Guest: Zach Paul
Topics: Peachy, retail real estate, startups

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. Today I’m joined by Zach Paul. Zach is the Head of Real Estate of Peachy. He’s an industry veteran being in retail real estate for 13 years. And thus far in his career, he’s always been on the corporate real estate side for retailers. I’m excited for him to join us. Welcome to the show, Zach.

Zach Paul 0:38
Thanks so much for having me today.

Ressa 0:41
So, Peachy.

Paul 0:44
Yes, Peachy.

Ressa 0:46
So tell us a little bit about Peachy, but first, tell us a little bit about who Zach Paul is.

Paul 0:53
Definitely, for sure. So like you said in the intro, I’ve always worked in house on the retailer side. I’ve worked for retailers like Rite Aid, my kind of first job in the industry was doing lease admin work. And from there I went to Spirit Halloween and learned so much about temporary short term leases and, you know, just churning out 250 plus 10 fields a year and you got to travel the US and really kind of see different retail markets.

From there I switched to work for Sherwin Williams doing, you know, working for a fortune 500 company, learned really the kind of intricacies of, you know, long term leases and you know how to structure different types of deals a lot of ground up development as well.

From there, I worked at a company called Go Puff, on demand delivery service, very much a startup kind of organization that was one of the first real estate employees that they hired was a great kind of, you know, experience learning about how startups work and how the funding works.

And just, you know, switching the strategy, you know, every week or every month when it comes to you know, how to grow from there, you know, unfortunately was laid off during the pandemic due to, you know, some changes in the business model. And that kind of brought me to PHP.

For me, you know, PHP, we are considered a startup, but I was really able to, you know, kind of use all these past experiences working for, you know, start up really scrappy organizations, but also really established organizations like Sherwin Williams and spirit Halloween, and implement, you know, fresh, you know, processes and procedures for our strategy.

Ressa 2:39
I don’t know if you’re aware, but Sherwin Williams was my first job out of college.

Paul 2:43
Yes, I think you were right before me. And when you left, I think I had to pick up the pieces. Afterwards, maybe I don’t, I had to just share the dates.

Ressa 2:57
I was a little bit before you. I started there in ’04. So it was a little earlier. But they hadn’t replaced me for a while. So maybe.

Paul 3:08
Yeah, I mean, great organization, right and unbelievable place. It’s a company that’s been around for over 150 years. And you know, for me, I was really able to learn the amount of effort it takes to open a store, right? I mean, you worked for Bill Seal. Yep, you’ll see, they’ll see like, yeah,

Ressa 3:27
Great guy.

Paul 3:29
He taught me the ins and outs. And again, I’m not an attorney, but I feel just working underneath him, I was really able to kind of get, you know, the intricacies and just how much lease language really does impact, you know the outcome. And yeah, great, great experience, really.

Ressa 3:48
So based on how you characterize the intro of what you do, and what you’ve done, I want to ask question that we didn’t talk about before we got on here. So we do have some younger listeners on and I’d like to do a PSA. So you’ve had both extremes, Fortune 500 company, and Sherwin Williams and a startup.

What are some of the types of people that you think lends itself more to a startup versus a much more mature organization like a Sherwin Williams, and vice versa? What lends itself more to, you know, a mature organization versus, so if you’re like, graduating college in a month, and you’re like entertaining job offers from both types of organizations, what would be some advice you would give to those people?

Paul 4:43
Yeah, I mean, I see value in both right? I think kind of the Zeitgeist today is like everyone should work at a startup and make a ton of money. But I think there’s also a lot of value working for an extremely established organization as well. I think, in order to kind of succeed at any situation, it’s really all about your mindset, and how you, you know, react or you know, how you react to different situations.

So I will say, you know, working at a startup when I started at PHP, and we can talk a little more about, you know, what PHP is and who we are and what we’re doing, when I started, we only had two locations. So there was really no kind of roadmap or formula or strategy whatsoever, when it came to, you know, what makes a good peachy location or what, you know, what are we going to do in the next year or five years, there’s really no kind of, you know, metric in place or process in place.

So I would say, you know, definitely be open and willing to learn and to change and deal challenges. And to think outside your comfort zone, a startup really does kind of, you know, test your limits in a way. But there’s also ways I find, you know, with a large, you know, organization, fortune 500, or fortune 100 company where you can still be challenged as well and kind of learn, you know, the process and the system and see how you would improve.

I will tell you candidly that my time at Sherwin Williams, there were a lot of things that I would have done differently, when it comes to the way the real estate process and the site selection process took place. But when you’re dealing with 150 year old company, you know, it’s it’s not as you know, quick to change in a way.

Ressa 6:27
Sure. I think, you know, I think in the mature organization, I think if you want to really understand the evolution of a business, you can learn that there if you want to get access to different people, and access to different departments. And if you’re the type of person who’s like, here’s how things if you need like a system already built, you’re like an execution person.

Like you’re, you’re like, someone gives you a task, and you’re the person who always gets it done. Versus at a startup, like those process procedures, those steps aren’t built. And if that’s like, you know, throws you off, it’s probably not a good place from a career versus an established mature company like Sherman looms.

Paul 7:26
Exactly. And, and honestly, there’s also a level of risks risk tilt, right, like, Yeah, I think it’s something that everyone has kind of their own personal risk tolerance, you know, I had, you know, three kids and, you know, huge mortgage, I don’t know what I really want to kind of risk it with a startup, versus if I had no kind of debts or obligations, or, you know, everything was fresh to me, maybe that startup kind of culture and risk is more appreciated.

But, you know, I think it’s, I think it’s good to kind of see the duality and see kind of the benefit of both. I mean, I always think about, you know, my first job in lease administration at Rite Aid, you know, I was looking at leases from like paper leases on microfilm as well, from the 1970s when they bought, you know, thrifty drug in California, and, you know, all these other kind of acquisitions. So, you know, it was really kind of able to learn the basics from that as well.

Ressa 8:21
Yeah. So, thanks for the intro on you. Thanks for the discussion points on startups versus established companies. Give us a little bit about what Peachy does.

Paul 8:33
Definitely. So for those who don’t know, Peachy, we’re based in New York City. We are a wrinkle prevention and wrinkle treatment studio, if you will. Very straightforward. I know a lot of you know, there’s a lot of med spas and you know, kind of other operators that are out there. We really do like three things and three things that prevent wrinkles and treat wrinkles. We do neuromodulator injections, which is Botox. Botox is kind of like the Xerox and the copier world.

So Botox is kind of like the trade name. So we offer Botox, Xeomin, jeuveau and Dysport all kinds of offer the same, you know, outcome in a way you know, reducing wrinkles and fine lines. So that’s kind of our bread and butter we offer that. We also have our own sunscreen line, and also prescription retinoids as well.

So for us, we’re very much you know, a science bat organization. We’re not trying to you know, offer our customers Hey, walk in and we’re gonna completely change the way you look. It’s more about you know, maintaining the way you look preventing wrinkles and just really doing what we can that is FDA approved and science backed.

Ressa 9:54
Got it? Do you wholesale, the suntan lotion, sunscreen?

Paul 9:58
Private label, private label, you know,

Ressa 10:02
got it. But can you buy it in like a target or Amazon or something like that?

Paul 10:06
No, no, we only we only offer it through. We only offer it through, you know, our studios, which is a special kind of blend that, you know, we have two founders and one of our co founders, you know, medical doctor has a background has expertise when it comes to you know, what, actually, you know, it takes to you know, prevent some damage.

So, that’s kind of what we do. We’re we always say and I always like to tell people, we really want to demystify and destigmatize wrinkle prevention, you know, there’s a whole slew of, you know, jokes and lightning and lightning night comedians that loves to talk about Botox and frozen face and all this kind of stuff.

But, you know, I will say over the last five years, Botox in general has become a lot more normalized. So, you know, a big push for us again, to demystify, de-stigmatize is to really kind of have a place where people can go and learn more about it.

Ressa 11:04
Really cool concept. You started with two locations, how many locations are open now? Eight locations are open. Got it. And you have signed leases for how many more?

Paul 11:14
By the end of this year, we’ll have 12 open.

Ressa 11:17
So give us a little color, what type of real estate are they looking for, are you looking for.

Paul 11:23
So typically, we’re looking at smalls 1200 square feet, as largest 2500 square feet. You know, for us, our core customer really is that female 25 to 35. That’s something else that kind of sets us apart a lot of other med spa or, you know, Botox driven businesses kind of focus on that, you know, 40 to 45 plus female, we’re trying to, you know, get our customer in early, our customer is not going to a plastic surgeon to get Botox.

You know, for us, we’re all about flat fee pricing as well. If you go to a Derm, or plastic surgeon or another med spa, they charge per unit. So they’re more kind of their, their motivation is really to, you know, fill your face with as many units as possible. You know, a customer walks in has no idea what they’re paying, versus at peachy, it’s flat fee pricing. A customer knows what they’re going to be paying no matter if they get one unit or 100 units.

So, you know, we’re really focused on that kind of millennial customer. I will say, you know, we’re really focused on high quality, high, high quality real estate. For us visibility’s huge co tenancy is probably the biggest thing for us. We really want to be by you know, your your very cool trendy, whether it be 10 dental or modern, you know, not monitor that but um, Bond, that bond, that small door vet, those kinds of brands, really speak to us.

Ressa 12:54
Got it and done some different product, product type your high street retail, obviously, you’re in the city in Chicago, you’re going to your lifestyle centers?

Paul 13:09
Lifestyle centers, yeah, we aren’t we are looking at lifestyle centers. I mean, again, you know, our customers really focus on fitness as well. So being near, say, a Lululemon or aloe yoga is huge. Being near SoulCycle Barry’s Bootcamp. Yeah, lifestyle centers work well for us.

Ressa 13:26
Got it. Very cool. And a lot of I’m curious, a lot of the brands that you worked with previously, maybe not go puff but but definitely in spirit. And with Sherwin Williams, as are known quantities now, I do see where a large Sherman landlord where spirit landlord, so very familiar with those.

And when those people pick up when they you picked up the phone before everyone knew who you are, what it was about, understood everything. I imagine you’re picking up the phone, and doing a lot of educating these days. To landlords. Right? Well,

Paul 14:02
I mean, yeah, I think you have to, I mean, think about the target demo that I’m talking to most of these landlords, it’s mostly male, unfortunately, and mostly, you know, 40 Plus, in some situations in some markets, you know, even significantly older. So, they’re kind of knowledge of Botox and or wrinkle prevention is extremely limited. It’s, you know, it’s limited to say, Oh, my girlfriend or my wife does it or oh, you know, these celebrities do it. It’s very limited.

That’s where my knowledge is. Yeah, it’s and that’s fine. And I think, you know, a big part of what I do in other in other careers as well, but especially here at Peachtree, is telling that story of who we are, what we’re all about, you know, kind of what we do to the spaces and you know why we are kind of the a plus tenant when it comes to you know, the amount of build that we do and and the low requirements we need so it’s really telling that kind of story and educated

Ressa 15:00
And how have you been finding the market and finding real estate and the type of real estate you’re targeting? You’re in a different rental sphere than you were at Sherwin Williams in stereo?

Paul 15:11
So yeah, very much so. And it’s, it’s interesting, because, you know, when you’re on the other side, you think, Oh, it must be so easy. It’s like there’s tons of spaces available. And you know, when you have a, and again, we don’t have an unlimited budget. But when rent is, you know, a little more flexible, you think, oh, it’d be so easy.

But I will say, in the markets that we’re looking at highly competitive outside of New York City, you know, this year, we’ll be opening up in Washington, DC and Chicago, and we had those leases executed. And you know, they’re under construction right now, which is great. But moving forward looking at in markets, like in Texas, or Nashville, or South Florida, there’s

Ressa 15:47
No space.

Paul 15:48
There’s no space, right. And even if we would pay the rents, they are their commanding, there’s just no inventory, which is a big challenge. Another big challenge for us is because the Med Spa space is so big right now, over the past five years, a lot of the great centers that we would love to be in, there’s already either a local or regional operator that has a use restriction. So when you add in low inventory and use restrictions, it can make it very challenging.

Ressa 16:19
Have you come across? It feels like you guys are niche in the in the space, have you come across anyone else who’s trying to do this on a national scale what you guys are doing.

Paul 16:33
There’s other there’s definitely other like, and I say Med Spa, but there are other, you know, operators that are similar to us. For us, though we’re very singular. We do like one thing or three things very well very well. We’re not trying to do facials, we’re not doing filler, we’re not doing you know, body CoolSculpting, or any kind of body work. It’s very simple. It’s sunscreen, retinoids and Botox.

And for us, you know, we have highly educated, highly paid nurse practitioners that they do this every day, you know, all day, you know, every day, so they know what to do to get the best outcome. So I always kind of say we’re very, and again, this may not be the best analogy, but we’re like Shake Shack, right? Shake Shack makes a really good burger and a really good milkshake.

And that’s what they do. Right? Chick fil A makes a really good chicken sandwich. So for us at Peachy, we do really good wrinkle prevention. And that’s it.

Ressa 17:36
Got it. That makes a lot of sense to me. Yeah, I actually liked those analogies. I like those. Yeah,

Paul 17:41
I mean, it’s, and again, like, there are so many dermatologists and plastic surgeons, and they really those businesses are structured to really kind of cross sell you, right? They want you to come in and say I need Botox. And then they’re gonna say, well, don’t you want to lose some weight? Or don’t you want to you know, inflate your lips, you don’t want to do something else.

And you know, the customer, it’s a different kind of experience versus you got a peachy it’s like, this is what you want. We have a conversation with you. Great, we can help you out. And that’s it. We’re preventing wrinkles for you. We’re treating your wrinkles. We’re not trying to cross sell you on all these different, you know, potentially not effective treatments.

Ressa 18:20
Got it. Okay, well, it’s been super insightful. I want to move on to one of the last pieces. You have a story about a deal that you did in Chicago, that you started telling me which sounded interesting. Take us away, Zach.

Paul 18:35
Yeah, I mean, we, you know, we talked about how like tight inventory is, and, you know, we’re extremely, extremely picky when it comes to co tenants and positioning. And I’m really happy to say we found actually a second storage space. It’s in the Gold Coast neighborhood of Chicago, which I think is probably one of the best kind of, you know, high street areas in Chicago.

And its second storey space, right across from Tesla brand new glossier just opened last week. And, you know, we were very much, you know, on the, on the fence about do we want to do a second floor space, we’ve never done a second floor space before. You know, we’re so used to New York City street level for everything.

But, you know, the landlord was extremely helpful. And, you know, we had a lot of meetings and discussions about design and build out and we’re going to, we’re going to move forward with it. It’s super visible, it’s a hard quarter as, you know, two thirds windows, which is great.

Ressa 19:37
So, that is good that it’s two thirds windows, and it’s a hard corner. That is good. I actually think even though you had no locations, I think you guys were probably a leg up on some other retailers as it relates to second story space, because you’re in New York. And that’s not a typical, it’s something that happens whereas in like, the suburban shopping center space, it’s much more rare than then like in New York.

So I think it would be helpful. It was a concern. You had never done it before. What what are the concerns about being on a second story? Like, when you guys are talking about like, hey, it’s second story. For those who might not know, why isn’t that great? Or? And how did you guys get to a point where this could work?

Paul 20:24
Exactly. I think the big thing is, is will the customers come? Right? I know, my, our kind of take internally here is in New York City, people don’t want to walk upstairs. They don’t they don’t want to take an extra elevator if they don’t have to. Versus in Chicago, hey, maybe this is a little more, you know, okay.

And they’re a little more willing to do it. You know, another example is Boston, if you go to Newbury Street, you know, every single retail space on Newbury Street either has steps off or steps down. So it’s just a matter of kind of determining, hey, will the customer, you know, appreciate this. And I think our trade offered for the space in Chicago was because of this visibility because of this positioning, and because of its substantially lower rent. That’s the play for us.

Ressa 21:11
Yeah, I think that’s those are good points. Like, the access might not be what you wanted, because it’s second floor. But when you start talking about corner windows, both sides, that’s really hard to get on the street level.

Paul 21:27
Yeah, I mean, I can I can rattle off, I mean, another great retailer, and like literally right bias as a read Sia, or ET, as you know, kind of all day, every day, our core customers go to retail store. So there’s just a ton of great things in that neighborhood. So to be there, and it’s super visible second floor space. I mean, we spent a lot of money on our marketing and our build out. So you know, it’s gonna get a lot of eyeballs.

Ressa 21:54
I’m curious. So you go to Chicago. And you were looking for space. You met with your broker? I assume you had a broker?

Paul 22:01
Of course, of course. I mean, another thing I didn’t mention, like broker relationship is huge. Is really I don’t know if other guests have said that. But for us, I mean, the local knowledge is is huge for us.

Ressa 22:13
Got it. So you had a broker, you’re torn sites. And I imagine and you can correct me if I’m wrong, you’re looking at stuff and you’re not finding stuff. You’re looking in the Gold Coast, which is really great area. You mentioned all the fabulous co tenants that are in the area that you are, you’re looking around, and there’s no first floor space available. And so how did the second floor get pitched to you? And let’s start there, because I have a follow up to that. But go ahead.

Paul 22:42
Yeah, definitely. I mean, again, I kind of chalk it up to a really good, really good broker network that we have. And you know, our broker, who’s with JLL, Shannon Pope, she said, Hey, guys, I know that you said on our initial kind of call and discussion, that first floor is what you need. And that’s it. You said I really need to drive by and I really need to show you guys this. And, you know, we got the tour book sent to us beforehand, before he made the trip out there.

And I was like, I don’t know, like, you know, my boss, who’s, you know, the co founder and CO CEO. I know he’s gonna hate this is not going to work well. It’s gonna be hard uphill battle. But I said, You know what, let’s still Let’s drive by it’s, you know, the windows look great. Let’s drive by and see it. So physically getting there really kind of sold sold it to us.

Ressa 23:29
Got it. So that’s interesting. So if it was done, virtually, you probably wouldn’t have made a deal there. Now show two on teams. Yeah,

Paul 23:37
I will say, you know, as much as I love zoom, and technology and really, you know, optimizing that for cost and everything, you know, there’s times where, you know, on the computer on Zoom In looks absolutely horrible. And I go in person. And in this case, it was great. made all the sense to us.

I’ve also had it the other way where a space has pitched us and it looks great. And it looks like everything is brand new and all the great co tenants but they want to get there, the positioning of the space is way off, no visibility in a corner and it just doesn’t work. So I unfortunately, we still have to try and actually physically see everything.

Ressa 24:16
So okay, so you go there, you’re like wow, this space could work. Is it a who’s under who’s underneath you?

Paul 24:26
Actually, that he does is Peter mylar and PNC Bank But Peter alar is right underneath us. They’ve been there for several I think over a decade. So they’re pretty well established.

Ressa 24:37
Yeah. Great retailer. Yeah. And so you you end and so everyone knows so maybe you get some walk bys What, what’s the what’s the cross street there?

Paul 24:49
Cross Street I don’t know. But I know the address is 875 North rush, North rush Okay, so don’t rush. And also another kind of kicker. I think that sold the deal when we went inside the space itself up the floor and up the elevator was right across from our retail unit was a very high end bridal. Bridal. Wow.

Yeah, local regional kind of, you know, couture bridal gown maker. But the idea that hey, a future bride plus her whole entire wedding party is going here. Right across this right across the hallway is, you know, that’s, you know, preventing wrinkles. So that’s really good. That really sold a deal for us. Yeah, that’s

Ressa 25:32
A good cotenant. And then how dramatic? Were the economics differences between first and second floor?

Paul 25:41
Dramatic? drama? I would say, I don’t know the numbers off the top of my head, but probably definitely more than 25% difference. Wow. Yeah. 25, maybe even 30%.

Ressa 25:53
Okay, so. So, the moral of the story, never say never, everybody

Paul 26:00
Never say never.

Ressa 26:01
Okay. So when When do you plan to open? You said it’s under construction, when to hope to open? It’ll be

Paul 26:07
it’ll be a q4 q4 open for us. So I don’t have I have the idea of the month. But just to be safe. I’d say q4 this year.

Ressa 26:15
And leads me to another question. Is there a better opening period for this type of retailer versus others? Like, you know, you’ve been at retailers like spirit where the opening period is like the most important thing in the world?

Paul 26:29
Yeah, there’s there’s no change in the opening date for Spirit Halloween. It’s very, very strict. No, I mean, for us, the great thing is, is that, you know, Botox, because of we’re such a visual, and you know, we’re on we’re on video calls all the time. I mean, you would think that near the holidays is good, just because of you know, functions and holiday parties and things like that.

But honestly, we see we see great sales months all throughout the year. So there’s no kind of preferred, I would say, but a big thing for us is just making sure we space our opens, you know, so that we don’t have you know, two or three studios opening and saying

Ressa 27:10
well, listen, Zack, this has been fantastic. I really appreciate the time. Thank you for telling the story about peachy unrushed in Chicago. I can’t wait to go see it when it opens. I want to take us to the last part of the show. I got three questions for you. They’re fun questions. Are you ready? Yes, I’m ready. All right. Question one. What is the last item over $20 that you bought in a store?

Paul 27:31
So the last item over $20 I bought in the store probably a pair of all birds. Yeah, I was going I just recently got back I was away I went to Japan for two weeks. And before I left I wanted to get a good pair of like walking shoes and very durable so I went to the Albert store here and flat iron and grabbed a pair

Ressa 27:53
cool retailer cool retailer great shoes.

Paul 27:55
I mean they do a great job. They’re also like very like eco conscious which I like so

Ressa 28:00
so second question, what extinct retailer Do you wish would come back from the dead?

Paul 28:08
So it’s kind of timely I feel like everyone would probably say Bed Bath and Beyond. I wouldn’t throw it back and I probably would say KB Toys

Ressa 28:18
what a good toy store. Yeah, toys. I

Paul 28:20
just have very vivid memories as a kid like going to the mall and just just being very much enticed by their massive amounts of merchandising tons of merchandise everywhere so that’s when I thought you know would be would be great if you could stick around but

Ressa 28:38
got it. Last question. Zack if you and I are shopping at Target and I lost you what I would I find doing

Paul 28:46
so I don’t go to Target much I am more of a Whole Foods person. But target I would probably be in the skincare I’ll probably like the beauty you know seeing kind of what’s what’s on the market. Got it. That makes sense now you’re not makeup but like skincare the skincare I’ll sure I got it.

Ressa 29:08
Well listen, Zach, this has been fantastic. I really appreciate the time. Thanks so much. Awesome. Thank you.

Thank you for listening to Retail Retold. If you want to share a story about a retail real estate deal that you were a part of on our show, please reach out to us at retailretold@dlcmgmt.com.

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