REAL ESTATE

Three Decades of Retail

BY Michael Fickes

Mike George likes to say that his company is in the retail real estate information business. “Our clients buy, sell and lease retail real estate,” said George, principal and president of Oakbrook Terrace, Ill.- based Mid-America Real Estate Group. “Clients that buy and sell real estate rely on us for information that helps them make the best business decisions. When clients hire us to manage and lease shopping centers, they want our information-based decisions.”

Founded in 1984 as Mid-America Real Estate Corp. to represent retail tenants, the firm quickly became a resource for retailers expanding into the Chicago metropolitan area. Since then, it has grown into the largest full-service retail real estate organization in the Midwest, providing brokerage services, investment sales, property management and related services.

Adding services

The company branched out beyond retail tenant representation in 1990. “During meetings with property management people about chain store clients, we found our selves educating them about leasing to retailers,” George said. “An effective leasing agent understands what the owner wants to accomplish and then interprets that into what retailers are prepared to do. What lease terms will this retailer accept? What level of rent increases will that retailer accept?

“We were teaching property managers about basics. Considering that, we thought that we could succeed in the property management business.”

Mid-America Real Estate Corp. formed Mid-America Asset Management and entered the shopping center property management business in 1990. Today, the asset management company and three other companion companies hold a giant share of the Midwest’s retail property management contracts. In Chicago alone, the company manages more properties than the next three competitors combined.

In the early 1990s, institutional real estate investors began calling Mid-America with questions about retail real estate investments in Chicago. “We answered questions about what investors need to learn before making a buying decision,” George said. “We turned that expertise into an investment sales business that has become a large part of our overall business.” Mid-America Real Estate Corp. handles the group’s investment sales work.

Geographic growth

New Mid-America offices followed in the early 2000s, thanks to Mid-America’s membership in ChainLinks, a national network of cooperating real estate service firms. When CBRE acquired the ChainLinks representative in Milwaukee, Wisconsin was left without a ChainLinks firm.

“We knew experienced people in Milwaukee interested in moving to a firm that specialized in retail,” George said. “We made them partners and formed Mid-America Wisconsin. The same thing happened in Minneapolis in 2009 and Detroit in 2011, and we formed Mid-America Minnesota and Mid-America Michigan.

“We’ve become the ChainLinks affiliate in Wisconsin, Minnesota and Michigan, in addition to Illinois.”

Keys to success

This year is the 30th anniversary of Mid-America Real Estate. Looking back over the years, George points to three factors that have enabled the firm’s long-term success:

  • It brings in the best people as partners;

  • It specializes strictly in retail real estate; and

  • Mid-America partners and employees specialize in specific retail real estate services.

“We have never tried to own all of the company,” said George, explaining his partnership philosophy. “We find the best people in our markets and bring them into the business as managing partners. As a result, the best people in our markets stay with us.”

The company is not involved in office, warehouse or multi-family properties. George’s strategy is to be expert in one narrow property area — retail — and capture a major share of that business, and that has worked.

“Moreover, we specialize internally,” George continued. “Everyone specializes in a single service: selling, leasing, managing and so on. So if you want to find the best people to expand your chain or sell your center, our name pops up quickly because of the great depth of knowledge that comes with specialization.”

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Phillips Edison’s Value-Added Strategy

BY Michael Fickes

Phillips Edison & Company has grown by acquiring troubled shopping centers in good locations, redeveloping and improving the tenant mix. Over the years, the company has continued to optimize retail property value with its complete operating platform providing a diverse range of retail solutions. Today, the Phillips Edison portfolio contains more than 260 shopping centers across the country.

Jeffrey Edison and Michael Phillips founded Phillips Edison in 1991, at the depth of the commercial real estate depression caused by savings and loans driven to bankruptcy by poor real estate investments. “Lots of distressed property was on the market,” said Phillips.

“Our idea was to buy small grocery-anchored centers at discounted prices and add value by improving the property.”

The company doesn’t just focus on grocery-anchored centers anymore.

When the housing bubble wrecked the commercial real estate industry in 2007, the principals saw the opportunity to grow out of grocery-anchored properties into other kinds of shopping centers. “We realized that the value-add part of our strategy didn’t have to be limited to grocery-anchored,” said Phillips. “Because we were larger, we could look at larger projects.”

Today, the company’s acquisition criteria aim at more property types. In addition to grocery-anchored centers, Phillips Edison also wants power centers, lifestyle centers and mixed-use properties. It will look at assets of 150,000 sq. ft. or more, in major metropolitan markets and dominant secondary market locations. All of the company’s non-grocery anchored properties go into a portfolio called Total Retail Solutions.

The Kenwood Collection embodies the new strategy

The broader perspective led to a major opportunity for Phillips Edison. In 2012, the company bought a half-finished power center in Cincinnati, called Kenwood Towne Place, at a bank auction. The original developer, Bear Creek Capital LLC, had lost the property to foreclosure in 2009. Legal challenges had tied it up for years. With those problems solved, Phillips Edison found itself with a major opportunity.

The new owner promptly developed a new strategy and changed the property’s name to The Kenwood Collection. “We thought the power center format was doable,” Phillips said. “But the location was so good that we thought an enclosed, luxury galleria would be more successful and more appropriate for the market.”

Indeed, the trade area includes the wealthiest communities in Cincinnati. For instance, 60% of the households in neighboring Indian Hill, the wealthiest community in Ohio, report annual incomes above $150,000.

In addition, The Kenwood Collection stands inside the ring road of Kenwood Towne Centre, one of the country’s most successful malls.

“We don’t have Chicago’s Oak Street high fashion retailers here,” Phillips said. “But we do have Oak Street customers. We think the Kenwood Collection can capture those customers.”

Saks Fifth Avenue wants those customers, too. The high-fashion retailer has signed a letter of intent to open an 80,000-sq.-ft. department store in The Kenwood Collection when its downtown Cincinnati lease ends next year.

The re-conceived center, now under development, will feature a mix of uses, including 300,000 sq. ft. of high-end shopping, dining and services; 200,000 sq. ft. of Class A office space; and a 2,500 space parking garage. Current tenants include Crate & Barrel, The Container Store and Mitchell’s Salon & Day Spa.

With The Kenwood Collection, Phillips Edison is delivering a premier property to its Total Retail Solution portfolio, one that demonstrates that the company’s ability to add value to underperforming grocery-anchored centers extends to power, open-air and now, luxury retail centers at the highest level.

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Spotlight on Miracle Mile Shops

BY Michael Fickes

Jerry Irwin signed on as general manager of Miracle Mile Shops at Planet Hollywood Hotel & Casino in Las Vegas in September 2013. He oversees all center operations, including design, development, management, construction and strategic direction.

Miracle Mile Shops spans 475,000 sq. ft. and boasts 170 stores. Recently, CSA asked Irwin about his plans for the center.

How do you conceive of your role at Miracle Mile Shops?

Irwin: Our owners have done an amazing job of redeveloping what was The Shops in Desert Passage as Miracle Mile Shops at Planet Hollywood. They took the property to the next level. My job is to continue that progress.

People come to Las Vegas to eat, shop and enjoy entertainment. So that’s our focus: Find the interesting new restaurants, shops and entertainment and bring them into our center.

Who are Miracle Mile Shops customers? How do you bring them into the center?

Irwin: We appeal to a very broad audience. Because the center is located directly on The Strip and is attached to Planet Hollywood, our audience is very similar to the Las Vegas visitor, which covers a very broad spectrum. On any given day we welcome people of all ages and backgrounds from all over the world.

We work closely with the Las Vegas Convention and Visitors Authority to bring people in. They bring many tours to the city, and we work closely with tour operators.

We use Twitter, Facebook and other social media very actively. We also work with bloggers. In front of the center, we advertise on huge LED screens — 150,000 people pass by on Las Vegas Boulevard every day, and 72,000 of them visit the center every day.

What new tenants has the center brought in recently?

Irwin: Last October, we announced two new restaurants and two new retailers: Ketchup Premium Burger Bar, Meatball Spot, Tervis Tumbler and Shoe Palace.

The official Britney Spears boutique just opened. It’s called Britney: U Wanna Piece of Me? The opening accompanied the December premiere of Britney’s two-year residency inside The AXIS at Planet Hollywood. The store offers branded Britney merchandise, including clothing, accessories, home goods and memorabilia.

This year, GNC and Original Diva will open, and we’re negotiating a number of new leases. You can expect announcements soon.

We’re also looking. We’ve launched a new website targeting brokers — dothemile.com. We’re sending out email blasts to tell brokers about it. We’ve also started a targeted restaurant program. We’ve selected 100 restaurants that we’re interested in looking at and emailed a personalized sales piece to each.

What are you working on now? What is your priority?

Irwin: I try to focus an equal amount of attention on all areas of the center since we really strive to offer something for everyone. From restaurants and retail to advertising content inside the center and social media, it is all important.

Give me an example of a specific project.

Irwin: We have an opportunity on Harmon Avenue. There is a valet area there where you can pull into Planet Hollywood and the Hilton. We have 60,000 sq. ft. in that area that we can redevelop. We want to create a walkable, fun destination activated with day-life and nightlife, including restaurants with al fresco dining and music.

What’s next?

Irwin: I think that shopping centers should always strive to do better by continually asking what customers want. That’s how you stay relevant.

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