strident zoning restrictions confine pot businesses to specific areas and limit their proximity to schools, childcare facilities, and other sensitive public sites. Therefore, it’s imperative you’re aware of your property’s positioning amid your local landscape if you’re considering leasing to a pot tenant.
Need Help Vetting Pot Tenants?
One of the primary services professional leasing agents provide is tenant qualification.
With years of experience in dealing with tenants of all stripes, including ample expertise with pot tenants, a leasing agent can help you differentiate legitimate potential operates from pretenders hoping to cash on the current legalization gambit.
Additionally, a leasing agent can help you sort out city rules and regulations. Not to mention confirm whether or not your property meets zoning and location criteria for a pot shop.
For more info on CBM’s professional retail leasing services… visit cbm1.com/services.
Well, in the protected waters of Marina Del Ray’s harbor anyway ;—)
Gorgeous Marina (Del Rey) Views Aboard Dream On
But the harbor scene was no less exciting or enjoyable than open waters. And the setting couldn’t have been more perfect if we’d scripted it… Bright and sunny cloudless blue skies and ideal temps (not too hot, not too cold), trimmed by a gentle, airy breeze that trailed our vessel, Dream On, as we cruised the gorgeous Marina inlet.
A Grand Time Was Had By One-And-All!
Meanwhile, the entire team was on-hand partaking in a delectable lunch, luscious libations, and engaging conversation as we sailed through the vivaciously glowing midday rays.
All set to the dulcet tones of a solo guitarist, expertly strumming a bevy of classic tunes on his nylon string Spanish guitar.
The Perfect Ending to Another Productive Year
All-in-all, our boat bash provided a perfect crescendo to another successful year!
Check out more pix from our dreamy cruise aboard Dream On at CBM’s Facebook page…
P.S. Many thanks to Hornblower Cruises for making our party such a monumental hit!
In a prior post, we covered the heaven forbid topic of “What if Disaster Strikes Your Shopping Center.” And in that post, we emphasized the need for emergency preparation and planning.
And as wildfires rage across Southern California, this question is even more pertinent than ever!
But there’s another side to the “disaster” story… Property Insurance.
If, God forbid, the recent fires burned down your shopping center, you have insurance to cover damages and loss. Or at least you assume you do anyway…
But have your REALLY read your insurance policy?
Have you pulled out your magnified glass (because that’s about what it takes these days) and scrutinized the “fine print?” And most importantly, do you have a clear picture of what’s covered if disaster should strike your property?
If you’re like many shopping center landlords, you don’t get around to investigating the details underlying your insurance policy until disaster strikes. And by then, it’s too little, too late.
To avoid stumbling into this potentially costly trap, here are several key considerations to keep in mind when purchasing your property insurance…
Don’t be Seduced by Price
Like most property expenses, the category which insurance falls into, you buy on price. And that totally makes sense. Your shopping center’s an investment. It’s supposes to earn income. Not vacuum cash out of your bank account.
But when it comes to an expense like property insurance, frugality only makes sense to a point.
If your agent quotes a price that’s “too good to be true,” investigate policy details and be sure the policy isn’t, in fact, too good to be true. Inadequate coverage may cost less upfront, but in the event of a casualty, it could cost you a fortune.
What Are You Really Buying?
When shopping for property insurance, pay attention to three key issues:
What’s ACTUALLY covered in the event of disaster? What level of restoration does your policy guarantee?
And pay particular attention to Repair Vs. Replacement. How does the policy differentiate between the two? What’s the damage threshold in which Repair give way to Replacement?
Your policy defines a set procedure for making a claim. In other word, the conditions you must adhere to in the event you make a claim. If you fail to meet these “conditions,” the insurer is within their rights to deny your claim.
As such, it’s imperative that you understand the conditions before you buy. And adhere to the letter of those conditions should you ever have to make a claim.
Federal and state laws define boilerplate insurance policy framework. But insurance carriers are free to add Endorsements, which are addendums that either extend or limit policy coverage.
Be sure you have a CLEAR understanding of your policy endorsements, and any potential coverage limitations they might encompass.
A commercial property is a unique animal. As such, you may want to consider some additional coverage.
If considerable damage occurs to your property, an engineer may be required to assess the extent. Specifically, whether repair is a viable option or if full replacement is necessary.
An engineer employed by the insurance company obviously has a vested interest in erring on the conservative side. As such, it’s in your best interest to hire your own engineer and get a “second opinion.”
If your policy includes “professional fees,” the cost of hiring an independent engineer is covered.
Business Interruption Lawsuit
A disaster at a retail property doesn’t just impact the landlord… Tenants are essentially out of business until the property is back up and running. In situations with lengthy restoration periods, whether due to major construction or claim disputes, tenants have often sued landlords for “business interruption.” Such suits claim loss of income due to property inaccessibility, which landlords have a duty to make accessible.
Even if a suit is thrown out, attorney’s fees can be considerable. And if a tenant wins, costs can be astronomical.
Some policies offer additional coverage for business interruption lawsuits, and depending on your circumstances may be worthwhile.
Avoid Non-Admitted Carriers
If you give your agent a budget, and instruct him find a policy in that price range, he’ll comply.
REMEMBER: Your insurance agent’s in business to make money (just like you). Thus it’s in his best interest to fulfill your requests.
But sometimes in order to meet your budget, your agent may be inclined to take shortcuts. One all too common shortcut is using a “Non-Admitted Carries.” These are carries that are not admitted into the state where your property is located.
It’s legal to purchase insurance from a non-admitted carrier. And many offer attractive pricing. Such carries, however, are not subject to your state’s regulation (which is often why they’re able to discount their rates). In the event of a disputed claim, you have less recourse and may struggle to compel a non-admitted carrier to pay up.
Need More Help Managing Your Shopping Center?
Property managers don’t get directly involved with property insurance. But from paying bills to managing tenant relation to monitoring site maintenance, we do handle just about every other aspect of shopping center property management. And our services relieve much of the burden management saddles property owners with.
For more details on how CBM’s property management can benefit your shopping center, visit our Services page.
Maybe they’re just hanging out and panhandling at your center? Or perhaps they’ve taken up fulltime residence at your property? Either way, the homeless are an issue that many retail shopping centers struggle with.
At the very least, the homeless are nuisance that drive customers away and hurts your tenants’ business.
At the worst, the homeless, especially if they’re taken up residence at your property, represent a huge potential liability, not to mention potential public health hazard.
Now, of course these are human beings…
And you want to treat them as humanely as possible. We’ve shared creative strategies major regional property management firms have used to minimize the impact of the homeless on retail properties they manage.
But in some cases, situations arise in which you simply need to have an individual, or individuals, removed from your property.
Unfortunately, the removal process is far from straightforward. A great deal of legislation has been passed both nationally, and in California specifically, that “protects the rights of the homeless.”
So, the questions is… How do you make this happen?
The process varies to some degree based on the municipality. As such, you must always check with your local city officials. The basic process, however, is roughly the same.
Here’s How it Works:
1. Post a “No Trespassing” Sign
This indicates that while your property is “open to the public,” and loitering of any kind is not tolerated.
2. Ask a “Trespassing” Party to Leave
This demonstrates that you’ve attempted to enforce your stated “no trespassing” policy
3. Contact the Police and Report a Trespassing Violation
To make such a report, you must be the property owner, a tenant, or otherwise have vested interest in the property.
The police will visit the property and issue the offending party a formal, written “warning.”
In some municipalities, trespassing alone is not enough to prompt the police to issue a formal warning.
You must witness the person littering, defecating, urinating, using drugs, camping, storing property, loitering, stealing, or otherwise detracting from business, generating customer complaints, etc…
In other words, you must explain how person’s presence is disrupting your business.
4. Contact the Police if the Person Returns
If the person returns, the police now have grounds to arrest the person. And the police have ongoing grounds to arrest the person should they continue to return even after the initial arrest.
Need Help Dealing With the Homeless or Handling Other Aspects of Managing Your Shopping Center?
As already noted, the process described above clearly is not the most straightforward path to ousting a homeless person plaguing your center. Unfortunately, it’s your only legally legitimate option.
The good news is this is EXACTLY the kind of problem professional property management can help resolve!
Your property manager can…
== > Act as your agent (satisfying the “vested interest in the property” requirement necessary to file a police report).
== > Wait onsite and meet with the police to file the report (reports must be filed onsite) and point out the trespassing party so the police can issue the written warning.
== > Serve as the contact point person to notify the police when the trespassing party returns.
And this is just one of the MANY services professional property management provides!
For More Information on CBM’s Property Management Services…
Visit our Services page at cbm1.com/services.
ICSC Report: Brick-and-Mortar Retailers Capture 75 Percent of Thanksgiving Sales
November 27, 2017 by REBUSINESS ONLINE
Shoppers at Macy’s in New York take advantage of Black Friday deals.
Shoppers at Macy’s in New York take advantage of Black Friday deals.
NEW YORK — Retailers with a brick-and-mortar presence captured approximately 75 percent of all sales transacted over Thanksgiving weekend 2017, according to a report by the International Council of Shopping Centers (ICSC) released Monday, Nov. 27.
Combined, online and brick-and-mortar retail sales during Thanksgiving and Black Friday clocked in just shy of $8 billion, an 18 percent increase over the same two-day period in 2016, according to Adobe Analytics, which measures transactions of the 100 largest American web retailers.
On Black Friday itself, online sales eclipsed $ 5 billion, up from $3.34 billion in 2016.
The ICSC report found that over the course of the weekend, more than 145 million Americans shopped at malls and shopping centers — 105 million on Black Friday alone — where they spent an average of $377.50 per shopper.
Approximately one-quarter of the average shopper’s total expenditure went to dining and other experiences. All told, consumers spent an average of $78.70 per head at dining and entertainment destinations in association with Black Friday 2017.
NRF’s Annual November Holiday Consumer Survey, conducted by Prosper Insights & Analytics
A poll by the National Retail Federation showed that potential Thanksgiving weekend shoppers strongly preferred Black Friday, but that many would be shopping into Cyber Monday. Click image to view larger. Source: NRF’s Annual November Holiday Consumer Survey, conducted by Prosper Insights & Analytics
“Shopping centers across the country should feel very optimistic about the season ahead,” says Tom McGee, president and CEO of ICSC. “What we are seeing over the course of the year, and more so during the holiday season, is consumers’ desire to take advantage of everything a mall has to offer, whether that is dining, shopping or entertainment.”
Approximately 74 percent of shoppers spent the same or more than they did in 2016. In addition, consumers visited an average of six stores during their 2017 shopping sprees, as opposed to four in 2016.
Roughly 25 percent of shoppers capitalized on omnichannel distribution by purchasing items online and picking them up at the store’s physical location. Among those who opted for this “click and collect” approach, nearly 70 percent made an additional purchase while in the store.
View original article here…
Mom-and-Pop Shops Are Threatening the Mall This Holiday Season
By Bloomberg, November 22, 2017, 5:00 AM PST
More bad news for America’s shopping malls: Consumers are shopping closer to home. And increasingly, home is not where the malls are.
Spending growth at mom-and-pop businesses has outpaced that of the big chains in the past two years, according to Sarah Quinlan, senior vice president at credit-card giant Mastercard Inc., which tracks purchasing patterns. When they’re not shopping online, Americans are seeking more personal connections and advice — something they can find lacking at national retailers.
“The consumer is shopping small,” she said.
Big chain stores still account for the majority of shoppers’ purchases, according to Mastercard. But many of the most affluent consumers are now clustered in walkable neighborhoods, letting them skip the mall in favor of neighborhood hardware stores, bookshops and grocers. And they’re willing to pay the higher prices, Quinlan said.
That doesn’t mean malls are going away. The A-rated shopping centers — the industry’s cream of the crop — are still doing fine. But the other roughly two-thirds of malls are struggling to cope with shifting spending patterns, an aging population and the rise of Amazon.com Inc. The uncertainty has even led tenants to push for significantly shorter leases, sometimes of only a year or two.
Independent retailers and small chains have been able to step into the void. Many of them are thriving in categories like hardware, furniture and crafts.
Holiday markets have capitalized on the trend, letting small businesses offer their wares in bustling pop-up shopping districts. Keoni DeFranco, who was shopping at a holiday market in Manhattan’s Union Square on Thursday, said he tries to support local stores when possible.
“I’ve become more conscious about what I’m purchasing and eating,” said the 29-year-old software executive. “I do a lot of browsing online, but I do enjoy going into stores and looking at what I’m buying before I purchase it.”
But local shoppers frequently have to overcome a big hurdle: price.
Since smaller businesses often can’t buy in bulk, customers typically have to pay more. Increasingly, that’s a sacrifice shoppers seem willing to make — at least when they’re shopping offline, Mastercard’s Quinlan said.
Sales growth at small businesses, defined as having less than $50 million in annual sales, was 7.3 percent last year, according to Mastercard. That compared with 4.6 percent for total retail sales. Small business purchases account for 37 percent of total spending.
But online growth still overshadows both the big chains and local stores.
E-commerce sales are expected to swell by 18 percent to 21 percent during the holiday season, the National Retail Federation estimates. That’s a faster clip than last year — and well above the roughly 4 percent expected for the retail industry overall.
It’s hard for brick-and-mortar chains to beat the convenience of a few mouse clicks. So they’ve promoted the idea of a retail “experience.” Smaller stores — with all their quirks and idiosyncrasies — may have an easier time offering a memorable time. They also can be more nimble in catering their selection to local tastes.
The ultimate goal for all stores is greater personalization, said R.J. Allan, head of retail corporate banking at Mitsubishi UFJ Financial Group. Getting that right means more loyalty and profit.
The bigger chains have the advantage of being able to invest in technology, including apps and loyalty programs that keep customers coming back. They also can connect an expansive e-commerce operation to their physical stores.
“Retailers that are able to bridge the consumer experience across brick and mortar and online will be best positioned for success,” he said.
The smaller stores, though, have another edge: The clerk might actually remember your name when you come in.
“I prefer to shop local when I can,” even if prices are higher, said Mary Bresette, a 66-year-old resident of Manhattan’s Upper West Side. “For me, it’s a sacrifice I’m willing to make.”
If you handle trash collection like most shopping center landlords, you contract with a private waste hauling company.
But even if you’re paying for private collection services, you’re still on the hook for the “landfill maintenance” portion of “sanitation fees” your local municipality charges your property.
Fortunately, you’re free to pick and choose from a variety of vendors waste hauling vendors. And in turn, you’re able to select a vendor that offers the most competitive prices.
Except, of course, If your property is located in the city of Los Angeles…
What’s this all about?
Recent legislation enacted by Los Angeles City government has given exclusive domain to a small group of vendors, each solely servicing a designated area. And in turn, the city has eliminated your ability to choose own service provider.
And the results thus far? The quality of collection services has declined, markedly. While costs of have jumped – considerably. In some cases, “sanitation fees” have risen by 300%.
Here’s What You Need to Know…
Department of Sanitation Franchise
At the close of 2016, the Los Angeles City Council voted to create the “Department of Sanitation Franchise.” In addition, the city council divided the city into 11 trash collection zones the newly formed Department of Sanitation Franchise would administer. The council then awarded exclusive contracts to seven companies who now service these 11 zones.
In other words, property owners who could once select from the roughly four dozen licensed trash hauling services now have ZERO choice. Instead, owners are stuck with their zone franchisee.
The Purpose of Sanitation Franchises
With multiple firms handling trash pickup, the collection process has become chaotic in many dense residential neighborhoods and commercial zones. In some locations, trash and recycling picks occur daily. And the associated noise and hazards created by numerous trucks blocking traffic and a multitude of collection bins littering already overcrowded streets have become nuisance and danger to residents, business, and their customers.
Assigning a single firm to collect trash in designated is intended to reduce this inconvenience to a weekly week, rather than daily occurrence.
Additionally, California Law mandates that 75% of city garage be diverted away from existing landfills by 2020. The city’s hope is the increased revenues the franchise system is expected to generate, a projected $3.5 billion over the next ten years, will fund recycling initiatives.
The Problem With the Franchise System
As you might expect, the lack of competition has impacted both the level service and pricing.
Since the new program was rolled out in July of this year (2017), countless property owners and tenants have reported frequent missed pickups. Moreover, missed picks that are often not credited to the property owner’s account.
Most troubling of all, prices have risen – significantly. In some cases, property owners have reported 300% increases.
Quick Case Study
CBM currently manages a retail strip center near the Beverly Center shopping mall, situated in the City of Los Angeles, adjacent to Beverly Hills and West Hollywood.
Prior to the institution of the Department of Sanitation Franchise, the 10,200 SQFT center paid $1,520 per month for weekly trash collection. The new Sanitation Franchisee now handling this property increased the fee to $3,800+ per month for the same weekly collection.
That’s a 148% increase. A significant jump the tenants now in place are unfortunately bearing the brunt of via increased Triple Net (NNN) fees.
The shift to the Sanitation Franchise system has caused some major problems for retail shopping center landlords and their tenants…
== > Missed collections leads an overflow of rubbish that’s not only a deterrent to shopping center patrons, it’s a public health hazard.
== > Failing to credit property owners for missed pickup is tantamount to fraud. And fraud the City of Los Angeles apparently condones.
== > Massive increases in collection fees hurt tenants most of all… The majority of retail shopping centers are leased on Triple Net (NNN) leases. Under the terms of a NNN lease, property expenses, including trash collection, are passed along to tenants. And a major increase in sanitation fees means tenants are paying considerably more every month just to cover their basic expenses.
In the case study mentioned above, tenants’ monthly NNN fees have risen by an average of $400. This jump adds up to nearly $5,000 in additional annual expenses. For retail tenants struggling to survive on already thin margins, such an increase could force tenants out of business altogether.
Clearly the Sanitation District Franchise Districts initiative is a travesty that’s destined to seriously harm countless local businesses. Not to mention hinder investment in Los Angeles retail real estate.
So, what’s a landlord to do?
At this point, options are few. Your best approach is to contact City of Los Angeles elected officials that represents you in the and make your displeasure with the new Sanitation Franchise Districts abundantly clear.
== > Determine who your district council person is – here. Call, leave messages, send emails, and write letters expressing your distress over the Sanitation Franchise Districts.
== > Contact Los Angeles County Supervisor, Sheila Kuehl – here. Call, leave messages, send emails, and write letters expressing your distress over the Sanitation Franchise Districts.
== > Contact Los Angeles Mayor, Eric Garcetti – here. Call, leave messages, send emails, and write letters expressing your distress over the Sanitation Franchise Districts.
Need Help Managing Trash Collection and Other Property Service Vendors?
There’s no doubt wrangling vendors is one of the most difficult aspects of shopping center management. And the fallout from the recent introduction of Department of Sanitation Franchise in Los Angeles outlined above is a clear indication of the considerable costs and frustration involved.
The good news is, CBM can help!
We’ll take change of all your vendors, including waste collection. On your behalf, we’ll ensure your vendors not only provide top quality service, but do so at competitive prices. And if they fall short, we’ll help you find new vendors!
To find out more about how CBM’s professional property management can benefit your property, visit our Property Management Services page at: cbm1.com/services
Shake Shack Poised for Biggest Growth Year Ever
By QSR Magazine, November 2, 2017
Boosted by both revenue and overall sales increases of nearly 27 percent during its latest quarter, Shake Shack is planning to open more locations in new markets throughout 2018.
During a conference call Wednesday, CEO Randy Garutti said the company plans to open between 32 and 35 new company operated locations by the end of 2018, with about 20 percent of those units expected to open in new markets. 2018 will be the biggest year of unit openings for Shake Shack to date, and will result in year-over-year unit growth between 36 and 40 percent. Shake Shack has revised its forecast of opening 24 restaurants by the end of 2017 to potentially opening 26 units.
New units will include a Shake Shack at LAX Airport and at Hartsfield-Jackson Atlanta International Airport. During the third quarter, Shake Shack entered the San Antonio market and added its second Michigan location.
While sales and revenue increased during the third quarter thanks to year-over-year unit growth of 36 percent, Shake Shack’s same-store sales fell by 1.6 percent compared to a 2.9 percent increase last year. Traffic decreased 3.8 percent.
“We’re pleased with both our top and bottom line growth in the third quarter despite the negative impact of Shack closures caused by two major hurricanes,” Garutti said, adding that the company closed nine locations for a total loss of 33 operating days during the storms.
Earlier this month, Shake Shack launched its kiosk-only, cashless store and tested a split kitchen for greater throughput. Garutti says that the company will continue to invest in these types of innovations and expects an increasing proportion of ordering to be conducted through the Shack app and delivery channels.
“Our average check via the app remains higher than in Shack,” he said. “We’re seeing encouraging return rates from our app users and while [it’s] still in the early days for us, we believe the Shack app is a really important tool for us to deepen our connection with our guests with a strategic push towards more personalized marketing initiatives to drive greater frequency and spending.”
Shake Shack launched its Hot Chick’n LTO during the quarter, and will continue to test chicken as an expanded menu category.
Garutti says that the brand has been pleased with delivery pilots and there is high demand for Shake Shack delivery.
“In terms of where we ultimately go with delivery, anything we choose to build will be with long-term sustainable economics in order to create a strong healthy business,” Garutti said. “For now, you’ll continue to see us approach this area of our business thoughtfully and strategically.”
View original article here…
Keep Updated on The Latest Retail Real Estate Industry News & Events
Sign Up for CBM’s Retail Real Estate News Blog
Choose your favorite method for receiving blog updates: