Dollar Tree in Hilltop Commons

Topics: Dollar Tree, store openings

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. I’m your host, Chris Ressa. And today it’s just me. I have a story to tell about a Dollar Tree deal that hasn’t opened yet. But we’ll be opening in Derby, Connecticut. Before we get there, just some things going on. I think, you know, I sit here, I can’t believe it’s almost a month away from Memorial Day weekend. We’re into the second quarter.

And I think it’s a really interesting time for retail real estate. You know, for those who are in the retail real estate industry, we are getting close to the ICSC Las Vegas, the Superbowl of retail real estate. I think it’s going to be an interesting show. You know, there’s a lot of disruption. In the capital markets, we have interest rates, we have some banking failures. Yet fundamentals at the real estate level, are holding strong.

In fact, I would argue they’re continuing to improve. And one of the reasons they are continuing to improve is the tailwinds of record leasing and 21 and 22. And the limited amount of store closures. One of the things I’m super bullish on 2023, and 2024, is given the record pace of leasing. One of the things that happened is municipalities were inundated and approvals and construction was slower than historical norms.

Many of those leases that were signed in 21, and 22 are opening stores and 23-24. So we were coming into as an industry 2023 with significant amount of store openings as compared to store closures. This time there were limited bankruptcies. There were, you know, limited store closures of any magnitude. And retail sales continuing to be really strong. So retailers felt good about opening stores.

Well, that record leasing is now about to start opening stores and happen opening stores. So at the property level, the centers are continually improving. And new merchants are coming to sites with brand new stores investing capital in real estate, and the fundamentals at the real estate level continue to hold and continue to improve notwithstanding some of the disruption in the capital markets.

And that said, there’s limited vacancy, which is a good tailwind going into any economic challenges that come upon any industry, in particular commercial real estate so and what that’s led to is continually having pretty strong leasing throughout the industry. You know, we’re having a really strong leasing year DLC. And I think that you know, as I talk to peers that are also having strong leasing years on top of these.

I don’t want to say record but high number of store openings. So I think that leaves a really strong core. You add to the fact that very little is being built. So limiting the supply of retail real estate, and there’s still repurposing of obsolete retail real estate.

Whether that’s turning it into a multifamily apartment building, whether it’s turning it into self storage, industrial, there’s still retail real estate coming offline, ship new stores opening, very little new being built, some supply coming offline. It’s creating really strong demand to the existing quality retail real estate out there. And I’m bullish on that going forward because have all those things coming to a head?

So, ICSC is the ICC recon is historically known as you know, this mega dealmaking show and it sets the industry apart. It most tradeshow organizations, they’re super content driven. And they’re people exhibiting. And if you’ve been to trade shows in other industries, I would say there’s not as much deal making. This is a deal making Mecca, landlords retailers brokers coming together to move deals, and many deals.

There’s many deals that start, there’s many deals that finish in Las Vegas at the ICSC recon, and I wanted to talk about a deal that you know, how to how a deal became procured. And that’s the Dollar Tree story. And I tell this story, because I think it’s a good one to tell going into ICSE as many people will be trying to figure out how to start a deal. So I’m going to talk about a story of Dollar Tree of Derby, Connecticut.

So Derby, Connecticut was a grocery redevelopment that he completed pre pandemic, there was one box left this neighborhood grocery center, just one box left, which is a 40,000 square foot box that we’re gonna put a furniture store in half in $1 tree and the other half there was a restriction in the shopping center that prohibited Dollar Tree, we have a good relationship with Dollar Tree Dollar Tree was in the in the market, not in our center.

This was opportunity for Dollar Tree the right size and good new prototype. We approached the grocer. And there was some concern about giving $1 tree waiver. And so it took a while for to get the waiver. And as we were I was talking to them and they weren’t ready to commit to the point that they would give us a waiver he Dollar Tree starting to change of course and strategy wasn’t sure they wanted to deal.

So I started this with took a while to procure Dollar Tree we procure Dollar Tree and a go for the waiver in the process. But that taking so long dollar trees are starting to pull back and you know, rethink things in the market and their overall strategy. So I was like, you know, trying to get taller tree to hang tight.

And trying to get the grocer to consent trying to work out a deal that would work for them to allow Dollar Tree in. grocer had some things going on the exciting things that they were working on. And this wasn’t a priority. got to a point where it really couldn’t get their attention. And days and then weeks start to go by and it was hard to really gain traction.

So I decided to go there. Unannounced, I drove up to the grocery stores headquarters to just say I’m here, look, this is important to us. How do we work this out? drove for hours and people who made this decision weren’t in in at that time. So drove home. About two weeks later, I do the same thing. I drive all the way up there. And the people I need to meet aren’t there. Finally I get a meeting with them. scheduled meeting after two times going there on an analyst

Ressa 9:37

Which I don’t necessarily recommend but I was really, it was really important for us, it was getting this was helping a refi it wasn’t necessary was helping. So go to the scheduled meeting. And finally we’re able to work out a deal to allow dollar Trent Now once we have that deal, we start moving to paper. Now we got to get like this Dollar Tree to finished. We had to change a couple things in the deal.

And finally get the Dollar Tree finished. Now, Dollar Tree set to open this summer, I tell the story, because there’s time where the you know, I wasn’t sure we were going to get the grocery store waiver. And but I held to my core beliefs, which was the following. One, I think that bringing all the retail trade that in bringing as much retail trade into one property as possible, bring the consumer traffic to his densified as possible, is more powerful than being separate.

Number two, they were already in the market, we weren’t bringing a new potential competitor to the market. And three, the vacancy was more impactful to the traffic and the property outlook than this competitors since they were already in the market. This is what I went to them with. And I knew a lot about the business, these two co tenanted in about eight locations and other markets. So this wasn’t a first to retailers.

You know, so they were they had, this wasn’t a first it wasn’t like creating something that hadn’t been done before. Additionally, because of the real estate orientation marketplace, I had really good understanding of where every grocer was, where other dollar stores were, how the traffic, actually with mobile analytics, how the traffic actually was playing out. And it was able to put together a compelling case that it was better to have them here than elsewhere.

And eventually the grocer finally acquiesced. So I think it’s an important story, because in today’s environment, we’re all dealing with legacy contracts. And it’s not just retail real estate, many industries are dealing with legacy contracts. I think, really understanding the other side is lesson one, as it relates to retail real estate, I had a really good context of what the other side’s challenges were.

Number two, really understanding the market dynamics from the physical plant level, you know, plant the actual real estate in the market, and then to understanding how the consumer interacts with that real estate. So business market consumer, that those three things, and then I’ll put, you know, a subheading, the tenacity to actually keep going, after being told, No, after being told, I don’t think so. Because I knew this was the right thing.

So there’s always this balance on like, when should you move on and let go and move to the next because it’s not worth your time versus having the tenacity to go get it. And I think you learn that with business experience, and it’s a challenging balance and the winter, drive forward and when to let go. And I felt this was one that we should keep driving forward for. And that ended up playing out as the right answer.

So as we sit in this world where we have many legacy business contracts between parties. I think in any industry, understanding the other side’s business, understanding the market, understanding that the market is critical. And understanding the other side’s business is more than just the actual front end what they sell what’s going on behind the scenes. Right. I had understood that there was a big deal happening in this organization positive for them, that this wasn’t a top priority.

And that gives me insights and how to manage Through that, right? There are things at times that makes sense but the other side might not have the ability to focus have the same ability to focus on it as you because the importance level is different. Well, how do you deal with that when the importance and the significance and the urgency three different things, right? On a tangent here, I like Rory Vaden definition importance, how much does something matter?

Urgency How soon does something matter? Significance How Long Will something matter? And so those three things I think about all the time, and they’re not always the same for each party on the on a business contract the deals that get done fast when the important significance and urgency lined up when the urgency significance and importance line up those the deals that take a longer time.

Ressa 15:56

So that’s all I got for everyone today. I hope everyone has a great trip out to the ICSC Las Vegas. And you know, just because you have a legacy business, a contract that says you can’t do something doesn’t mean that that can’t be changed. It may be very challenging, may have to do some things that you’d never thought you’d have to do to actually get it done. Continue to be persistent. Have that tenacity, but you have to believe in the art of the possible. So that’s it everyone, thanks for tuning in.

I hope you enjoyed the story. Stay tuned. We got more great stories coming. Thank you for listening to Retail Retold. If you want to share a story about a retail real estate deal that you were a part of on our show, please reach out to us at retailretold@dlcmgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to Retail Retold so you don’t miss out on next Thursday’s episode