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How to increase cash flow at retail properties – What’s in Store with Karly and Chris

What's in store with Chris Ressa and Karly Iacono Cash flow secrets
Episode #: 269
How to increase cash flow at retail properties - What's in Store with Karly and Chris

Guest: Karly Iacono
Topics: Increasing Cash Flows, Densification, Ancillary Income, Financial Strategies, Property Upgrades

Today’s episode of What’s in Store is all about cold hard cash! Join Chris and Karly as they discuss how to increase cash flow at retail properties.

What You’ll Learn

  1. What are five strategies to increase cash flow at retail properties?
  2. What should you consider before densifying a property?
  3. What are some examples of ancillary income opportunities?
  4. Do cost segregation strategies have diminishing returns with a larger portfolio?
  5. What are offensive vs. defensive property upgrades?

About Retail Retold

The Retail Retold Podcast highlights community retailer stories from across the country and gives a behind-the-scenes perspective from business leaders in both retail and real estate industries. The show’s episodes contain valuable insights that help solve the needs of entrepreneurs and real estate pros. Join host Chris Ressa and new guests weekly for amazing insights and thought-provoking stories.


Karly Iacono  00:06

Welcome, everybody to What’s in Store, the show where we cover hot topics at the cross-section of retail and real estate. I’m Carly Iacono. And I’m joined by my co-host Chris Ressa. Chris, Good morning. How’s life treating you?

Chris Ressa  00:20

Life’s good. Last week I was in St. Thomas.

Karly Iacono  00:24

Always these wonderful vacations and fun things you have planned? I don’t know. I think we’re making everyone jealous. I want to hear about it. But I don’t really. So just tell us quickly how great it was.

Chris Ressa  00:35

It was 80 degrees, 0% humidity, blue skies, and a beautiful breeze the entire time. It was insane.

Karly Iacono  00:47

Alright, that’s enough. No, I’m kidding. I’m happy for you. I know you’re on the road a lot for work. So I’m sure your family was really happy to have that time with youtoo. It’s awesome

Chris Ressa  00:57


Karly Iacono  00:58

Very nice. Very nice. So for today’s episode, for everyone listening, we appreciate you tuning in as always, we are covering a topic I think you’re really going to be happy about. And that is increasing cash flow at retail properties. Everybody can get onboard with this one. Here’s some real strategies we’re going to cover today on how to increase your cash flow if you’re a retail investor. So, in no particular order, we’re going to go through some ideas Chris and I have, and share our thoughts on why they work and why they might work for you. So let’s start with one that I think is less commonly talked about.

And that is densification. And this might be a more advanced maneuver on retail investing, but it’s changing the densification of your retail property. And I know you’ve had some success with this, Chris, because I’ve heard about it at some of the properties that DLC owns. So why don’t you tell us what densification looks like? And what some of the challenges might be for that strategy?

Chris Ressa  02:06

I think, to put it in simple terms, it’s how do we add GLA to the asset? How do we build more buildings? How do we, whether that’s going on vacant land, whether that’s going up, whether that’s going backwards, how can we put more income-producing building on the asset, on this piece of property? And, you know I think one of the themes today, when people are thinking about adding value at retail assets. There’s a lot less vacancy, I think the world of before was, if we take away vacant space, that’s how you add value, you’re adding NOI to the property and there’s a lot less vacant space.

And so when you’re looking for, you know future CAGR and you’re looking for NOI growth, and there’s no vacancy, it starts to make it more challenging. So you have to start to think of other ways to really, you know, maximize this piece of property. And so, densification causes can be really great. It’s really complicated, because you have to get, typically, especially if it wasn’t planned for 20 years ago when the property was originally built, you need to go and get a ton of approvals from municipal, from local government, and it’s a process to get through.

Karly Iacono  03:37

So just to contextualize the vacancy comment that you made, of course, I have a stat for everybody. Q4 of 2023 vacancy was 4.7%, down from 4.8% the quarter before. So when we thought we could get no tighter, basically, right? We’re at almost functional vacancy of zero, it’s still tightening. So we are at 4.7%, which is a new historic low in terms of retail vacancy, which is amazing. So I thought I’d throw that out there. And then, as a follow-up question to the densification comment you made. How easy or difficult is it to get municipalities on board with these changes? Right? It really would be a change to zoning regulations I believe, correct?

Chris Ressa  04:27

It’s typically only zoning, every municipality is different. So let’s put that, every municipality has different regulations. Zoning comes in when you’re adding

Karly Iacono  04:38

A different use

Chris Ressa  04:39

 A different use if you’re going to add multifamily, if you’re going to add industrial, self-storage, typically it might not be classified, that piece of real estate might not be classified for that. That’s why people love Houston is there’s there’s like no zoning in Houston so it’s  you usually don’t have to get a zoning change to add a use to a property in Houston. So what makes it potentially challenging is municipalities typically have some sort of plan that they want to put into the community. They call it a master plan. And you have something that you think the market calls for from a demand perspective, and you can monetize, which may or may not match into the municipality’s master plan. So there’s a lot of back and forth to try to get something that everyone can get their arms around.

Karly Iacono  05:36

Right and are there certain clauses and leases that would make this difficult for the existing tenants? Like you know a lot of tenants have parking requirements. And if you’re cutting up a piece of the parking lot, I would imagine you really have to be careful with your requirements in your existing leases, how are you getting around anything that might be a conflict with your existing tenants.

Chris Ressa  06:00

So oftentimes, these things require waivers from those tenants, I would say, because of the nature of retail properties, they were built with massive parking lots typically over the course of time, parking comes up, I would say it’s not the most common typically, site plan changes are a big one and then use changes are a big one, the retailers might have a use restriction in their lease, you might need waiver on that, or site plan changes are a big one, that’s a big one, if you’re changing the site plan you typically need some consents.

When a retailer went in, they envisioned the site plan as it is today, and changing that, they might say, would impact them and they need to know about what that change is. You also have adjacent landowners where they might have OEA’s and REA’s, where the plan you have might conflict with an REA or OEA with an adjacent landowner and you’d have to engage them to make it happen.

Karly Iacono  07:14

I would think, in a lot of cases retailers would be open to this if it drives more traffic to the center, from a non-competing use, right? So I would imagine that how flexible they are with changes to the site plan or parking, etc. would really have to do with what sort of densification you’re talking about. So do you have to tell them exactly what tenant is coming in? How far do you have to get into discussions with your existing tenants to get them on board usually?

Chris Ressa  07:44

Super detailed, you’re gonna get into the detail of like, how high is this building going to be? And you could be talking about like, okay, I’ll live with 32 feet, because at 32 feet from driving on the road, the person can still see my building, but at 34 feet they can’t, so you can’t go to 34 feet.

Karly Iacono  08:10

So be very prepared before you have these conversations with your tenants. Yes. Yeah. All right, not the easiest strategy. But I would say probably the most profitable, if you can pull it off, because you’re, in essence, just creating a new property within your property or, you know, creating additional GLA, as you said.

Chris Ressa  08:31

Assuming you’ve nailed your construction costs, and assuming, when you put a shovel in the ground, there’s nothing unexpected under the ground, then yes.

Karly Iacono  08:46

Right. So lots of ifs. Lots of things to think about, but a strategy that, I guess we’re gonna have to see more of as the nature of retail changes, and there’s less ground-up new development.

Chris Ressa  09:01

Yeah for sure, I think at the end of the day, your basis in the property is one of the biggest pieces, right? Because buying as we know, new construction is really challenging when you’re going in buying a new piece of land, depending on what your basis is, you might be able to densify the property. And depending on your scale of what that densification looks like.

Karly Iacono  09:26

Alright, so not for the faint of heart, but probably our favorite strategy if you’re a more sophisticated developer-owner and can pull it off. Let’s move on to some slightly easier strategies. The next one being ancillary income. Now this can take a lot of forms, right? We’ve seen cell towers, we’ve seen EV charging stations, you know there’s a lot of sort of partnerships within your property that you can create. What are some of the interesting ancillary income ideas that you guys have tried and how have they worked out?

Chris Ressa  10:00

So I think a lot of real estate, commercial real estate always looks at ancillary income. I think the malls have done a great job over the years, like you walk through the middle of the mall and all those kiosks, or they have sponsorships and advertising. I think today, some of the green initiatives are making interesting opportunities.

The two that I would use as examples are, the big one I would use is solar. And adding solar to a property. And typically, there’s a couple of ways solar works, you can lease your roof or lease a piece of land where panels are built. And a solar operator leases the roof, just like in the cell tower scenario. And they’re doing one of two things. They’re either trying to sell energy, they’re trying to sell it back, the electricity they produce back to the grid, or they’re selling it to, they might sell it to a tenant or tenants in the shopping center as well. It’s highly driven by the tax incentives in that state.

Karly Iacono  11:30

And how long are those solar leases, usually? I would imagine, because they are substantial it’s a really long term.

Chris Ressa  11:40

Yeah, 20-25 years. Another way you could do it is you could be the solar operator where you don’t lease it to anyone you just put solar up. But you have to be a real expert in the tax incentive world, to understand how to max because that’s where the benefit really is and the IRR is driven for the solar operators is on the tax incentives. So I think you’ve seen a lot of landlords lease roofs, but there are some who are becoming solar operators.

Karly Iacono  12:12

So if you lease the roof, does the company that you’re leasing to assist you with the tax incentives, or they take the tax incentives

Chris Ressa  12:21

They take it all

Karly Iacono  12:22

And you just take

Chris Ressa  12:23

You get rent

Karly Iacono  12:23

So it’s almost like a ground lease, but it’s a roof lease, so you’re getting income, and then they’re dealing with all of the state programs, etc. And they’re getting the benefit of that?

Chris Ressa  12:31


Karly Iacono  12:32

Very different scenarios. Okay, great, great plan. I guess if your building allows for it.

Chris Ressa  12:41

Yeah the other one that you’re seeing a lot of groups move to is LED parking lot lighting, I think this is going to be something that happens in all asset classes. And it’s continuing to happen. It’s been around for a while, but I think now it’s really starting to ramp up. Because typically, if there is, if you have a common area, there’s typically some level of electric cost that doesn’t pass through that doesn’t pass through to the tenants, and if you can lower that your NOI increases immediately.

So there’s an initial investment cost, in changing over your parking lot lights to LED. And that’s whether you’re an office building, whether you’re a retail property, a multifamily property. And then once that’s done, you start to see savings immediately typically, and depending on the size of the property that could be impactful.

Karly Iacono  13:48

That was my next question. Those are actual tangible savings, you feel that it’s worth the initial investment. I mean, we won’t I guess, direct numbers depend on what your energy costs are in your state.

Chris Ressa  13:57

It’s really hard yeah.

Karly Iacono  13:58

Right it’s pretty variable. But you feel that that’s, that’s a meaningful savings over time.

Chris Ressa  14:04

Especially at large assets. Yes, larger assets, for sure. And at a minimum, you’re doing your tenants a good service because you’re lowering their energy costs, which should help them be better, you know, more profitable stores as well.

Karly Iacono  14:26

And you’re doing something good for the planet and can feel good about that. Right. throw that in to.

Chris Ressa  14:31

All that stuff. Sure.

Karly Iacono  14:33

Any other ancillary income ideas you want to share before we move on?

Chris Ressa  14:37

I think you mentioned EV charging, but this is starting to get big. This is starting to get big. I think you’re going to start to see this really ramp up, and you’re starting to see parking lot spaces get rented. I can’t believe how many EV charging operators there are in the world.

Karly Iacono  15:09

I agree. It seems like a new one pops up all the time because I get all those emails, if

Chris Ressa  15:12

If you’re in commercial real estate, you’re getting an email from some new provider of EV charging. It is wild right now.

Karly Iacono  15:23

Like every week. It’s like the new car insurance.

Chris Ressa  15:26


Karly Iacono  15:26

Have you heard about our platform? all the time. Yeah. and are they rent? Like you mentioned renting parking spaces. So is that the most common structure that you’ve seen? It wasn’t

Chris Ressa  15:28

It is wild, so what that tells me though, is the economics for these EV charging, must be really compelling. I honestly don’t know the ins and outs of those. I spent a lot more time getting my wits about me on solar. And LED lighting. But for the amount of emails we’re all getting on EV charging, it must be unbelievable economics.  It wasn’t, it’s becoming. It wasn’t. But, I think one of the reasons there, you haven’t seen an explosion is because there really wasn’t a great structure between the landlord and operator and that’s starting to improve. And, yeah, so there’s a lot of, there’s revenue sharing ones.

Karly Iacono  16:32

They’re all part of, maybe that’s the old model.

Chris Ressa  16:35

There’s revenue sharing ones, there’s traditional rent ones. There’s a bunch of different types of structures now. But I think you’re starting to see more of traditional what landlords are used to, like a rent scenario, which I think is going to start to make these happen more and more.

Karly Iacono  17:00

Now with any of these outside partnerships, do they always travel with the property? So if you were to sell the property, have you ever seen it where the solar contracts are bifurcated, and they stay with the old owner? If there’s an upside to it, or the EV chargers? If it’s a parking lot space rental or maybe a profit sharing? Yeah, I guess either way, could they ever stay with the old owner? Do those agreements always travel with the current property owner?

Chris Ressa  17:30

They’re getting set up like a lease like no different than anything else. The only way on the solar end is if you’re the solar operator, you would have to be the tenant going forward.

Karly Iacono  17:40

Right, so you’d still be involved in the property, because that’s almost an additional business that you’re running not just a lease.

Chris Ressa  17:48

Correct, you’re in the solar business,

Karly Iacono  17:50

Right. Alright, good stuff. Those are a lot of really interesting ways to add value, I like it. The third thing we’re going to talk about is really obvious, but I think undervalued, and that’s working with your tenants, your existing tenants on renewal terms. We’ve seen such an uptick in retail rents, that renewals are a great time to revisit your rent levels, your increases, your options structure, and not necessarily just kind of continue as is. So what changes have you been making and pushing for on tenant renewals that have had meaningful impacts for you?

Chris Ressa  18:32

I just want to back up one second, I think the difference today versus seven, eight years ago, because this isn’t new, is that I think the pendulum has shifted because the discussion is, is almost they’re either renewing or they’re leaving the market. Whereas previously, the discussion might be they might go across the street, they might go down the road.

But if there’s no vacancy, and construction costs make it challenging to build ground-up, then if they want to capture that market, the landlord now has more leverage than they once did previously. So I think that’s the, the lay of the land. Pun intended. And then I think things there’s the monetary pieces of leases and the non-monetary that people are focused on, I think said simply is like, can we get, you know, higher rental increases, then, for a long time. We had this, you know, there’s a lot of flat rent growth, or there was this 10% every five years, right, which was, I would say we talked about that But standard

Karly Iacono  20:00

For a long time.

Chris Ressa  20:01

Regardless of the market, like it was, it was still like people were like, oh, real estate’s local. It almost was like widespread where like, it didn’t matter if you were in Wyoming, New York, Texas, like this is just how commercial real estate works,

Karly Iacono  20:17

Right, it’s true, yeah

Chris Ressa  20:20

So I think you’re starting to see more fragmentation, where certain property certain markets are starting to command higher rental bumps. And so I think the point, as you said, it’s a good time, I think the point that I would make is not to just go back to well, this is how it works in commercial real estate or in retail real estate, we do a 10% every five years, and now really, like focus on this to try to see where you might be able to get maximize the opportunity that we’re in, because we’re in a really interesting moment in time.

Karly Iacono  21:02

Do you think tenants are looking at their portfolios more individually by asset than they were before? Because I would imagine if you’re a large national tenant, you have hundreds or even 1000s properties across the country, you’re going to want your lease forms to be as consistent as possible to make your life easier. So, have you seen any tenant pushback on this concept of individualization by market in deal terms?

Chris Ressa  21:31

I would, I would say that that’s always the case. Tenants are very sophisticated, they’ve always tried to make individual look at the individual market. And so with landlords, I would just say, just so happened that it felt like 10% every five years was happening everywhere. But tenants are still pushing back on landlords, the thing that I’ve seen the biggest change in, is that tenants are seeing this happen. And we’re starting to see interesting trades happen where we’re seeing many more tenants want to do what I would call blending extents.

Where they’re proactively going to landlords, and saying before the lease comes up, and saying, hey, I’ll give you a bunch of lease term. But let’s talk about the rent. And so, which, you know, in COVID, we were talking about all this flexible lease term was going to be the new thing, right? Whereas what’s actually happened is retailers are trying to lock up site control for as long as possible.

Karly Iacono  22:50

Which is good for investors in a lot of cases, because then they have predictability, lenders, have a longer term to lend against. I mean, there’s definite benefits to that. You have less chance to roll the leases and at higher rates, but definitely is improving the stability of the assets, I think.

Chris Ressa  23:06

For sure.

Karly Iacono  23:08

So we touched on the monetary things you can examine on renewal. But let’s go into non-monetary so other provisions in the lease that you can update to increase your cash flow, one being making your leases triple net if they’re not already. We’ve talked a lot about the increase in the cost of nets. That’s your maintenance, your insurance, everyone’s been talking about insurance costs going through the roof. So if you can make your leases triple net and push those on to the tenant, of course make it a little more landlord-favorable. That’s another way to increase your cash flow that many people don’t think about. They just go with the existing lease form and then argue over the rent levels. Have you had success converting leases? Or maybe your leases were always triple net. But have you had any success changing some of those expense provisions and putting them on the tenant during renewals?

Chris Ressa  24:01

Yeah I think in my space, most of the leases are net leases. However, some of those things like caps on cam, right. That’s something that’s being addressed given inflationary pressures. I think landlords and tenants are having a discussion on you know, actual common area cost and caps on cam and either increasing caps or removing caps, I would say more increase in caps.

Because tenants want to make sure that landlords are doing their best job to keep costs down and the caps are way that to do that. But I would say that the caps were artificially low given inflation, right. There was a lot of for larger tenants. 3% caps versus smaller, maybe 5%. Well, if inflation was you know, whatever it was 7,8,9 percent. Those you were getting outside those caps And there were some, you know, actual shrink there or leakage there for the landlord. So that’s one area, I think, from the monetary piece of the common area maintenance provision that we’re seeing.

Karly Iacono  25:14

And I don’t think anyone thought those caps were low when they were putting them in place, but no unexpected 9% expense growth in a year. So I guess we’ve all learned from that and trying to make better decisions on what’s realistic and not moving forward. So capture a big deal. Yeah, for sure. How about management fees and admin fees? I’ve seen some landlords add those to their leases when they weren’t previously in when they’re renegotiating with the tenant to add a management fee and or an admin fee. How do you look at those pieces in your leases? Is that a common provision or not as much?

Chris Ressa  25:51

I think it’s a common provision that is added, but I think the totality of the circumstances, matters. So we have a tenant in a building in the Midwest, actually, and we’re moving our office to a different building. And it’s a pretty sweet overall economic deal. And as a tenant, we tried to put a cap on the CAM. And the landlord’s like, you’re getting this below market rent, all this free rent, you’re getting this great TI package like, I have to say mercy somewhere. So, I think the totality of the circumstances matters when you’re getting into the nitty gritty pieces of things like admin fee and management fee, I think the nature of the entire deal is irrelevant.

Karly Iacono  26:56

Kind of entertaining to see you on the other side of that negotiation you’re like, but we also deserve and they’re like, Okay, enough, stop. That’s funny. So yeah, that makes complete sense, right, you’re not going to get everything that you want in a negotiation. But if you’re not winning on those other pieces, maybe that’s somewhere else to push or try to increase the financial nature of the leases in the landlord’s favor. The next thing we want to touch on is not necessarily tenant or lease related. And this is improving your cash flow through financial strategies. Now, there’s a few different levers you can pull here.

One is cost segregation, analysis, and this is moving into, you’ve made your income on the property, how do you protect it? How do you shelter it from an accounting perspective? Of course, Chris, and I are not accountants, but we are aware and have used personally and through our businesses, some of these strategies. So cost segregation, we’re not going to go too deep on but that is a way to accelerate your depreciation and shelter gains on an investment property. I think it’s an amazing tool. Have you tried that have you guys used it? Any thoughts on cost seg?

Chris Ressa  28:09

My the, the only thing I would say on cost seg, is I think it’s really interesting to the individual, private investor, as a company gets larger, there’s a lot of other things that they have to factor in, if they’re owning more real estate, as it relates to tax challenges and opportunities

Karly Iacono  28:43

What a nice way to say that tax opportunities

Chris Ressa  28:47

I think the long and the short of it is I think that you know, the cost seg and bonus depreciation for the individual investor really, you know, makes real estate a compelling opportunity.

Karly Iacono  29:06

Right. And your ownership situation matters, obviously, like, you just pointed out. So all these tools aren’t right for everybody. Which makes sense. The next thing to think about would be pretty basic, right? A refi ,less attractive in today’s market, but loan terms should be looked at on a consistent basis to make sure you can improve your cash flow through improving your debt. I think it’s a pretty obvious one. And then the third thing on the financial levers you can pull are any tax incentives.

How often do you look for tax incentives in your portfolio? Is this a once a year kind of comb-through? Do you have people who specialize in certain states and counties and your team that are looking for any programs that might be available to property owners? How often do you think about tax incentives?

Chris Ressa  29:56

So I think the first thing On the property tax side is, is there an opportunity? You know, are you evaluating? Are your property taxes appropriate? And should you be challenging them? That’s number one. That’s something that we look at regularly on the on the tax incentives. Like, like municipalities, you know, I think in San Francisco, I forget who the retailer was. But in San Francisco, there was like, I want to say I forget, I don’t know if it was the gap or who, but San Francisco to keep people in the city and going to the office every day, if they didn’t do hybrid or something like that San Francisco was going to provide the business like, no payroll tax for a certain amount of time, or like some sales tax. I don’t know what it was, but some break.

So I think there’s interesting opportunities, I think the the thing that you see the most in real estate is TIF financing. So tax increment financing, where there’s a, for a project to get off the ground, the economics don’t work, but it’s a it’s a need for the community, and everyone believes it’s a need and the through tax increment financing. There’s a a public private partnership and the public, you know, the municipality or the local government bridges the gap to make a project happen. I think that’s the one you see the most ensuring commercial real estate.

Karly Iacono  31:47

Yeah, no, I mean, a lot of developments would never happen if there weren’t tax incentives to support them. So agree, that’s a huge driver. I think the question is more what can you do when you already own the property during your full period and reviewing property taxes, making sure that you’re applying for any available programs to make your your property more attractive is important along the way. The last thing we’re going to touch on are closing the financial chapter out, we’re going to the actual bricks and mortar building, what can you do to your property to increase cash flow, in terms of spending more money to make money might sound a little less attractive than some of the other ones? But how can you spend money to make money?

And this could come in the form of basic cosmetic upgrades that allow you to attract a different tenant base, maybe it’s a new facade, maybe it’s as simple as paint, right? Some, sometimes we look at properties, and I think, gosh, if they would just spend a little bit of money of course, we say this on painting the facade or restriping, the parking lot, what a difference the the aesthetics of this building would have. So how do you factor in cosmetic upgrades or updates to your properties? And do you think they often have a meaningful tangible benefit when recruiting new tenants?

Chris Ressa  33:17

So my short answer is it depends. But to start, one of the first things to do is, is there some deferred maintenance? And we see this all the time where I’ll use round numbers, just let’s say a new roof cost $200,000. But you’re spending $50,000 a year in repairs? Right? Right, you’re going to immediately improve the cash flow of the property on a long term basis if you get a new roof. So I think there’s the deferred maintenance piece that’s non-cosmetic, but it matters because there’s a lot of things at the asset that might be the roof is one example. I think, on the cosmetic end, I think the one that comes to mind the most is the facade, you know, a lot, especially in the northeast, maybe it’s less in the newer, newer developed places like in Florida and Texas and Arizona, where growth really started to catapult in the mid-2000s.

But when you look at some properties that are from the ’60s ’70s ’80s these facades were built in a different era, their cosmetic as well as functionally not the same as they were. So we had a property in Williamsville, New York and we had budgeted to redo the facade. And typically when you when you’re doing something like that you want to make a fancy picture of what it will look like to go attract the tenants sign the leases contingent on you bringing that rather than go, right, just spend the money and hope they come. So what you would normally see the reason you have all these fancy renderings and architects put this together, right? It’s no different than, you know, if you’re going to do a new development with a piece of dirt, you have to show people what it will look like.

And so the renderings you don’t, you don’t always just always see you, hopefully, you don’t just build it on spec, you go get the tenants. And in there, it says what this will look like. same holds true for like doing the new facade. But in this scenario, up in New York, we we went and decided to do a little roll the dice of like, if you build it, they will come and it did work. The property is almost 100%, if not 100% leased today. And it was less than half vacant when we bought it. But we had done a pretty epic facade renovation. And it allowed us to change this from a non-grocery anchored to a grocery anchored, bring in national tenants, best in class locals. And it looks fantastic. I wish it was in my town. It’s an awesome property. So yeah, there are times where if you build it, they will come. I would say what’s more common is can you design something, go to market to see how the market reacts to that, and sign deals contingent on that? You delivering that?

Karly Iacono  36:30

I wonder what the inflection point of vacancy would be that that would make sense? Because if you have a very low vacancy level in your center, but yet it’s outdated, when do you pull the trigger on that? Right? Because your recommendation is okay, you have a rendering and then you go to market and see how tenants respond. What if you only have a few small spaces, but yet your center is outdated? Do you wait? Do you show me the renderings even though it’s not a lot of square footage? Like? How would you quantify that?

Chris Ressa  37:01

I think the what? I think it depends on a lot of things. I think the first thing is, what is your intention with the property? If this is a long-term home, it’s different than if you’re selling it in two years, and then you have an exit. So I think that is the first piece like what’s the business plan of the property? I think the second piece is, and I think this is the inflection point, which is is this offensive or defensive? And I think that’s the question we ask a lot like, is this going to unlock something, potentially even if it’s down the road, but we know doing this is going to unlock something? Or is defensive where it’s like, you know, you got to keep up with the Joneses. Everyone’s doing this, it’s not really going to we’re not going to really add any value, but if we don’t we’re gonna go backwards. Right. And that’s the one that I think pains everybody.

Karly Iacono  38:03

Because you can’t realize any upside. You’re just hoping not to slip the other way. Yeah that one’s a tougher call. Yeah. Good point. Really interesting. I think that’s a wrap. We covered a lot of good information today. Thank you so much. always wonderful to see you.

Chris Ressa  38:20

You too.

Karly Iacono  38:21

For everyone listening. That was What’s in Store with Carly and Chris. We are so happy you tune in and we will see you again next month. Take care everyone

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