3 Things a Property Owner Should Know Before Entering a Snow Market
Guest: Jim Barone
Topics: Barone Enterprises,
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 Jim Barone. We have an interesting episode one we haven’t done before here. I’m excited for Jim to be here. Jim is the owner of Barone Enterprises. And today we are talking about a topic we haven’t talked about, but is very relevant to retail real estate, which is snowplowing. Jim, welcome to the show. Excited for you to be here.
Jim Barone 0:43
Thanks, Chris. I’m excited to be here.
Ressa 0:46
So Jim, tell us a little bit more about who you are and what you do.
Barone 0:50
My name is Jim Barone, like you said, I’m the president of Barone Enterprise. We are a commercial real estate management company based out of Buffalo, New York. We primarily work for large retail center owners, like yourself.
Ressa 1:06
Got it. And how long have you been doing this Jim?
Barone 1:13
Barone Enterprise started in July of 1990. So we just celebrated our 33rd anniversary. So we’re pretty excited about that, that we’ve made it this long.
Ressa 1:24
And you’re a Bills fan.
Barone 1:26
I am a Bills fan. Thanks for bringing it up.
Ressa 1:30
Where you got the game Monday night.
Barone 1:32
I was it was a very long, very late very disappointing night.
Ressa 1:36
You said something to me earlier on the show that I hadn’t even considered, are Bills fans concerned about not making the playoffs? I didn’t even think that was a concern.
Barone 1:45
Absolutely. The other night, if we beat the Broncos, we had a 62% chance of making the playoffs. If we lost we were down to like 24%. So we have a 24% chance of making the playoffs now. We have a terrible schedule coming up, one of the hardest in the league.
Ressa 2:02
Wow. I, that would shock me if the Bills didn’t make the playoffs. Even though my Jets would sack, Wilson did beat you guys, which is shocking. But man, that was a tough opening night.
Barone 2:20
It was, I was there as well. So that was very tough. All wrong. Fight on, one long flight.
Ressa 2:27
Ok, so you do work for retail property owners? What work are you doing for them?
Barone 2:36
We basically do everything except roof leaks for centers. We have landscaping crews. We have snow plowing crews, asphalt concrete. We do drive it in effect repairs. We do small build outs. We do power washing and parking lot sweeping and a lot, you know, just a lot of the day-to-day repairs that happen at a center, you know, someone driving through a building will pull the car out of the building and repair the facade and, you know, everyday something different.
Ressa 3:08
And so you guys, you definitely, from a property management perspective, the actual labor, you do a lot of the service work, which is, you know, you mentioned snow plowing, landscaping, you do a lot of the repair work, you do some build out stuff. And then one of the areas that you do a lot of and you guys are experts in is snow, correct? So we’re definitely, we’re focused on snow today as we are sitting here getting close to Thanksgiving. Has Buffalo gotten its first big snow yet?
Barone 3:50
Yeah, we had about three inches on Halloween night.
Ressa 3:52
Three inches. All right. That’s not a big snow for Buffalo. I mean, last year, how many times did it snow in Buffalo?
Barone 3:59
We had 81 occurrences.
Ressa 4:03
81 occurrences. So you know snow. And how many of those occurrences are over a foot?
Barone 4:10
We had seven last year.
Ressa 4:14
What I remember the big one, what was the you got? Like 10 feet one? One storm right? Something crazy.
Barone 4:22
Yeah, last year was a pretty monumental year, right before Thanksgiving. We received just about six feet of snow. And that shut the city down for a few days to the point where we had to move the Buffalo Bills game to Detroit, because we just, there was no possible way to get the stadium dugout. And the second storm was right before Christmas where we had over seven feet of snow.
Ressa 4:49
But here’s the thing, you say shut down. It took six feet, seven feet of snow to shut down, but generally, one of the interesting things about Buffalo that I’ve noticed from being an owner, you get a foot of snow. And like, if that happened down south, it’d be prom, but you get a foot of snow in Buffalo, the world keeps moving. Commerce keeps happening, people are out shopping. People are going to school, schools aren’t closed, things are happening with a, you know, when there’s only eight inches of snow.
Barone 5:22
Yeah, the depths that we get in Buffalo and that we manage and that we’ve become accustomed to is definitely much different than other markets we handle in the country.
Ressa 5:32
So today, we’re going to talk about the top three things that property owners of retail centers need to know if they own property in a area that has snowfall. Before we get there, one of the big things that constantly comes up when I talk to owners who own in markets that snow is, do you go on a per push or per occurrence snowplowing contract? Or do you go to a fixed contract where you’re paying a price no matter how many times it snows? And so this is the big debate.
And what I find is the following that happens, Jim, and you tell me if this resonates with you with some of your customers, which is everyone’s on a per push contract until they have that one year, where there’s so many occurrences that they blow their budget out the door. And they’re scrambling because they didn’t plan for to pay this much in snowplowing. And they want to move to a fixed contract. But everyone thinks like, oh, that’s that’s the better way.
I often say like, you know, I hear you, but snowplow guys and gals, they’re not, they’re not going to lose money, that if they’re doing this over the long haul, it’s going to work out for them, you know, over a five year period or so you might win one year, lose one year, but over the course of time, it’s going to even out, generally speaking.
And so I’d like your take on this concept, because I would tell you, it’s it’s the biggest discussion among owners is the type of contract, because if you get caught with your hand in the cookie jar where you had a per push year, and there was 81 occurrences, that’s going to be an expensive year for an owner.
Barone 7:31
Yeah, I think that’s really going to depend on the demographic and the actual area that we’re talking about. In Western New York, for example, an area that I’m very familiar with, it would be very advantageous as an owner like myself to be on a per push basis, because I would make a lot more money. And I don’t, I can’t remember a winter in the last 33 years that I’ve been doing this that we’ve had less than 25, 30 occurrences. So it really doesn’t make sense, as a retail owner, to go to a per push in this particular market.
I’m all in if you want to change my contracts, Chris. However, it wouldn’t be in the best interest of your company to do so. In other areas now, that gets the occasional storm or gets very minimal amounts of snow, it might make a lot more sense to do something like that. But like you said earlier, a lot of times, owners like to know what they’re going to have in their budget so they can forecast for the season.
And very quickly, snow plowing can push you outside of that, then you’re scrambling and you’re maybe not painting that center or you’re maybe not replacing those sidewalks that you wanted to replace. And so it starts to have detrimental impacts on the following season.
So it really is a tough choice to make on which way to go. I guess. You would like to know how much you have in the bucket to spend for that season. But the risk, especially in areas around the Great Lakes, is probably pretty extreme. And it’s probably something that doesn’t make a lot of sense. Over time.
Ressa 9:12
Yeah, I’m in areas that, I don’t have any centers in areas where that for the areas that I have that are in snow areas, it never just snows a little, I mean, I’m in Chicago , it snows a lot in Chicago. I’m in New England, like Maine, snows a lot in Maine. I mean, I’m in Buffalo, snows a lot in Buffalo. I’m not in these areas where like, you get like one or two snowfall, like I’m in these areas where when it snows it snows.
So the other thing so I think that’s helpful. I think the other thing that we talk a lot about and we didn’t talk about this offline, but there’s one, and this is random, but the price of salt. So, if you’ve never owned a center in a snow area, you’re about to spend more on salt than you do on a car. So tell people about the purpose of salt and what’s happened over the years with salt from a cost perspective.
Barone 10:25
Okay, so what happened? Well, let’s start the beginning what salt does is salt will actually, you know, help melt the snow. Once you get the vehicular traffic and your centers, the heat from the tires will then you know, work with the salt to melt the snow so that we can have a safe environment for our customers. 20 years ago, you could buy salt for about $25 or $30 a ton.
Now when you say the word ton a lot of people think well, that’s an immense amount of salt. What one ton of salt actually is if you’re familiar with a bobcat bucket, one skid steer bucket, one bucket will yield about one ton of salt. So it doesn’t go very very far.
Ressa 11:08
In a big power center, like one of my senators, on a on a on a snow on a on a pretty snowy day at eight inches of snow. How much salt do I need? 15 To 20 ton 15 to 20 tons. Okay. So 20 years ago, 25 bucks a ton.
Barone 11:23
Yeah, today you’re paying about $140 a ton
Ressa 11:27
$140 a ton. The price has gone through the roof. So $140 a ton. I need 15 tons. Right, per occurrence. And you had 81 occurrences last year now they all don’t need 15 tons. But that’s a lot of salt.
Barone 11:46
It is. We go through 1000s and 1000s of tons a year up here.
Ressa 11:50
Yeah. You know, you’re very quickly, as an owner, in six figures of salt. I think, I think everyone always asks, Are there other products out there other than salt? Yes,
Barone 12:08
Yes, we have tried a lot of different things over the years. There is a liquid brine product that we use as well, where we mix pure brine into a water tank, and then we can mix it with water and then it has spray nozzles. And that has a much lower melt factor to it. So it hits a lot quicker, because salt, when it gets below zero, you need all that heat from the tires and things like that to get it to start activating. Just because you salt the property doesn’t mean that it’s necessarily going to melt.
Salt needs, you know, some kind of warmth to activate, where the liquid brine will get below zero and still kind of give you an active melt. We’ve tried to do that. The problem with that is it’s so cold in some of these areas where your nozzles are constantly freezing, even though you have such a high salt content within that brine. So it’s very challenging to have the operation center to manage the brine and then how far away is that to the center. It’s not something that we could keep on site to where we could respond quickly like we can a pile of salt.
Ressa 13:17
Now, yeah, and salt works, and I think it’s good it’s pricey but it works. The problem though is, salt can damage your asphalt and your sidewalks over time and now you’ve got more repair maintenance to your sidewalks and asphalt. So to the point of this episode, there’s a lot of opportunity and snow in places for retail property owners where it snows, but you need to really get your arms around what it means when it snows and what that means from the management of your property.
So with that, Jim let’s go to the top three things and owner should know before they buy a property in an area where it snows. What’s your number three.
Barone 14:06
My number three Chris is recognizing the challenges that come with ownership or management in a market that’s knows versus a market that doesn’t snow. Let’s use Buffalo, New York as an example one and let’s use Key West, Florida for example two. You could have two centers with the same 300,000 square foot GLA, same anchor tenant, same store, same tenants. The price per square foot for your cam charges in western New York are going to be much greater than they are in Florida due to snow removal.
So when owners who are based in other parts of the country will purchase something in an area that has aggressive snowfalls, they’re often very surprised and shocked. Come contract negotiation time for snow plowing because they’ll say, well, I have a center that’s a twin to this in Texas, and it cost me $1.50 a square foot, you’re at $3 a square foot, you know, what’s going on? What are these problems? So it’s something that a lot of people really don’t think about when you know, they’re acquiring properties.
Ressa 15:20
Sure. I’m with you there. I think definitely the cost. I think the other thing that, you know, I think gets, you know, is that people don’t know is just that, how to manage the actual property when it is snowing is not difficult, per se, but you need to have someone who knows how to execute and do that, because it’s, there’s a lot of things going on. And usually when that’s happening, there’s other things happening as well, right? Like, every property owner is expecting their plot to be plowed.
So you better have someone that you can trust that’s going to show up and plow up. And there’s usually other things happening, right? When there’s six feet of snow, there’s other emergency services and things that are going on, that are making this, you know, events that are happening, and snow might just, and snow plowing might just be a part of it, you might have other issues you’re dealing with. So as snow, there’s a lot of opportunity, there’s a lot of reasons to own real estate in, there’s still still a lot of opportunity.
But there’s definitely challenges that you need to be aware of. And, you know, as you said, the prices and understanding that there’s going to be, you know, increase cam for snow versus a place that doesn’t have snow, we just talked about what the price of salt could be. But there’s, you know, for your business, right?
I know, for snowplow owners, it’s become more costly to own a snow plow business, and more challenging to figure out how to make a buck and you have a short season to do it. And so it makes it tough. I’m sure you know that all too well, Jim.
Barone 17:25
Oh, absolutely. It is very challenging. And really extreme. It’s sometimes when you’re dealing with such monumental events, like what we’ve experienced last year, with five, six feet of snow. There is so much more going on. A lot of things that people don’t think about are, you know, there’s driving bans in place, and we’re not exempt from those driving bans. So we have to go on out there and, you know, risk driving and breaking the law, you know, to get to the centers in the first place.
There’s, it’s very difficult to get there, something that used to take five minutes might take you five hours due to you know, things being people being stuck in the roads and the roads being impassable and police blockages and, you know, power outages, down lines, trees, all that stuff. So it’s very, very difficult. And it takes a lot of preparation and a lot of planning to be prepared for the storms. Not to mention the fact that you’re trying to get your equipment to start when it’s that cold and it’s buried in snow.
And so there’s a lot of steps and a lot of preventive things that you need to do to be ready to execute at a high level. When you have things like this. During the center’s you have a lot of when it snows five, six feet. Well now that six feet of snow is on top of your roof. We’ve had centers collapse over the years, we’ve had roof collapses, we’ve had gas lines snapped on roofs, windows smashed out from the weight of the snow moving down and blowing things out.
There’s always, every storm is different. And there’s always so much more to be concerned about than just actually moving the snow. And I think the one thing that a lot of owners don’t recognize and don’t think about is when they have a center they’ll have, let’s just say 500 parking spots. So they’ll have tenants and what the…
Ressa 19:22
I think you’re actually going to say what I was asking, what I was going to ask you next, but go ahead.
Barone 19:26
You have say 500 parking spots so now all sudden you get six feet of snow and you have all these tenants who are used to having 40 spots here 50 spots here, all sudden, where does the snow go?
Ressa 19:42
Where does it go? That’s what I was gonna say yeah.
Barone 19:45
So you put, you have all these massive piles right? And so these you can only push the snow so far. So you have all these big piles and now your parking went from 500 to 300 in the Western New York area. We have such a heavy load accumulations of snow in the first two months of the season. And that’s retail time. A lot of that small owners here they do 25 to 30% of their annual business between middle of November to Christmas.
So they every parking spot counts, as well as visibility for your smaller stores, if they’re going to an anchor center, and they’re leaving BJs. And they get to their car, and now there are huge snow piles, they can’t see Bed Bath and Beyond on the other side of the snow pile, they leave, now Bed Bath and Beyond lost that potential client. As well as, there’s nowhere to park, people are driving around in circles, so they just get frustrated and leave.
And now, you know, the snow already affects these people’s business and bottom line so much. It’s very important that, you know us as providers and owners, you know, do the best we can so that we can provide the tenants, you know, as much parking and you know, as many hours open as possible, especially during that season.
Ressa 20:56
But one of the things that, you know, when I first got into this business that I didn’t realize that you might have to do, and we have to do this a properties, you have to haul the snow out of there. You plow it, and then in some centers, we haul it out of there, because there’s nowhere to put it on the property, especially when there are six feet of snow.
Barone 21:14
Yeah, that’s. And that’s something that really goes with this here with the north versus the south thing. A lot of times when these properties are designed, they’ll go to an architectural firm in Texas. And they have a plan because they have to put curbs everywhere because they have to do traffic control. How can we keep the center safe, so people can exit the store get to their vehicle without getting hit. So we have separation curbs, we have, you know, Mark spots, safety, bollards, all of these things.
And if you’re somebody who works primarily in the southeast, you don’t think about snow. But all of a sudden, in the north, we have the centers who are designed to, you know, go along with a certain plan. Well, a payloader doesn’t fit through them, these drive-through’s and all these things, you can’t fit a payloader or a truck with a plow through these things. So that starts creating other challenges. You have to get specialized equipment in order to do things like that.
These are all things that owners don’t think about when they’re, you know, renovating, adding in a tenant, you know, in today’s market, you have to really be flexible, you have to think outside the box. You know, what can I do with the space, I have a former Kmart space? Well, let’s break it up into four units.
And let’s put XYZ in there. You have to have mixed use, you have to have, you have to think of a lot of different things. But what you don’t think about is, how does that change the original design of the plaza? And what are we going to do when we get snow?
Ressa 22:41
So most drive-throughs, normal normal plows don’t fit through drive-throughs?
Barone 22:46
No, they, you know, a plow these days, you know, you’re eight and a half, nine feet. They design these things basically for your average car. They’re not necessarily you know, anybody who drives a pickup will tell you, you know, even going through McDonald’s drive thru it’s, it’s a challenge and a three point turn most of the times to get through the drive thru.
Ressa 23:05
Got it. Okay. Number two, what’s number two on the thing that property owners should know before they enter a snow market?
Barone 23:14
Insurance. That is the number one cost of owners as well as providers like myself, my biggest challenge in life is keeping an insurance policy in force for snowplowing in this market.
Ressa 23:32
So mostly, you say that, is it hard to find people that will ensure your business?
Barone 23:38
It’s near impossible to find. Due to the frequency of claims, and the slip and falls. It’s very, very challenging. When a storm comes at 11 o’clock in the morning, and the store is already open the parking lots full, you’re very limited with what you can do. Snow is piling up, you’re salting, making it safer yet more unsafe, because it’s slushy, and then it ices over underneath.
So people are wearing heels, slipping, falling. And as property owners, you have waivers of subrogation hold harmless agreements and things like that, that us as the snowplow companies have to sign so we assume all risk. And we are responsible for all claims. So once you start…
Ressa 24:30
But I’m paying that in my contract in other ways, when your insurance goes up, the price of my snow removal goes up. That’s the problem.
Barone 24:37
Right. Well, that’s why, you know, going back to our first subject not to go backwards, but to talk a little bit about that flat rate versus the contractual rate. I’m sure there’ll be a lot of insurance issues that would be created, if it was a per time versus a contractual obligation because I know for myself to even be able to obtain insurance for centers, I have to provide copies of the contract, things like that. So depending on what the verbiage was in those contracts, a lot of guys might have trouble even getting insurance to do a per push, type situation.
Ressa 25:13
Got it. Okay, that’s number two. What’s the number one thing property owners need to know, before they enter snow market,
Barone 25:23
You have to possess an incredible and sensible amount of sense of urgency, and a preparation plan. There’s a lot of things that go into being successful in a storm. A lot of times, one thing that you have to really have, you know, in anything with commercial real estate, as you know, it’s very important to have key tenant selection when you have the luxury to select your tenants, you know, in today’s market, that might not be something that you know, is very viable.
However, if you do have a choice on signing one tenant versus another, you have to think of these things, if you have a center that has a dialysis center in it, you can’t close the dialysis center due to snow, you know, someone can die. So it’s very, very important that you choose the right vendor, and you manage the right tenants.
So depending on what tenant you have in your center, if you have grocery stores, and pharmacies, and a lot of the places that we have, you know, in our portfolio here with DLC, is we have a lot of pharmacies, renal cares, and dialysis centers, blood labs, all of those things become basic and essential necessities for some people to live.
Last year in those storms, you know, we had several instances where ambulances were stuck, where we had to go pull them out with the machines, and they had people having heart attacks from trying to shovel stone back of the ambulance, I can’t, we probably saved several lives last year, just by helping getting that ambulance from point A to point B by driving these loaders down the streets to get these things into hospitals. So these events happen, it’s really essential to have an understanding.
Also, the biggest problem with storms in Buffalo, especially around the holidays, is the sacrifice you have to make to be able to field, these response teams. I always blame everybody for praying to God, I want a white Christmas, we want a white Christmas while we get answered. And next thing, you know, we have seven feet of snow. And you know, I’ve missed probably, you know, 15 Christmases over the years with my family. And, you know, last year in particular was a year that there was a lot of changes in my life.
And a lot of you know, first times and a lot of things that I was looking forward to for a very long time that December 22, I got a phone call. This one’s looking rough. And we got to start planning. And I spent Christmas in a payloader for 30 straight hours with no food and, you know, in seven feet of snow digging out a target.
And, you know, I didn’t celebrate the holidays with my family until after the new year. And as well as a lot of my staff. So you know, there’s a lot of sacrifice and a lot of things, but so I was feeling pretty bad about myself and feeling like I you know, maybe need to rethink some things.
However, you know, when you get a postcard from someone that you save their dad’s life, because you, you know, got that ambulance out or you cleared this page, you know, there’s, it makes it real, you know, there was about 30 people that died last year and that storm up here. Wow, that’s so you know, doing things like that community driven things, really helps me have a much better sense of why I do what I do. So, you know, there’s that was the light at the end of the tunnel.
Ressa 29:00
Got it. Well, that’s remarkable. The concept of saving lives for what you do, and no doubt there’s, you know, their sacrifice because it typically snows around the holiday time. Last thing, that was a great recap. So we got, you know, to go back, the one was just the preparedness two was the cost in the insurance piece and then three was the urgency or I got it mixed up. So super, super helpful. And I think this is a really interesting context around the snow. One last thing. If so, two things one, how big is your staff? How many people you got working on snow in Buffalo?
Barone 29:59
about 60 to 75.
Ressa 30:03
60 to 75. So there’s a lot of people trying to attack the snow in Buffalo on Jim’s team. So give the owners something that if you’re new to a market and you’re about to, you know, you need to get a snowplow contractor. What are the things that they need to think about when they’re trying to select someone to plow the snow?
Barone 30:29
Well, I think they should do their homework, obviously, you know, ask for references. And, you know, speak to some, you know, other owners have similar properties to see, you know, what their response time is, what their record is. Make sure they have the right insurance. That is the number one largest thing that you have to look for to make sure that as an owner that you are properly covered.
And you know, that they have the right amount of umbrella policies in place as well, to cover whatever potentially can happen. This particular area is very, very lawyer driven. Every street corner has a billboard, you know, slip and fall, give us a call. So, you know, it’s very, very important that you protect yourself as an owner and that you signed with a legitimate and a professional company that has the proper coverages in place and has the experience and the equipment to be able to handle your site.
Ressa 31:29
Excellent. Well, Jim, this has been fantastic. Really appreciate your time. Thanks so much for coming and stay safe and snow this year.
Barone 31:39
Thank you, Chris. I appreciate you having me on.
Ressa 31:42
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