Focus on: Landlord/Tenant Partnerships

Last June, two organizations — Retail Industry Leaders Association and International Council of Shopping Centers — co-sponsored a sustainability initiative that ultimately would set the bar for landlord/tenant partnerships.

The last 14 months haven’t been without bumps. Forging positive, mutually beneficial programs that involve cooperation from shopping center owners and their retail tenants has long been one of this industry’s greatest — and most frustrating — challenges.

Yet, by emphasizing the goal of accelerating the adoption of energy and waste reduction — and most importantly, cost-saving — practices within retail facilities, the organizations, along with a facilitator, Paladino and Co., another newly added partner organization, the Professional Retail Store Maintenance Association (PRSM), and landlord and retailer participants, the partnership today has legs and wings.

The RILA/ICSC/PRSM Landlord/Tenant Retail Sustainability Collaboration got its official start on June 9, 2011, in Washington, D.C., with a meeting of 13 landlord and retail minds. The group identified three key business performance issues that impact both landlords and tenants — energy efficiency and renewable energy, recycling and lease agreements that incent environmentally beneficial behaviors — and forged a path toward tackling each.

Chain Store Age checked in with Adam Siegel, RILA’s VP sustainability and retail operations, to explore the effort’s first year of progress. We asked Siegel — along with Camilla Titterington, acting head of real estate legal for PetSmart; Letitia Webster, global director, corporate sustainability for VF Corp.; and Will Teichman, director of sustainability for Kimco Realty Corp. — to talk candidly about challenges, lessons learned and next areas of focus for the group.

After you walked away from last year’s meeting, where did you start?

Siegel: For the first six months, the team focused on our initial three priorities. We then came together in early 2012 to review a number of toolkits we collectively produced that will facilitate cost savings through energy and waste reduction, and to discuss next steps.

During the review, what progress were you able to identify?

Siegel: We now have a hard focus on “green” leasing, which addresses how to update the leasing process to incorporate sustainability — from the site selection and Letter of Intent stage to lease execution.

We have realized a lot of things that can be done operationally, with a focus on improving business performance, that need to be addressed in a lease. For example, if a retailer does a lighting retrofit, do they see a savings from that? The same goes for the developer. The lease needs to define who has operational control over various aspects of the building — like parking lots and roofs — and how energy-saving investments are funded. Going forward, we need to further define what green leasing means to the industry and continue to develop case studies of successful partnerships as an example to others who may want to reduce their costs.

Looking back at the last year, what have been the key challenges and accomplishments?

Siegel: The greatest accomplishment occurred in the very first meeting, where we discovered that all 13 landlords and retailers in attendance were — much to everyone’s surprise — strongly aligned with each other in regard to how they want to collaborate, now and in the future.

Another success is that it has been easy to sign up new retailers and landlords to collaborate on this project. Everyone involved realizes the business opportunities if retailers and landlords can work together.

The greatest challenge is that we tend to run into organizational and structural barriers, both internally and externally. As an example of an internal barrier, a retailer or a landlord may have corporate sustainability goals, but that doesn’t mean that everyone in the organization knows those goals and/or knows what they need to do to achieve them. So internal alignment can be a challenge.

Looking ahead, we will be continuing our green lease conversations. We are in the infancy of this pilot project, and what we do will set a precedent for the industry. And we will also be continuing to identify everyone who makes decisions across the lifecycle of a building, and helping them understand how their decisions affect sustainability issues and associated costs.

To the retailers, what about this collaborative process with landlords most surprised or impacted you?

Webster: From VFC’s standpoint, we appreciated the willingness of both groups to come together in a very transparent and honest conversation. This allowed us to really dig into what the real challenges are that we each face, and then begin to think about how to approach them in a way that can create win-win situations for both sides.

Titterington: [For PetSmart], this process has exemplified collaboration in action with each party bringing energy, expertise and openness to the table that has been beneficial to all involved. RILA has brought together sustainability experts from retailers and landlords that has resulted in “green leasing” becoming a distinct possibility. In order for green leasing to become a standard practice, however, the related opportunities and benefits need to be understood and embraced by all key stakeholders, a necessary next step in the process.

What about a landlord’s perspective? What surprised you?

Teichman: When it comes to sustainability, landlords and tenants are seeking surprisingly similar outcomes. Once both sides are in the room together, the dialogue quickly turns to removing roadblocks in order to achieve these outcomes.

Do you all now see opportunities to partner to improve both your organization and the retail industry as a whole?

Titterington: If we continue to focus on creating a compelling business case for all parties, opportunities for retailers to partner with landlords to implement sustainable solutions will continue to increase.

Teichman: As a result of the ICSC-RILA collaboration, we have already taken tangible steps with several national retailers to partner on sustainability-related projects. While this is a significant milestone, it is important to keep in mind that smaller regional and independent retailers are often under-represented in this type of forum. Kimco will continue to make partnering with large and small tenants alike a priority when it comes to sustainability.

For more information about the program or the process, email Adam Siegel at [email protected].