Bed Bath & Beyond in Woodbridge, NJ with Seth Geldzahler

Guest: Seth Geldzahler
Topics: Bed Bath & Beyond

Transcript:

Chris Ressa 0:01
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. I am very excited today I’m joined by Seth gal tower. Seth has been in the real estate industry for 30 years. He was a practicing attorney for eight years in New Jersey and Pennsylvania. He spent the last 24 years at Bed Bath and Beyond. He started there as an attorney. He then ended up moving to the business side. And he was the head of real estate there. So welcome to the show, Seth.

Seth Geldzahler 0:53
Thank you. I’m happy to be here. Excited. So Seth,

Ressa 0:58
tell us a little bit about you, who you are and what you’re up to now,

Geldzahler 1:02
you gave you gave all my deets in the intro there. But yeah, I practice real estate law, doing retail residential office development work, and had an opportunity to really get a few retail clients when I was practicing in the private practice back in 1992. Through 94, five, and then in early 96, I had the opportunity over to Bed Bath and Beyond to be a real estate attorney there. And I got there in August. And in October, I handed in my resignation and said I can’t do this. And it was just not fun. I felt like first year lawyer I was just it wasn’t a good, good experience. So the head of real estate and general counsel was the same position at the time, said to me, please don’t leave. I have big plans. There’s a lot going on. Give me three months. And some reason I trusted him and I stayed and in January, that was in October, or November. And then in January he was moved up to coo he named a new general counsel. And he asked me to help him coordinate the business side of the real estate. So I spent the next year traveling around the country with a couple of my we’ll call them mentors and learning the business side of site location. I understood the negotiating side from a legal perspective but learned a lot about the business side of coming up with deals and pricing them and figuring that out. And eventually over the next few years I moved up to run the department and vice president of bull real estate for Bed Bath and all of its subsidiaries and had the opportunity to learn industrial space and office space data center space call center space, international stuff in Mexico and Canada. So it was a it was a wonderful experience. A lot of changes in the last 18 months at Bed Bath and Beyond. All of senior management changed over and in May I just in the middle of pandemic and personal life and other things said I want to spend the summer just decompressing not decomposing, but decompressing and hanging at the beach. And so I did that and you’re I am now looking for the next phase in my life.

Ressa 3:43
Fascinating story. You mentioned mentors, the you hear that word thrown out a lot, you know, how instrumental were mentors in your professional career?

Geldzahler 3:57
Extremely I have three specific mentors that I refer to, to this day one is one of my best friends. The first lawyer I work with that wolf block in Philadelphia. And we are still very close. I learned a tremendous amount about lawyering, not necessarily the specifics, but about being a good lawyer and time management and other things from him and that was critical. And then another lawyer when I was practicing in New Jersey really work to hone my skills of specific real estate things and was just very she was very influential in the way I approach things. And then when I got to bed bath and was asked to learn the business side, I worked with Leonard Cohen, who was a an icon in the industry been in the retail real estate world for many years as a buyer Volker, and then consultant to Arlen’s department store. He was partners with Milton Cooper at some point, and was a consultant to Bed Bath and Beyond. And I traveled the country with him and learned an incredible amount about certainly site quality and market analysis. But just watching him deal with landlords and deal with lawyers and put together programs, it was just just learning a tremendous amount so and up until he stayed with Bed, Bath and Beyond up until last year, he passed away. Unfortunately, I was with him right at the end, because I was that close with him and really went to him for guidance all the time. So mentoring to me, was critical. And I tried to pay it forward and have done what I can with some of the younger people that I’ve come across.

Ressa 6:00
That’s awesome that I love to pay it forward. Given where we are today, you know, what advice as a mentor, would you give a young person entering the workforce?

Geldzahler 6:17
There’s nothing that’s that is too stupid to ask or comes across as stupid if you the more you ask, the more you learn, the more you have the ability to engage in dialogue. And so that’s that’s, that’s my biggest advice to anybody that I talked to is nothing is too stupid to ask. And he can’t learn it unless you ask him.

Ressa 6:45
sage advice. And so you’ve had this illustrious career, and you’re in a new phase. Now, what is next to look like for you?

Geldzahler 6:57
It’s a great question. As I said, I took the summer to decompress. I don’t know what I want to be when I grow up. But I’m doing a little bit of advisory service, I’m dealing with a couple of people that I’ve met over the years that are looking for ways to restructure their leases, both landlord side and tenant side. And I pride myself on being creative and looking at things from all different angles. I used to joke that at Bed Bath and Beyond the biggest criticism I got was that internally was that I was a landlord sympathizer. And then of course, landlords, you know, we were we were relatively tough negotiators. But so I’m able to look at things from all different angles. And so I’ve been spending some time working on that. And I know I don’t believe that I’m gonna I’m never gonna say never will. But that right now, I don’t want to be back in the big corporate world. It’s just not the I’m on to the next phase of something I want to do. So that’s what I’m working through now. Yeah, I

Ressa 8:09
would agree on the that you definitely have a way to look at things in a creative format. I remember the mock negotiation you did with Brian Finnegan at the open air conference at ICSC on CO tenancy. And I thought that was interesting to see both your guys perspectives on it. So I agree. So you’ve got to see everything going on in the pandemic. I guess from an outside looking in being in the belly of the beast, and now outside looking in. And now you’re talking to probably more people, you know, casually and not in a formal manner. What’s your take on what’s going on in the market today? What are you seeing out there?

Geldzahler 8:57
It’s an enigma. It really is because the economy is super strong but the economy the market is super strong. I don’t know about the economy and I don’t although I was an economics major and undergrad and I I can’t make any statement about the economy so to speak that we can see the market the confidence in big companies and the way the market is trading right now at a high as is very interesting. Because I still see a lot of people we know people aren’t shopping in stores. That bath and beyond just Had great numbers they showed significant comp increase of course that was on very negative comps last year, but it still was their same source sales were up 90% of which was rose generated a lot by a 90% increase in their online sales. Thinks store sales were down about 18% in the quarter, but that shows me that people still will shop and are wanting to shop so on confident that there’s a future for for retail. We all know bricks and mortar is critical for even even just for the just in time or delivery, you know, same day one our last our last mile, whatever you want to call it. And you can see that in what I read that Beth did and target is doing now. And you know that they they’re doing two hour delivery from their stores, which I think is going to be a huge plus for any retailer that can come up with that. Um, concerned about the small stores, the mom and pops, so to speak, because I think that we’ve lost incentives and the last bit of the political climate has affected the incentives available for people right now. And SBA carry is over. I guess as of October 1, I was just on the phone with a landlord earlier today who said that they’re counting another 15% Decrease in October receivables from September because of the small shop of the small shops, that 15% of their small shops would reduce their payments this month because they have to start paying interest on their SBA loans. So you know, I guess post election, we’ll see some things happening that can help with recovery. But it’s, it’s interesting, and certainly changes I live. They spent the summer a lot of the summer at the beach, we have a condo at the beach. And I mean, so it’s a building with those 60 units in it. And they had to restructure the entire lobby to handle all the boxes that have been delivered. They actually built another room and it’s not a doorman, beautiful, wonderful building, but they had, and it’s not secure. But the boxes were overwhelming the entire mail and the whole lobby area. So they had to create an area for it. And I think that’s pretty common. It’s just this morning, I saw huge, huge boxes from Wayfarer and others of furniture being delivered that were sitting in the lobby of a building, what two years ago, we would never have seen that.

Ressa 12:20
You know, it’s it’s interesting that there’s there’s certainly some stores that are going away. And there’s an increase in online. But we all know and I know you know all too well, the economics as a retailer of profiting online is a real challenge. I you know, there’s very few digitally native and online only brands that are profiting given everything we know and that market share has opened up, I am surprised, you know, take a category like toys or Ross. They were like number to 73 or 300 on fortune 500, something like that they had like 11 and a half billion dollars in sales, most of which was in stores. So they had the salespeople were going to stores and buying toys. They couldn’t profit because they had all this debt. But I’m surprised that somebody and it’s challenging for a brick and mortar retailer today given the cost. But I’m surprised there hasn’t been some fund, some entrepreneur that said given all the open market share, let’s deploy a couple of 100 million dollars. We won’t have legacy tech issues, we won’t have all these other issues to take a physical chaining in start to bring in E commerce and just start in the New World Order of what a physical store might look like in the future. Because it seems to me that based on what we’re seeing in traffic today, you know, retail sales, brick and mortar, it’s proven it’s going to survive. You know, you look at the ones who are doing well the big box Walmart’s and targets and the Home Depot’s and Lowe’s. And I think there’s an opportunity to thrive and I am surprised that no one has put a check out to start something at scale, like was done in the 90s given the you know, call it a contrarian view, but that you’re seeing digitally native brands start to open up stores. I’m surprised you’re not seeing at scale, the opposite, especially as you see things like with JC Penney and Sears and, you know, the groups that are closing stores, you know that that hasn’t happened. You know, maybe headline news is just so powerful that it, you know, keeps people’s dollars in their wallet or deploys elsewhere. But what do you think? Do you think there’s a place for some if we know One had the legacy tech infrastructure, existing issues to have to deal with debt issues. And someone had a pocket of cash of $500 million to go start a retail store chain today. Start with physical, then, you know, the backside do ecommerce. What do you think that is? Yeah, there’s opportunity there.

Geldzahler 15:23
Yes, I think there is opportunity, certainly Simon feels that there’s opportunity in owning real estate and owning retail, they have the cash that that toy business would be an ideal thing for them to fill space and to, you know, to get the right people and the right they’re a merchandising, I think, you know, someone like that, or the partnerships that they’ve created to do that could be interesting. I guess there is one or two of the failed brands that they might be bringing back, I think I’ve read some articles about that. I don’t think it’s do the physical first. And worry about the tech a little later, I think you’ve got to do them hand in hand, or really even have the tech in place, although there’s probably so many off the shelf things now that you can jump into that are probably 90% of what you need. So yeah, I think it is opportunistic at this point and can be. But I think partnering with developers that have begun space and maybe even vendors that manufacturers, you know, there might be a some type of a co op that can be started to do something like that, where everybody’s got a piece to contribute, rather than somebody coming up with a few 100 million dollars.

Ressa 16:39
Yeah, it’s a good point. Because, you know, we are seeing traditional retailers continue to expand even in the face of this. And we are seeing the digitally native, at least they were pre pandemic opening up stores. And you know, there’s always the mom and pops opening stores, I just come to like, is there someone sitting on the sidelines and going? Well, this market share, it’s not all going online, because online still only represents 14% of retail sales. And you know, I can’t imagine Walmart and Target have taken all of it. Maybe there’s an opportunity for some stores, and to start a new chain. And we’ll say, I’m interested to see with the brainpower of America that’s been sitting home for the last six months, in three years what they’ve created. Because I think, I think there’ll be some interesting things that happened from people sitting and being able to strategize and decompress.

Geldzahler 17:40
Yeah, it’s interesting, I’m thinking about what you just said. And from my experience, said, Bed Bath and Beyond I was, you know, byebye baby is one of the subsidiaries of Bed Bath and Beyond. And when babies are us, subsidiary of Toys R Us went away. My first thought would have been that the their major competitor was byebye, baby, and that they would have seen a tremendous amount of business increase, which they did see a nice uplift. But, you know, you mentioned target, and Walmart, and then the internet, I would say probably got 75% of the business that they had, which was surprising to me. So so they may be absorbing more than we think they they are interesting.

Ressa 18:27
Well, that was anything else that you’re seeing out there that you think is interest, that’s interesting, new.

Geldzahler 18:36
Every day, there’s something of interest that is a nice distraction from paying attention to the politics that we’re in in the next four weeks. So yeah, for sure, I’ve had that opportunity to really focus on things that I that I feel I have an opportunity to pay it, perhaps have some control over and to be in my comfort zone of, of my knowledge. So I do read a lot. And there’s still so much speculation. And there’s that’s that’s what I I see. And you can it’s almost like politics, because you can find things that are very aggressively predicting both directions. So I guess as as the basic economist that I was when I was in college, you know, you learn that once all economists agree, then you have to worry. That’s kind of how I feel about the reduction of just the future of retail. So if everybody were agreeing on something, we’d all be in trouble. So I just keep reading the differences and bleeding little bits from everything.

Ressa 19:43
I like that. I’m glad we’re not at a place where they all agree. I agree with that. That’s interesting. All right. So you’ve been involved in more deals than most. And you have a story about a store in Woodbridge, New Jersey. That’s pretty interesting. Why don’t you tell us about that?

Geldzahler 20:02
As much interesting as just talk about experience and how things happen and it’s something that I did in the last year. Again, i i Open over 1000 stores Wow, experience at Bed Bath and Beyond. But you know, relocating a store is always more complicated than opening a new store or new market. Because you have timing issues of your existing store and, and constant perhaps the Battle of whether you’re negotiating because you’re just trying to get a better deal or because the space the new space is better. So in Woodbridge, we had a

Ressa 20:43
real quick do you find in your on the business side, it’s harder to move a store that’s underperforming to try to get it to perform or is it harder to move a store that’s performing for fear that it you move it and you’ve broke down, it’s not broke, don’t fix it,

Geldzahler 21:01
right? much riskier certainly to move a store that is performing well. And more frightening. Moving and underperforming, store has its challenges. And as you can see from just you know, again, all look at that bath, because they just had their earnings call, they’re gonna close 200 stores because that are underperforming and then maybe start up again in a year or two, which is a strategy that could make some sense. But moving an underperforming store. If it’s underperforming, but it’s still making money, then it’s usually a good thing to move it and it’s everybody’s excited about it. It’s underperforming and not and needs to be in the market for some reason, but it’s never made any money. That’s, that’s a very, very concerning and risky move. But again, if you have any store that you want to move, because you know it can be an A plus volume store, by being bigger, or by having better access or visibility, then there’s always some angle of taking a let’s say it’s a $12 million store and moving it hoping it’s going to do 15. So Woodbridge is a perfect example of that. It’s a it was a 60,000 square foot bed bath and beyond store that actually was formerly a Bob’s discount, not the furniture store, Bob’s Powell store, they that Beth had bought three stores, back in 98, I think or 99. And so these, this store 60,000 feet and had been renovated and negotiated and an opportunity came up to take a Toys R Us box actually right around the corner, but different access different visibility. And there’s a lot of discussion about whether it was the right move or not. Time will tell. But what was unique was we had an exercise date coming up. And at the same time, the landlord who I knew very well had a had another tenant with the lease that was far into negotiation, I happen to have no known the person and we saw cut a deal very quickly, from from the first conversation, to getting a lease signed was less than 19 days. And that wouldn’t have happened except for one relationships. And both of us moving toward a common goal, and controlling our attorneys, and making sure that our professionals, the architects and the store planning groups were working together very closely, it was not an easy deal to make. In fact, it’s going to be a Bed Bath and Beyond and byebye baby side by side, they’re under construction now. And so there were there were lots of issues, but two full days locked in a conference room after we came to terms on a deal. You know, with a lease that was very, very good. It wasn’t something I would say as a model lease, I’m sure there were issues in there or things that that we kind of just said, Okay, we’ll agree not to address it here. But for the most part, we just pushed it through, and it can be done. And it’s one of those things that you know, everybody always says it their cycle on a lifecycle of getting a deal done. If it’s important enough, and I know you’ve done it, too. We’ve talked about doing that person I know you probably have sat down and got to gone from term sheet to deal in less than two weeks if you really all plan to do it. Yeah,

Ressa 24:50
that is fascinating. And I think, you know, going pre pandemic. I think one of the common things in just commercial real estate In not unique to retail, real estate and commercial real estate was, everybody, both users of space and landlords deals take too long. And so this is fascinating to me. And even more fascinating. They’re under construction now. I guess, you know, there’s so much to unpack from that story. You know, why doesn’t that happen more? Why can’t we seem to figure it out?

Geldzahler 25:28
That’s that’s the multimillion dollar question, because that’s exactly, you know, everybody, everybody’s got to put their fingerprints on things. And I, you know, lawyers are there protecting us from mistakes that we’ve made in the past to repeat them on both sides, so that always take some time. And, you know, you want to have as few contingencies as possible. So you’ve got to do a lot of due diligence to get through some of that time, you want to make sure that you’re not going to have permitting issues, and that you can actually have the floor load and be able to have the loading go the way you need to. And sometimes that takes studies that could take another 10 days or more to get done. So all of those things play into it. And you have to so so. And time No, it’s never anybody’s 100% focus

Ressa 26:27
that I think that’s big. That’s a big thing right there. I think the other thing is that you mentioned that both sides, getting to commitment, it feels today, it takes longer for both sides to get to commitment and say, we’re all going to do this. And I think in your story to me, the reason that it happened so fast was you both got to commitment. Quickly, you said we’re going to pass on our option, we’re going to do this, here’s the terms you guys got to terms and boom, and you got to a commitment quickly. And then all the other stuff, the the a&e Engineering trucks, studies, lawyers, to some extent, you can control that a lot of that is just dollars and focus. But getting to commitment. And you know, are both sides ready to move forward to me is really the piece what happens I think, on the on the tail end of why things take long as because if both sides agree on commitment, then it’s like, yeah, it’ll get done go through, everybody’s got their processes. You guys circumvented that by just saying it has to get done now. And as you said, you control the attorneys, and the a&e and all that, but I think the key is getting to commitment quickly. And I guess, you know, that will be the multimillion dollar question of how to get organizations especially, I think it’s a call to action for everyone out there. Because our industry is moving so quickly. Compared to what it did previously, things are changing, the consumer is changing. And we have to get to commitment quickly, or we’re going to, we’re going to all struggle, the move to the next step or things are just going to, you know, that ebb and flow of they start, they die, they start they die, they start they die. And so

Geldzahler 28:21
you said you said very clearly, and and Lancome, who I mentioned earlier, as my mentor, probably the first year I was with him taught me that time wounds, all deals, that was, you know, really profound, and you think about it, and just anytime there’s there’s opportunity for things to go wrong in that timeframe, it’s going to happen. And so we’ve got to just be focused and get to the commitment. And then make sure from the commitment to the documentation. That’s where things fall apart. And there’s a a hyper focus. And it’s hard to do on when you have, you know, 40 balls in the air. But you know, you you come up with a schedule, you know, and that’s what we’ve done. I think that’s what we ended up doing. We actually sat down in the day one and said, Okay, here’s our schedule, we’re going to have these things done by these days. And that really made a big difference. The

Ressa 29:17
what got you all over the hump that it was the successful store and you said, You know what we’re going to pass on our option, and we’re going to take this, we’re going to take

Geldzahler 29:27
option that was the issue is that we had to have this fully signed and negotiated by our options. They otherwise we were going to probably have to renew renew, and that was the pressure on our side and their pressure was that the supermarket was trying to do a deal there. So we both had a reason to push this in the timeframe. So but that we decided to not stay. It was clearly an oversized store. To the new place. It was a little bit smaller than the whole big one that we were in now or that they were And the motivation was to do an open store renovation and split it up and make it two stores was so complicated. And that as the company was in significant transition or isn’t significant transition, the opportunity to open two brand new stores with new concept looking, was in New Jersey not far from their corporate headquarters was very attractive.

Ressa 30:26
Very cool, very cool story. This has been awesome. There’s a topic though, that you talk about a lot that I forgot in the beginning that I want to just talk about for three minutes, which is one of the issues you’ve brought up a lot to me over the years is with the shift of to online, ad sales and how to retailers comp store managers is something that you’ve talked about a lot, because, you know, the store manager is so influential in how that store does. And it’s an interesting topic, because we don’t talk about it enough in our industry.

Geldzahler 31:12
Well, my topic is really how do you measure success of a store of a retail store and, and and screamed at me when I was listening to the earnings call from Bed Bath the other day where they talked about their Opus, curbside pickup, and all those things and said very clearly, those numbers are in their online numbers. They’re not in the store numbers. And, and so customer orders online, it’s through the online platform, but the stores fulfilling they go to the store and pick it up. But it’s not shown in the store comps. It’s shown in online comps. So as a company, their comps are up, but they moved it out of the store. So all of a sudden, this store, when you look at its four wall EBITA isn’t getting the benefit of those things. And so the store manager screaming, saying, Hey, I’m using my employees to stop the shelf and to pull the items from the shelf and to wrap it and wring it and have it ready for somebody to come and pick up. And then you’re giving the credit to the guys that are sitting in, you know whether it’s New Jersey or India online, you know, creating the this platform. So help because otherwise, you’re going to close every store. And I have been pushing hard, even with ICSC and other organizations to come up with a standard that could make sense of not looking at sales per square foot of a store to determine what its success is. And I often say let’s equate it to our store managers compensated or bonused. And they have to include it one way or another. And there’s been so many different proposals, things like including all sales or 70% of all sales within 10 miles of a store, or, you know, whatever, whatever metric you want to use, but it’s got to change. And the way for it to change is for tenants, landlords, lenders, and even analysts retail and read analysts or landlord analysts to sit down in a room and come up with something that they can be comfortable with other than sales per square foot, because that’s just not really relevant anymore. I don’t know the answer, but I’m trying to create a focus group to come up with this kind of thing. Well,

Ressa 33:28
if you get that focus group, let me know I’d love to help. So

Geldzahler 33:32
have the number two on the list.

Ressa 33:36
All right, well, that brings us to the last part of our show. We call it retail wisdom. I’ve got three questions for you ready, sir? What is your best piece of commercial real estate advice

Geldzahler 33:50
I said it before and that is more lots to say. I know I wanted I was gonna say I said it before and as ask a lot of questions. But I think it’s understand the other side understand everybody’s perspective. That’s great advice. Second question.

Ressa 34:13
What extinct retailer Do you wish would come back from the dead?

Geldzahler 34:21
I was a big Geno’s kid when I was when that’s what I used to have to go with my parents and I remember their French fries being the best. But that’s probably very local and I don’t know most people wouldn’t would know that one, but

Ressa 34:34
that’s alright. That’s a good one. Yeah. Explain everyone with Geno’s is you know

Geldzahler 34:38
this was a was a fast food. It was like Burger King. It was Burger King McDonald’s and Geno’s in New Jersey, and I don’t know where else they were. But that was that was the one we had the first one that hit Rockaway township when I was growing up was genius before Burger King McDonald’s. Awesome. Last question.

Ressa 34:57
I actually I went to Amazon’s way website and I did some googling of the top 10 hottest products on Amazon right now the number two product according to some money talks news is the Under Armour adult charged cotton 2.0 SOCKS they are crew socks, six pairs what does that retail for?

Geldzahler 35:22
I just just bought them literally so six pair if it’s the under I think it was the Under Armour ones that I just bought was it retailing for it was a best buy for in Runner’s World or something for the value and I think it was $12

Ressa 35:43
You’re very close on Amazon it’s 1499 but maybe I’m wrong as early as 12 That’s really good. Very close thank you for playing so what why is there so you just ordered them so why is everyone ordering the socks?

Geldzahler 35:55
I don’t know I just know that my I never have enough socks and we tend to do laundry less when it’s just the two of us so for some reason socks we go through two or three pairs a day when I’m now that I have the peloton and doing other things so I’m out running and walking. So I never have enough so I just ordered 12 pair of socks like yesterday. Interesting. And I took the Amazon delivery offer so I got a $2 credit maybe that’s why I thought $12 Maybe credit because I am delivering it on my Thursday is my Amazon day.

Ressa 36:28
Maybe there’s an opportunity for a new specialty retailer specializing in socks. And And on that note thanks that this has been awesome. Appreciate it.

Geldzahler 36:37
Thank you very much. I enjoyed it.

Ressa 36:41
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