Guest: Brett Sheets
Topics: real estate, leasing

Transcript:

Chris Ressa 0:00
This is Retail Retold, the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa, and I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC Management.

Welcome to Retail Retold everyone. I’m your host, Chris Ressa. And I am excited to be joined by a longtime friend, Brett Sheets. Brett has been in the business for over 30 years. He’s the SVP of Leasing at Barclay Group. But he’s been at retailers public REITs. He was a broker. Now he’s a developer. He’s got a wealth of knowledge. I’m excited for him to be here. Welcome to the show. Brett.

Brett Sheets 0:43
Thank you very much for having me. It’s awesome.

Ressa 0:45
So Brett, why don’t you tell everybody a little bit more about who you are and what you do?

Sheets 0:51
Yeah, well, I’m actually based in Phoenix, Arizona. That’s where Barclay Group is, my current employer. Before that I was at Varied, which was cool. We were one of the largest REITs, publicly traded REITs in the country. And so as their Head of Leasing as well, we sold to realty income, I decided I want to try something different. And so I decided to try the developer side of the business. The Barclay folks here, I chose them. And they chose me, I chose them because they’re just good people.

They’re there. And they’re one of the most active developers in the country. We’re mostly developing grocery anchored centers. We do some fitness centers, and I handle all the pre-leasing of the ground-ups, and all the renewals for the existing center. So that’s sort of where I’m at now. Prior to that, I was with a retailer, a national retailer, and I helped grow them across the country.

They, when I got there, they started out with 275 locations, it was franchise driven, we can have whole conversation about franchises, it was franchise driven. It was Cold Stone Creamery, I can say who it was, we had 275 locations, and I grew it to about 1200. So I was responsible for their real estate. But I gotta tell you, that gave me that national exposure that I felt like I was lacking. Because before that I was a broker.

And when you’re a broker in one state, it’s a little bit more of a challenge to get that out-of-state, across the country sort of exposure. So I felt like that really catapulted my career, quite frankly. So as you mentioned, for different really, disciplines, pure broker, learn to learn it on the streets, cut my teeth on the streets, got my own business, work commission, straight commission, then I went to work for a retailer.

And then from there, the REIT, one of the largest institutional REITs in the country. And then now here at Barclay Group.

Ressa 2:53
Now I’m curious, most people in any industry don’t float from side to side of their business. Right. As much as being the Head of Development for a retail chain. And I, such kudos, I think there’s a lot of people out there who are probably fans of Cold Stone and wouldn’t be able to go one to one if it wasn’t for Brett Sheets.

So I think it is really interesting. It’s a really interesting job and really fascinating. But I would say while there’s some similarities, it is quite different than your job as the Head of Leasing for Vary. And what you do now, and so what would you say to someone who’s looking to make a big transition like that? Because I think a lot of people out there find it hard to go from side to side, they feel pigeon-holed?

Sheets 3:49
Yeah, I would agree. I think some people just can’t make that jump. I think it’s really hard for a broker to jump over to the retailer side, in my opinion. I’ve seen a lot of retailers jump over to the developer side. I don’t see a lot of retailers jump over to the brokerage side. I’ll tell you, the thing about, you know, and I worked for a franchise concept, and like I said, we could talk for hours about franchise concepts.

And it was a great concept. They were growing like crazy, but I always say, when you’re a retailer, whether you’re a franchise or other, and we can talk about what’s hot and what’s not. But when you’re retailing, you’re growing and you’re hot, you’re hot, but as soon as you stop growing, you’re not. And I sort of read the write on the wall kind of early that hey, we’re growing too many stores too fast. And that’s when I decided to make the jump over to the landlord side, the realty side.

Ressa 4:42
So I think, so at the time, if you were cold or at, you know, why would you be interested in Brett Sheets at the time? What do you think? And like, forget about even our industry, like, someone wants to hop over. Like I think when someone post a job, they’re looking for specific requirements. And you probably didn’t meet a lot of them that they were looking for. So how do you get that job?

Sheets 5:09
Yeah, that’s a great question too. You know, my, my good looks and charm. Just kidding. Love it when people tell me I have a radio voice, but a radio face by the way. You got both, you get both. Anyway. So you know, I think what they wanted at the time, they were strictly had one product type. And it was net leased reads. So as Walgreens and Rite Aids and Walmart’s and Home Depot’s, but they wanted to grow fast, and they wanted to get more credit.

They wanted to get more wall to weighted average lease term. And they wanted, and they wanted to spend more money. And so the way to do that is to buy big power centers, right. And so that’s, you buy a power center with the Pet Smarts and the Ross’s and TJs and all those things. And that’s how you buy into the investment grade tenant. And that was their goal. So they saw that, and I was a shop guy, right? I was at the Cold Stone, I was, I was looking at 12 to 2000 square feet.

But what they saw was I had the relationships, and we can talk about relationships later, to relationships across the country, because I was out meeting with all the developers, meet with all the landlords, meet with all the brokers. And so I had relationships in every market, and they had to grow in all 50 states.

So I think they saw that in me. And I think they also saw that, I had some process and systems because we are growing so crazy and Cold Stone that we had to have processes and systems and good people. But I felt like I managed a process. And it got deals done fast. And they wanted to see that happen over at Kolaver,i was cool at the time, but very…

Ressa 6:48
Got it. Okay. Yeah, I think it was a great point, like having a large network, or having an having a good deep network are critical. And, you know, if you’re finding a job, or whatever you do, but I appreciate your sharing that. So I think you’re in an interesting place now, right? We’re in a volatile market for development. It’s always about development, it’s always tough. It’s never easy, right?

Developments, always tough. Right? But you’re in a pretty tough development time, as am I, I’m in a tough development time. There’s usually opportunity in times like this, but you know, how are you navigating the waters? Question one and two, what are some of the challenges you’re running into?

Sheets 7:44
She has so many minutes. It’s interesting sitting in the three hour development meeting that we have every other Monday and a I’m learning a lot, this team is great for that. But on the other hand, we have close to 40 development projects in different phases.

And that could be a, you know, small, little EGS redevelopment, build a suit up to you know, a huge 200,000 square foot grocery anchored center with shop space. I would say we’re sort of suited well here in Arizona right now because of the amount of people moving in.

So that’s a good thing we got a lot of people move it in. So, you know, retail follows rooftops the old saying. So I think that’s a really, really good thing for us. But we’re also building in Colorado, and which is a pretty growth market to Texas, pretty high growth market. And we’re starting to dip into a little bit in the Carolinas in the east coast. But that’s more client specific.

But what what we’re seeing, and it’s really gotten sort of crazy, just in the past few months, what I’ve noticed is, you know, sitework, just to do site work because of costs of cement and concrete and fuel fuel surcharges. All that labor shortages has really affected our costs. And there’s a certain point that the tenants there’s a certain tipping point where they can only go so high. Right. On, on, on rent. Yeah. So that that makes it a challenge. And we’ve come up with some creative ways.

And we’ve, we’ve met with a lot of retailers and I think they they get it in general. And so that’s a good thing. But bottom line, you know, we’ve I still have I have one incap in a multi tenant building. I have I get six loi guys, that’s a good problem to have. Great problem. Yeah, and so I’ve got we have plenty of activity. So I think the tenants still want to grow out there. My concern is with the with this recession, that we are may or may not be in I think I think something’s got to give here. Hopefully it’s temporary.

But what we’re doing with the tenants I’m doing, I’m getting more percentage rent, because you know, they can only afford to pay so much. So I’m, I’m starting to really implement percentage rent, it’s a fair percentage rent, it’s a win win. And then I’m getting a little bit more term, you know, some of these tenants that would only do 10 years may get up to 12 years, they’re not going to do 15 or 20.

But even shop guys will do that just gives me more time to amortize the costs into the deal. And, and we’re pushing higher rents, you know, we really are, we’re pushing in mid to high 40s in this market for brand new developments. Because there’s nothing There’s nowhere else for them to go.

Ressa 10:45
So there was there’s been a lot of discussion about annual increases on rents. One of the things you brought up as interesting is, you know, maybe that’s a place for percentage rent, we all want to get annual increases because of because of the inflation. But when you hit a roadblock, right, most people don’t want to pay 8% per year.

You know, maybe a bridge is percentage rent. But have you been able to get an A friend of mine, Jason Richter recently talked about this, or posted that on LinkedIn? Are you? Are you getting solid annual bumps?

Sheets 11:35
Absolutely. I think on the on the shop tenants, three percents 3% annuals, we love to talk about this right 3% annuals all day long, on the shop tenants, the bigger boxes. I’m pushing 12% 12 and a half, sometimes every five, five? Yeah, every five,

Ressa 11:56
if you’re getting 12% bumps. Every year on a box deal, we should talk offline.

Sheets 12:03
And then on the ground leases ground, these market is really hot right now in especially in Arizona. So we’re able to instead of, you know, do reverse builds or build the suits or sell Outparcels we’re able to do ground lease. So it’s

Ressa 12:18
interesting. So why do you think the ground lease markets so hot?

Sheets 12:21
I think it’s lack of product, lack of product. And, you know, I’m somewhat lucky I don’t call myself the Maytag repairman. But I’ve got grocery anchored centers, fry, specifically Kroger product, and the guy across the street doesn’t have an anchor. So most of my tents they want to be I’m drawn five 6000 people a day with a grocery store.

And then in some cases, when we can buy to buy enough land, we’ll put a fitness, iOS fitness, we’ll put it in the same center, they’re drawn to 1000 people a day. So I’m drawn to traffic, so people kind of want to be over with us. That’s why they’ll do a ground lease. It’s it’s getting tougher, but I don’t see it drying up in the near future.

Now the ground leases I’m only getting 10% every five year because they’re spending all the money. There’s there’s been in the investment, but and we’re delivering typically, you know, Qurban, you know, ready pad, you know, get a rough graded and, and they go to work

Ressa 13:23
for those who don’t know, can you play teacher? Can you explain what a ground lease is?

Sheets 13:33
Well, I’ll tell you, at that very, I did three ground reasons, ground leases in 10 years, that would be a lot. So I come over here and the ground lease is everywhere. So ground leases typically is going to happen on an out parcel or a pad, they’re typically longer term, we’ve been getting 15 to 20, some one only 115. But 20 year ground leases, it’s basically as is you deliver the pad, you don’t give them any contribution.

And then I’ll walk through that to you don’t give any contribution, they write you a check for the ground for the ground pad and they do all the work, you got to prove the elevations. So the ground lease is something as a REIT or a real estate investor. Love ground leases, because you don’t have to collect rents, you don’t have to collect.

You don’t you’re not paying real estate taxes and insurance, it’s almost like a net leased REIT let net leased asset. Whereas there are situations where we’re going to do it’s kind of structured, the lease is structured as a ground lease, but we’re making a contribution. So we’ll typically cap that contribution at this point. So kind of like a reverse build to suit you know, hey, we’ll write you a check for a million bucks. Here’s what your rent is going to be.

And then you build your building. And then kind of the third part of that is the the true build a suit and that’s when we’re building the building for them. We’re going to turn it over to him and that’s more like a typical lead lease. And we’d like those two. It’s just you get to underwrite the credit. And you got to understand the costs of building that building.

Ressa 15:07
And, yeah, for those who don’t know ground lease, someone’s actually, instead of leasing the building from you, at $1 per square foot, they’re leasing the ground for a rate. annualized basis, they’re paying you monthly. And typically, they’re doing their own common area maintenance, paying real estate taxes directly to the municipality, and they’re self insuring the building, it’s, you know, it’s a more passive, less operational for a landlord.

And typically, it has to do with. And so why would a retailer want to do that? It has to do with one access, there might not be any other opportunities and to sometimes their financial model that they’re using, actually turns out better than paying a higher rent for a bill to suit, their cost of capital is cheaper, it’s cheaper for them to build the building, own the real estate, depreciate the real estate than it is for them to actually rent that building for you.

But then they pay you a smaller fee for the ground and they do the actual building.

Sheets 16:13
Exactly. And a lot of tenants out there have not or stayed away from ground leases. Yep. We could name a few. But there’s, they started to realize they were losing market share. Because that hamburger guy that would never do a ground lease, while its competitors like okay, I can get some market share here. I’ll do a ground lease, get a store up. And so that’s part of it, too. Yep. Is just getting control the market. So

Ressa 16:42
I want to take a pivot for a moment. I want to I want you to share story. You have a story about a a former Circuit City that why don’t you tell that story?

Sheets 16:53
Yeah. I won’t say what market because it’s just in case to protect the innocent. But it was a former Circuit City about 35,000 feet. You know, we hired brokers in the market. They did a great job. I

Ressa 17:05
think so the building was being we’re talking about a vacant building. Thanks to be Circuit City. Right. Okay, exactly.

Sheets 17:11
Anyway, I think within the second month, I went out to go tour it, I had to go see it, touch it, feel it. And so I met the brokers out there with one of my deal makers. And so we opened up the back door, and the place is trashed. There’s spray paint everywhere felt like somebody maybe set it up as a haunted house.

It had blood blood things and things hanging from the ceiling. It was a weird deal. They had a fire in the middle of it. Thank goodness the the building didn’t burn down. So anyway, they’d like us campfire

Ressa 17:43
in the middle of the building. Yes, yes.

Sheets 17:47
Yeah, I think they had chairs around it there. Somebody was having fun in there might have been one of these, you know, parties. Oh, my God, the beautiful together. So I never

Ressa 17:55
got invited. I was younger. I never got invited to the Circuit City party. So,

Sheets 18:00
ya know, either. So, you know, sort of fast forward, we had a big pylon sign right on a freeway, right. I mean, just perfect. But we lost that pylon sign in six months. If we didn’t release it. That pylon song sign went back to the city. You know, they can tear it down. So I lose the pylon sign. It was in the RAS and the restriction Wow,

Ressa 18:25
what a weird thing that the pylon sign is yours unless you release not the building the pylon? No, I had to release the building. Oh my god, or you lost the pylon? Or we lost the pile. What was the tip put up like Welcome to Main Street in such and such town? Yeah.

Sheets 18:45
I think there was way too many billboards way to be pylon signs. So this is the city’s way of reducing all that off the freeway right? To clean up their city.

Ressa 18:54
And for those who don’t know, retailers and brands love pylon sites is a huge value not having that makes lease ability of the building a lot less likely.

Sheets 19:06
Yep, exactly. And the tenant, and we had lots of prospects. They had to be open. Oh my god in six months, they had to be open. They had to be operating in the building within those six months. It was crazy time and there’s no way we’re going to do it. So what we came up with is our brokerage house and I’ll give kudos to him. I should probably say at CBRE and we will give give them a shout out.

We we had them sign a lease with us for a temporary not temporary but I signed the lease with us for a West office satellite office. So CBO CBR and hassle somebody had to be there. So CBRE opened it up. We signed a little lease with them that we could terminate right? signed the lease with them.

They got phones. They moved in a desk They sent one of their junior guys, a new guy in the business probably now he’s been in the business for a while. Had one of their junior guys sit in that building every day, you know, lights and a phone and a computer and was opened up, you know, for a satellite office.

Ressa 20:15
Oh my god, this is one of the best stories ever heard. This is amazing.

Sheets 20:19
Yeah. And, you know, fast forward, we ended up we ended up getting getting the deal signed it took actually took about 12 months for them to get lined up. And what was

Ressa 20:29
the use of the tenant that was coming in?

Sheets 20:33
Well, I shouldn’t say because I think they already closed down.

Ressa 20:34
That’s all right. But

Sheets 20:37
yeah, it was a while ago when I did this. I I haven’t been to this market. Remember, I had stuff and 49 these days, I could remember all of them. But it was your typical retail type use that like the parking like the exposure off the freeway. You know, all that. Just as you know, it takes a while to backfill a junior ba Yeah. Wow. Yeah, that’s my hat. That’s my

Ressa 21:00
dad. That is crazy. So what a creative first off kudos to CBRE for doing that. I’m sure the rent was light. Since they had one person in there. You didn’t charge a lot of rent to lease the box. But they do it for you so that you could get around the fact of not giving the pylon sign back to the municipality so that you could get your junior box retailer and total team effort.

Wild that is totally wild. i I haven’t heard that before. I’m kind of put back on my heels because that is super creative. And you were working this was that when you were at Ferrari. Yeah, correct. Right. What did the guys that were read say were they like this is the most creative thing in the world really, like crazy.

Sheets 21:50
Very happy that we backfield it after they’re happy, but I don’t think they cared about the sign going away. Because it would have been my job to backfill. Right, right. But as you know, it would have been harder and probably less rent. Wow. So

Ressa 22:04
kudos, what a cool story. Bread. That is a good one. Yeah. Okay. So what else? Are you what else is top of mind for you in the world as you’re in this crazy retail real estate world today?

Sheets 22:22
Well, like, let’s see, I get I’ve got five loi sitting on my desk that I need to that I need to answer here by the end of the day. And so as I said earlier, I think activity is still tremendous. And I think that tenants are willing to step up, it’s just trying to work with work with them. Because their costs have gone up, right? You know, it used to be, you know, you talk to when these haircutting guys I won’t mention their names.

And they say, Hey, Brett, yeah, that worked. At the first deal we did with them, at the beginning of the year, 45 bucks a square foot work to build out a vanilla box. Now it’s costing me 65. So I’m not gonna make up the whole 65. But maybe I can come somewhere in the middle, if they give me a little bit more rent, or I incorporate that percentage rent I did, or I get higher bumps. So we’re willing to write the checks if the numbers still crunch.

But what we’re what we’re trying to do now is we’ll deliver a shell on the new construction will deliver the gray shell, if it’s a restaurant, we’ve got a, I call it a modified gray shell, I think we do a pretty good job given modifying gray shells. And then we give it an allowance, we just don’t want to take the vanilla box construction risk right now, especially since it takes so long to get these leases signed.

We just don’t want to do it. You know, we’ve come up with some language to put in loi that basically says a market condition exists. And if cost, if you don’t sign the lease, by this time, and costs go up more than 10 15% We’re going to have to have a discussion. You know, we’re either going to have to raise your rent or reduce or reduce your TI because our costs are going up as well. And I would say most of the tenants have been sort of they’re not happy about it, but they seem to be okay with it.

Ressa 24:07
So, we we’ve done something similar we’ve because we’ve tweaked a bunch of things. The first thing we did to me the answer to that if your construction teams good is which I know yours is the first step to that is the speed to execution. And so what we would do is we would put in and say listen, in the loi, due to inflationary costs and construction. The lease needs to be signed by this date, or we cannot honor the rent.

And what I would tell you on the shop space, most of the tenants got the lease done by that because we were transparent because we would say Okay, you know, a construction team would say, Listen, I think I’m gonna be able to build it in this price range. But I’m telling you, if I can’t start by this date, that means I can’t deliver by this date.

And in the northern states, we have issues which you probably face in Colorado, right? If you don’t get started in construction in September, you could be not building until April, because the grounds frozen. Now that time window, the construction guys are not going to stick their neck out to hold pricing. Because that’s too long of a window. So that was one way we got around it.

Sheets 25:40
How much time to give the sign the lease those that negotiable or just throw up? No, we would,

Ressa 25:45
we would, it would be it would be fact base, I would say it’s based on talk to your construction. And they would say, hey, I need to start, I need to start drawing plans. And by this date, and I need to start construction here. So whatever that means for you, I need to start controlling all these around, you start construction on April 1. So if it’s February 10, right, in that scenario, you need a lease sign pretty quickly.

If it’s December 15, we would say alright, you have 45 days, something like that, to sign this lease. And, you know, otherwise the rents subject to change. We had, I think one instance where the rent did change, and the group said, Listen, we were too slow, we get it. Let’s see, I don’t know that we can make the numbers work. But I understand you were very clear with us. That was an easier way for us, because we’re pretty confident our construction team.

But I’ve been in a lot of scenarios I’ve done a I did a grocery store where we were to deliver base building work. But then the tenant improvement work we were doing it was a turnkey, was capped at a certain dollar amount. And then they reimbursed us anything over? Well, it turned into at reconciliation, it turned into chaos. Because well, that really wasn’t tenant improvement work, that’s base building work. And it was gray in the lease.

Additionally, they had they they had the option, the tenant had the option to pay me cash back for it, or pay a higher rent spread over the course of the lease. Now in this scenario, the tenant didn’t want the rent to increase. So they paid they paid they paid. But to get to an agreement of what that number was. Post the cap was was tough. And so you know, you could easily say like, something like, Alright, I’m going to spend $50, anything over that is your contribution.

But then you get into the stuff of like, did you get three bids? How do I know that was the best value for the $50 a foot. And so when it came to all the small shop leasing in the amount of activity, I thought that would be a a bottleneck. So I stuck to the rent piece and challenged the construction team give me the date, you can hold pricing too. Right? So that’s what we did.

Sheets 28:36
Yeah, that’s an eye here. Yeah, the problem we’re having here in this market, because the growth is a lot of contractors won’t even hold the price. Sure, in 30 days. So a lot of them want it to be what they want to write to change it, you know, once they start the work, which is just crazy talk. So I have the confidence in our construction team for sure.

And our development team. I just don’t know if I have the confidence in the contractors, but I think that’s got to change. I mean, you know, I think I think once the subs are starting to call us and ask us for work, I think, I think that’s when things will change. It may not be for another three to six months. But you know, that’s kind of what we need to happen in this market.

Because right now it’s you can get three bids from some of these guys, you know, they we have issues with, you know, the, you know, all the supply chain, we’re having issues with H backs and transformers, ses switches, electrical switches, I mean, that’s holding up stores from getting open. You know, wait, no, that’s gotta give.

Ressa 29:35
So we I was on the I was on my team and reported back to me, was our fault phone call with Dick’s Sporting Goods in their electric gear manufacturer. Because we’re turning addicts and their electric gear manufacturer guy, they were talking and Dick’s was apparently challenging, like, you know, what do you talk about on this timeline?

I think my takeaway from it was this was the issue was, there’s a lot of people that manufacture electric gears. Yeah. But there’s only like one group that manufactures the components that go in the electrodes.

Sheets 30:14
Exactly. Exactly. Yeah, that’s the same thing. We’re here. And I talked to one of the junior boxers, I don’t know if he wants me to mention his name. He, you know, in that 20 to 30,000 square foot range. And he told me, they’re preordering H Vax and inventory. And I’m trying to do the same thing with switches, and and also transformers. And so because there’s such a huge growth plan.

Ressa 30:42
So yeah. I know who you’re talking about. But yes, so the I think it’s a it’s an interesting time for sure. is, you know, you mentioned the activity, I think the one of the things I would say is tenant demand is robust. I think people want to access market share.

The Economics of deals are challenged by construction costs, but the industry is just so creative. And they’re finding ways whether it’s, you know, back in the day, we’re temp leasing to a CBRs kid who’s on a phone, so we save a pylon, or whether it’s there’s some creative percentage rent measure now or whatever it might be. The industry is innovative.

Sheets 31:32
Yeah, I agree. It’s tough. Are with our construction guys doing their performance? You know, now construction loans are what? Pushing almost 7%? Sure, six and a half 7%. And so that’s, you know, that hasn’t really caught up yet. But it’s starting to.

Ressa 31:46
Yeah. And you mentioned on the franchise side, right. I’ve talked to them, right? Their construction costs have gone up their SBA loan, interest rates have gone up, there’s a whole meal, you know, their costs have gone up. But I often say, once we sign a lease, I can’t change the rent. could always raise the price of the burger. Yeah. Good point. I can’t raise

Sheets 32:07
the prices, they’re going up. And they seem like they’re going up.

Ressa 32:11
I can’t raise the price of the burger. On the What about the nonmonetary? What’s any challenges you’re seeing in non monetary things in deals?

Sheets 32:25
Well, it kind of relates a monetary, but timing, timing, especially with the Yeah, the ground leases and with even with the mom and pops, trying to figure out getting permitting and because they all they’re all having issues with permitting architecture all behind. Lawyers are all behind. And so that the timings is just killing us right now.

Ressa 32:46
Yeah, that’s it’s one. And, and there’s a lot of like people want, I’m like, I don’t want any contingency periods, I want to sign a deal and have a deal. And there’s all these different like periods of time that you have to get through to get to like, when the actual lease is effective. You signed the lease, and then there’s this huge other period of time, and we’re like, we want to get to a lease deal.

Sheets 33:06
Yeah. You want to know my goals? I want to know when rent commencement, what am I going to get rent? Right, whatever that is. And that’s that’s getting to be a huge challenge for us is that that timing thing, you know, exclusive, they’re here to stay co tenancies, we’ve sort of been kind of pushing back pretty big on CO tenses, because we only have one anchor. And so we’re coming to the end, rarely do they close. So we’re careful with that. But otherwise, all the typical, yeah,

Ressa 33:38
I’ve seen I’ve seen a bigger push by tenants on assignment provisions, so that they can create flexibility. You know, if a black swan event like we recently had happens. So we’ve been pushing back, we lost a deal on an assignment provision recently. That was in lease, which hadn’t happened in a long time. years.

Because the tenant didn’t feel like they had the flexibility they needed if something happened, and they wanted to sell, but we felt we had no control of who was in our shopping center and what it would be. And we were investing in this tenant. And we neither of us could get comfortable. That’s rare, but it was just a eyebrow raiser for me.

Sheets 34:24
Right? Yeah, absolutely. Well,

Ressa 34:27
Brett, this has been great. Any last things you want to talk about? We haven’t touched up covered a lot,

Sheets 34:37
you know, renewal strategies, and because it’s something I’ve been dealing with for a while here, because everybody’s trying to read Retrade the options right, because the options, their option, not our option. Yep. And so I always listen to them. You know, if you want you don’t option, you know, give me a call, but you have to show me your p&l. Show me your balance sheet.

Show me how you’re doing so that I can justify because you tell me your over market rents, show me some of your sales. And so for me and the retailer’s hate it, when I say this, market rent is not just, you know what the deal down the street can be done for, but it’s what you can afford to pay. And so to show me that you need to help him, you need to help them, maybe we’ll figure something out. But if you don’t need the help, you’re going to option. You know, that’s this.

That’s what we signed, you agreed to it, when you sign the lease, you should agree to it now. So I’m seeing a lot of that. And lately, it’s been working out great for me, I’m getting probably 98 99% hit rate on renewal tenants, when they call me up and asked me for help some of morning, get me the balance sheet or the sales, they just say we won’t give that I’m like, well, then I look forward to your, your renewal.

So so that’s one sort of theme that I’m seeing out there. Because it’s been around for years, where they never want to take their option, they want to retrain it, you just got to do your homework, you got to know, can they move somewhere, because we all know, you know, some of those cosmetic type companies will move if there’s another opportunity down the street, they can get a brand new store if you don’t work with them. I mean, there’s there’s tenants out there that are like that.

Ressa 36:13
The thing I would say, and I think you give some good advice. And everyone out there, this is a former retailer who’s saying this, let’s keep that in mind. Brett’s former retailer. Exactly. So I would say the following. At the end of the day. It’s a tough spot for a retailer right now. Because occupancy is super high. It’s not about options.

But even if there was the cost of construction, the rent the adjacent landlord needs to make the deal work most likely is more than they’re paying you hard or the retailer has to spend a lot of money to move that store. Right? They would have to have a significantly actual above market rental rate to make the real low pencil in today’s environment. And so we’re seeing high renewal rates as well, because of that.

Sheets 37:18
It’s kind of like a house. You don’t want to move because the construction costs to go build a new house have gone up and the interest rates a dub. Exactly. So

Ressa 37:28
people aren’t going to move anymore. People now have 3% Handcuffs with their mortgages, you know. Exactly. So Okay, last part of our shows a fun part. Brett, I got three fun. Are you ready? Shoot one, what extinct retailer Do you wish would come back from the dead?

Sheets 37:46
How that’s an easy one for me only because it brings back such great memories. And this retailer that I think they blew it completely blew it. But I would take my kids, both my kids to Toys R Us. And it was to me it was it was entertainment. It was me I could spend a couple hours there. Right and entertain my kids at Toys R Us and I let them pick out one thing every time. But they would try everything.

They had a smile on their face. I think just I missed Toys R Us as a concept. Love to see that type of thing come back. But they didn’t invest in their stores. Their store started getting dirty. Inventory started getting light. So I kind of saw the writing on the wall. That’s for sure. Yeah, that’s that’s, that’s probably the one I missed the most. How about you?

Ressa 38:33
Well, I’ve answered this before I there was a store my dad used to take me to call to recall. It was home improvement store. And some fond memories. My dad, there’s many there’s many stores that I wish would come back though, but recklessly.

Sheets 38:46
Isn’t it funny that we talked we talked about the memories? Yeah, that we missed the stores that are gone because of the memories not necessarily the product. Right.

Ressa 38:58
Question two. What item over $20 is the last item you bought in the store?

Sheets 39:04
No, I might embarrass myself but that’s an easy one for me. Wine prime or burgundy wine. Okay.

Ressa 39:10
Last question. Brett, if you and I were shopping in a target, and I lost you what I would I find you it?

Sheets 39:20
That’s easy. That’s a loaded one. You know, I used to hang out in the I won’t go there. I used to hang out really in the electronics area. But you know, I just That’s boring to me now. So I’m in the outdoor section. Okay, the sporting section. Is there one new game board game or outdoor game that I can get that I can we can play at parties or something like that. So that’s kind of where I’m hanging. All right. And, and also, by the way, probably in the grocery section, check in the wine.

Ressa 39:54
All right, Brett. Well, this has been fantastic. I really appreciate it. Thanks so much for hopping on. Appreciate it. it and are you going to New York?

Sheets 40:03
I’m trying. It’s a little tight but I’m gonna give it a shot.

Ressa 40:07
We’ll have to connect. Absolutely.

Sheets 40:09
I really appreciate you. You inviting me.

Ressa 40:13
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