Closing Deals

Owen Buckley raised the issue of “getting to the finish line,” meaning to complete a project and getting a tenant to sign on. He asked attorney Rick Katz of the Katz Law Firm why, with all the advances in technology, leases take so long to finalize.

As Katz explained, attorneys for would-be tenants “let a lot of things sit,” often for a month or even more. “We send things off into the abyss,” he lamented. “Many, many times, it takes an incredible time to get it back.”

“Time kills deals,” said Glenn Stephenson. To address the problem the Plaza takes an aggressive approach. Once the delay gets to a certain point, if the deal is not moving at an acceptable rate, “We are coming to see you. We are bringing our attorney. We are all getting together at one table, and we are going to resolve these issues.”

“That is a way to get it done,” agreed Katz. “I think the critical thing is that there is someone on the other side who really wants to have that meeting.”

Stephenson observed that closing costs money and the slower the close the more the money. “The Gap cost us almost $27,000 dollars. Urban Outfitters cost us almost $30,000 dollars because of the legal battles,” said Stephenson.

“We discovered,” he added, “that when we got on the road and went to

see them, got everybody together, even with the cost of all the travel, we were still saving a ton of money.”

Buckley wondered whether deals were being slowed down because of the lack of retail interest over the past decade or so.

“Among the smaller retailers,” said Mike Fishman of Coldwell Banker Commercial Fishman and Company, “I think there is more pain in the market than is typically acknowledged.” He suggested that many smaller retailers are struggling more than they are willing to let on.

Lynn Best of Applebee’s saw the problem from another perspective. “We have landlords that just don’t play well with us,” she noted. “Our biggest problem has been the landlords.”

Louie Skizas could not generalize as to where the problem resided. “A lot of times we are finding that the sellers and landlords are slow to respond to us,” he noted.

When asked whether it is taking longer to get a deal done in the finance world, John Parker responded that there had been no perceptible change. To be sure, the sub prime event perturbed the credit markets, spreads have widened, and treasuries have fallen considerably, but “interest rates are still pretty good.” 

Still, as Parker noted, some players have left the market and the insurance companies have not filled the breach. “If you were doing a deal today, it might take a little longer,” he argued. “It’s not quite as much of an auction as it was last spring.”

“I haven’t seen any change in the short term credit market,” said Fishman. “There is still a lot of money out there chasing deals and the banks are very, very aggressive. So I haven’t seen that there has been any disruption in the credit supply.”

On the broker’s side, David Hickman acknowledged that many retailers are pushing deals back from ‘08 to ‘09. In part they are waiting too see how consumer markets will perform. In part too, there is an excess of retail space available in the marketplace, “I definitely see some challenges in terms of tenant velocity,” said Hickman.

This caution struck Lowe as “interesting” given that retail sales have been generally up in the past year.

Specific Projects

In speaking of downtown Kansas City, Missouri development, David Hickman enthused, “I think it is going to definitely elevate our game as an overall city.”

“I think it’s going to be wonderful,” agreed Jeff Haney, though conceding that “people are going to have to get used to going up their parking decks too.”

“I think it’s a great project,” affirmed Glenn Stephenson. He believes it will help the Plaza. “The one disappointing thing” that Dan Lowe saw in Cordish’s downtown Kansas City development was the lack of unique tenants.

On the other end of the metro, south Johnson County. Bob Johnson described 135th Street as “probably the most overbuilt street in the city.” As he described the situation, there is a lot of movement within Overland Park from one area to another. “The whole corridor needs more rooftops and more density,” he added.

John Sweeney noted that sewer lines are being run as far south as 175th street and that 119th and 135th Street will likely remain the commercial center of this extended area for the foreseeable future. Still, he believes that 135th Street could benefit from more density closer in. “It goes back to the whole mixed-use, that everybody wants to do.”

“Corbin Park [135th and Metcalf] will get built and look pretty and I think draw customers,” said John Rubenstein. “The question is was it worth their time and effort to get it done?”

David Hickman questioned whether 135th Street would eventually succeed at the expense of 119th Street. “Are we going to see 119th Street go down a couple of notches and 135th Street rise up?”

Bill Schultz offered a useful summary statement for 135th Street, for Downtown, for all those retailers struggling to find their footing and all those developers struggling to oblige them. “In tough times, the smart people survive,” he observed. “The ability to reinvent and to find that niche is the key.”