Leasing the Inland Empire with Roxy Klein
Guest: Roxy Klein
Topics: Skills that transfer to CRE, Patience vs. Urgency, Conditional Use Permits
What You’ll Learn
- How to balance patience with urgency in the dealmaking process
- How strong is the leasing momentum in the Inland empire?
- Is there such a thing as bad real estate, or only bad pricing?
- What is a conditional use permit?
- How quickly deals change, the importance of being adaptive
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.
Transcript:
Chris Ressa 00:03
Welcome to retail retold everyone. I’m your host, Chris Ressa. And today I am joined by Roxy Klein. Roxy, if you don’t know, has this awesome newsletter report that she sends out to everybody. I’m going to have her at some point tell a little bit about what that is. She is a broker at Progressive real estate partners in California. I’m excited for her to be here. Welcome to the show. Roxy.
Roxy Klein 00:31
Thank you so much for having me, Chris.
Chris Ressa 00:34
So I mentioned the newsletter, because that’s how I found out about you. So it works. Obviously, marketing works. Because I somehow got on your newsletter list.
Roxy Klein 00:44
Because of your awesome podcast, Chris.
Chris Ressa 00:49
But why don’t you tell everyobdy more about who you are what you do?
Roxy Klein 00:53
I am moved up to be the vice president of retail and leasing sales at Progressive real estate partners. And I focus primarily on the Inland Empire, which is the Riverside County and San Bernardino County of the Inland Empire of Southern California.
Chris Ressa 01:26
Cool markets to work in. So you started seven years ago, you’ve had, a little bit. It sounds like you were just getting your feet wet. And then all of a sudden COVID came?
Roxy Klein 01:40
Yes, yes. And that’s actually the story that I’m going to tell in regards to the deal. That dramatically got modified because of COVID.
Chris Ressa 01:53
Save it, we’ll get there. So what did you do before you were in real estate or commercial estate?
Chris Ressa 02:01
For the bulk of my adult life from the year years of 18 to 36, my family and I we had a candy manufacturing company, and we manufactured novelty candy products. And it got started from an idea I had my senior year of high school, which was to turn sand art into candy. And I mentioned that idea to my parents. They said, Hey, that’s a great idea. Let’s do it. So we did that. And I did that for a long time. And after doing that for a long time I decided that I wanted to do something new. So I spent about a year and a half finding myself. And in that finding myself I did photography, I did promotional products, I did printing, and specifically for photography, I did dog photography. And ironically I was at an event and I was next to a nice lady who was a groomer, who also was a commercial real estate broker. And we started chatting and I’ve actually had my broker’s license since I was 20 years old. So I’ve had my broker’s license for over 25 years. And she said, Would you like to learn commercial real estate? And I said, that sounds like fun. Let’s give it a go. So that’s how I I got introduced to commercial real estate.
Chris Ressa 03:28
Candy manufacturer sounds so much more fun than real estate though.
Roxy Klein
03:35
It was it was I got to invent new candy products and travel around the country and sell them and market them. But I think everything though, has its time and that’s the nice thing is a lot of the assets that I obtained in regards to sales and marketing, I have been able to implement into my commercial real estate career.
Chris Ressa 03:59
That’s incredible. Yeah, because if you asked me , would I rather be someone who was like, yeah I was able to find that cool development deal, and I bought it. Or would I rather be the person who invented Reese’s Pieces?Reese’s Pieces. So very cool. You just gave me a good lead in you said there was a lot of things that you had skills that you had built from your candy manufacturing base that actually translated well to commercial real estate and so talk about that.
Roxy Klein
04:35
So just basic cold calling. I remember when I first started out in the candy industry, you know, was cold calling and just to get over that fear of picking up the phone and having people say no to you. So I was able to get over that fear at a very young age. I did a lot of trade shows while I was in the candy business and that really exposed me to be able to think on my feet and sell on my feet and be able to ascertain why someone should do something. And I know that, you know, buying a $10 million piece of property versus buying $5,000 worth of candy is dramatically different. But at the same time that the components and getting the buyer into the mindset and comfortable with you are very similar in my opinion.
Chris Ressa 05:32
Unbelievable. It’s so if you if you go back, just to give us some insights, because I’m genuinely curious. Who is buying? Who are you selling to? Who are you cold calling?
Roxy Klein 05:45
Sure the bulk of our customers were schools and cities. So regarding schools, I would speak to the president of the PTA and the principal of the school and for cities, I would traditionally speak to the person in charge of the Parks and Rec division.
Chris Ressa 06:08
They were buying candy for different events and stuff.
Roxy Klein
06:11
Correct, mostly carnivals, festivals, and fundraisers.
Chris Ressa 06:19
Cool. All right. Well, let’s take a time out from all the fun questions. I know you know kind of what they are not totally. So hopefully, I don’t give you too much on the spot are you ready?
Roxy Klein 06:36
Yes.
Chris Ressa 06:39
What is one skill you don’t possess today that you wish you did?
Roxy Klein
06:44
So just so you know, this is my least favorite of your questions. But if I have to give you an answer, I am going to say patience. Patience is a skill that I know I need to work on. I do feel though, that being somewhat impatient helps me as a broker because I’m always wanting to make up that call and get the deal done. But at the same time, if you’re too eager, it looks bad to the other side. So I have a tip I can share if that’s okay.
Chris Ressa 07:19
Share away
Roxy Klein 07:21
Fantastic. So I learned about this a couple years ago, and it has helped me out dramatically. There are fantastic technological devices out there. And this one in particularly is one I use on a specific instance when I do not want the other side to know that I’m impatient. And what you can do is you can hook your email up for trackers. So you know, when someone is reading your email, there’s been so many times where I’m waiting for that LOI response. And I just do not do anything. And I get a tracker that says, hey, this person’s looking at your email, and that calms me down. And then I just sit back and do nothing. And then within 10 minutes, I get my LOI counter. So that’s my that’s my trick to helping out. Anybody that’s impatient like me.
Chris Ressa 08:13
Got it, well, thank you for sharing. I will say. I’ll say your impatience has probably led to the success that you’ve had. And you know, Gary Vaynerchuk says, I’m not sure if you’re familiar with him. He’s a social media influencer who owns a media company. He says, micro speed, macro patience. So in the short term issue things, you have to move fast, you have to be impatient, you have to make it happen. But for the big things that everyone knows, take a long time and a lot of hard work. Those things, you have to be patient and keep plugging along and sometimes bide your time. And not everyone agrees with that. I think it’s interesting. I think it’s a good way to categorize because I do think in some regards, being impatient has led a lot of people to success, because, you know, those who sit around and wait, you know, typically miss the opportunities. I agree. So micro speed macro patience. Question two.
Roxy Klein 09:25
Yes.
Chris Ressa 09:29
When is the last time you did something for the first time.
Roxy Klein 09:34
This year, actually, I have become the president of Acre, which is a fantastic organization. And it is focused on retail in Southern California. And it’s a networking organization and we put on events throughout the year and it’s a fantastic opportunity for people to learn and network. And this year I have the privilege of being president of the organization and this is The first time I have ever been president of a nonprofit organization
Chris Ressa 10:04
Very cool I love that. Last question, what is one thing most people agree but that you do not.
Roxy Klein 10:12
This one, I do not know if everybody doesn’t agree with me, but I’m sure I have my followers out there that either do or don’t. And it has to do with Uber, the food delivery, I just do not believe in that. No DoorDash, none of that for me. If I want food, I’m gonna go out. I’m going to get it myself. I’m going to enjoy the restaurant experience. The million dollar TI that that owner put in, I want to see it, and I want to eat there and I want to enjoy my food at the restaurant.
Chris Ressa 10:47
I love it. So, is that all of it? You know, you’d never ordered a pizza on a Friday night nothing like that.
Roxy Klein 10:55
I will do pizza that’s it. Pizza can be delivered to my house. But I stop there.
Chris Ressa 11:03
Alright. All right. Listen, I’m not complaining, I love people going shopping. But I’d be lying to say that we don’t have some Door Dash show up at my house from time to time. Okay. Southern California, Inland Empire. What’s going on out there? Tell me about what’s going on in the retail market. I’m looking at right now.
The Inland Empire employment likely to exceed Orange County. So that’s one thing. This was said by Roxy to me in the newsletter, even though we don’t know anything in the Inland Empire, but born in California for that matter. But its still very insightful information. What’s going on in southern cali?
Roxy Klein 11:53
in regards to leasing, it is still very, very strong, specifically for good real estate and second generation opportunities. There are a lot of tenants out there that are just looking for the second generation, several of them have done new construction before and just will not do it again. So for good spaces, they least quick.
Chris Ressa 12:22
Someone once told me, I’m curious if you agree with this, I’m not telling you if I agree or don’t. Someone’s told me, there’s no such thing as bad real estate only bad price. I’m bringing it up because you brought up the word good real estate. There’s no such thing as bad real estate only bad price.
Roxy Klein 12:41
I often think about that because you will sometimes hear about the tenant that has not a good location and they’re just knocking it out of the park. But I think the reason why I mentioned good real estate is because I also feel that our industry has set up certain standards. And in order to get past that real estate gatekeeper, you have to match a majority of the items on their list most of the time. Now there’s exceptions I’m just talking about generalities with good real estate.
Chris Ressa 13:19
I want to bring it up because I think about some of these things from time to time and people bring up things like good real estate is good, and oftentimes here’s the reality. What is good for one user might not be for the other some people, the markets that they want to be in are different, some people the types of real estate there in, and some people need a physical location they don’t need to be front and center they and so they’d rather pay less in the back there was a tenant long ago who was like Chris here’s where we are, we C real estate in A markets I want to be the best market but don’t want to pay the best price I want to be in the C real estate in the A market, as long as I’m in that market I’ll succeed, put me in the C real estate because I need to access the end consumer but I don’t need to be front and center they’re gonna find me because of what I do.
And I was like Oh, that’s very interesting. A market C real estate. So, I was curious just wondering but there’s no such thing as bad real estate only bad price. I would say I’m not sure that I need absolutes. I’m not sure there’s probably such a thing as quote unquote, bad real estate out there but there’s a lot of truth to that at the right price a lot of people can make certain real estate work. So I would say that leasing activity is good in Southern California, in the Inland Empire. Anything else going on anything interesting, that is worthy of note about the Inland Empire and retail real estate?
Roxy Klein 14:58
I think In general, it’s just important to note that, you know, we’re not LA, we’re not Orange County, there’s this huge market of people that sometimes people just don’t pay attention to. When I call on a lot of retailers, a lot of times they just say, we’re not ready yet for the Inland Empire. They know about the Inland Empire. But a lot of times a comment of, we’re not ready yet. So I feel that, you know, eventually everybody is going to be there. A lot of retailers are already here. And it’s just a market that a lot of people should definitely give a second look at, if there’s if it’s not currently on their radar.
Chris Ressa 15:44
Ground everybody
Roxy Klein 15:47
So the Inland Empire is huge. San Bernardino County is the largest county, we have millions of people. And it’s, you know, nothing like LA density is nothing like LA whatsoever. But there’s a lot of people here, there’s a lot of people that have a lot of money. A lot of the cities in LA County have you know, anywhere from I’m sorry, in the Inland Empire have anywhere from 100,000 to 150,000 average household income. So it’s definitely a market that should not be dismissed. A lot of people have money here to spend and and there’s a good sizable amount of people.
Chris Ressa 16:32
Great. Yeah, I think it’s a good market. Listen, I’ve worked in markets, my whole life retailers have said we’re not ready for that. You know, we want someone to we bought properties in some challenging markets over the years and we bought property in markets that were secondary and tertiary. And, you know, one of the things that’s interesting is, a lot of times once the retailer opens up in their market, I’ll get, wow, I wish we opened here sooner we’re crushing it. We’re doing the same sales, we’re doing at X place, but the costs in those markets are typically less than the major city. So I’ve heard the same no’s before, keep at it Roxy. They’ll come.
Roxy Klein 17:22
For sure. for sure.
Chris Ressa 17:28
Like you mentioned, you have a story about a deal. What’s the name of the store? What’s the name of the deal? Give us a story.
Roxy Klein 17:36
Okay, well, the deal. It has to do with a building that I just started leasing. When I started at Progressive real estate partners back in 2019. And this is a new construction building. Some of my colleagues were working on it before and it was kind of like a hand me down type listing. And I was very excited about the property though. I was happy to have the opportunity.
Chris Ressa 18:05
Where are we? Are we in Hawaii, where are we?
Roxy Klein 18:10
We are in a city called Laverne which is actually in LA County. It is in the western San Gabriel Valley area. Not a large city but you know, it has a decent sized population, high incomes. The property is on Foothill Boulevard, which is a major thoroughfare. And the property has a lot of attributes to it. In regards to you, theoretically, it shouldn’t be difficult to lease. So, number one issue in regards to this property is the landlord. The owner also owns the restaurant that is existing in the property. So this was a property that had some excess land, the owner decided to build a multi tenant building. And now the issue that we have, as he says, Hey, Roxy, we have to be really careful of any tenant for parking. I don’t want any tenant to interfere with my parking as a restaurant owner. And I really don’t want any food here because I don’t want anyone to compete with my business.
Chris Ressa 19:33
Okay, I understand where it’s coming from.So I’m picking up what you’re throwing down, picking up what you’re throwing down, but I would say if he’s so mindful of what he wants, wants from leasing. He’s probably not as concerned on some of the other issues that typically come up, and maybe he’s a little more flexible on TI, because he knows that he’s looking for a particular tenant, maybe not. Maybe not. Maybe he’s a little more flexible and some other things since he knows that. He wants to be patient and wait for the right user.
Roxy Klein 20:26
And I do need to preface that I really do like this landlord. He’s great to work with. Okay, so 20. So 2019. I start on this. And I get an offer from a swim school to take about 75% of the building.
Chris Ressa 20:51
How big was the building?
Roxy Klein 20:52
The building is about 8500 square feet.
Chris Ressa 20:55
And it is built right. So he built it on stack.
Roxy Klein 20:58
Yes.
Chris Ressa 20:59
Oh, boy.
Roxy Klein 21:02
We negotiate the offer with the swim school, we execute a lease. It is contingent on a CUP, the tenant gets the CUP.
Chris Ressa 21:13
Hold on timeout. No, because it’s different terminology at work. What’s the CUP
Roxy Klein 21:18
Conditional use permit. I hearings involved, a lot of money’s involved, not easy to obtain. A lot of times when that type of use that requires the CUP is needed, some landlords don’t even want to mess around with it.
Chris Ressa 21:35
So I’ve been involved in getting conditional use permits. Let me ask you a question. This permit was it indefinite or did you have to renew annually?
Roxy Klein 21:47
Oh that’s a really good question.
Chris Ressa 21:49
So this is the problem sometimes. Sometimes, it’s usually non-confrontational. But one of the risks with the conditional use permit. One of the reasons that I get a little leery is a lot of municipalities make you renew it on a pretty frequent basis. And so then you’re left wondering, you signed the lease, you spent the money, the retailer spent this money, what if they don’t renew it in year?
I mean whatever the timeframe is. So conditional use permits, you definitely need to know all their details they’re different for each municipality, but you needed a conditional use permit. That’s why it’s nice to get a total unconditional. Usually when it’s conditional, it means you can use it conditioned on this, usually one of the conditions is renewing it from time to time.
Roxy Klein 22:34
Gotcha, so I went to the hearing, was very happy that it got approved. And you know, at that point, I just figured, oh, you know, only have 25%, left of the building to lease this should be easy. And a couple days later, COVID hits. And the tenant had a couple days left on their contingency period. And they approached the landlord, and they just say, we want out, we have no idea what this COVID is, we don’t want to have to worry about our personal guarantee, we have a couple of days left, we want out. And the landlord says, you know, I understand I’ll work with you. Let’s just sit tight, and see what happens.
So we sat tight, and got to the point where the tenant says, it’s going to cost me about a half a million dollars to do this build-out, I can’t jeopardize that money, I just really want out. So we refunded the tenant, their security deposit, everything was done to void the least time, for Roxy to get back to work. Meanwhile, of course, I have been working on the the small space that was available, but I haven’t been marketing the entire space because of the lease that was signed and everything. So moving forward. Now we have an offer from a dentist who themselves is going to take up about 30% of the building. So you know not as quite as good as before, but what landlord doesn’t want a dentist?
Chris Ressa 24:33
It’s a good use for sure.
Roxy Klein 24:35
So we did the deal with the dentist, lease was signed. The next day, somehow the swim school use was made essential. The broker from the swim school calls me back and says we’re back in, we want our deal back.
Chris Ressa 24:54
Oh my goodness.
Roxy Klein 24:56
And I say well, you know, we don’t have the square footage we had before. We have less square footage? Can you make it work with what we have? And they couldn’t. So, I moved on we opened, we leased another space to a CPA that has been in the area for a long time and last space, working on it.
Have interest from an orthodontist. First thing I do is go through the lease from the dentist. And since it was such a small building, we gave the dentist somewhat of a generous lease. That would include all dental practices. We go to the dentist, he was super nice. He said yeah, no problem. We’ll go ahead and let you do the deal with the orthodontist. We just want a little higher ranking on our assigned position on the monuments. But no worries. The deal with the orthodontist, and now it’s fully leased.
Chris Ressa 26:07
Excellent, what a good story. I have to say good story, it’ll probably be called like, dentist in Laverne, California, the episode title, but because we usually call it one store, it is a good story how this all came together. Thank you for sharing.
Roxy Klein 26:27
Of course.
Chris Ressa 26:28
What are some things you took away from that? Because I think it’s a really interesting story.
Roxy Klein 26:39
Definitely how deals can change. And I noticed that a lot during COVID. In regards to retailers changing their mind. But at the same time, I also learned that there’s other fish in the sea, and not to you know, let one hinderance interfere with the ultimate goals.
Chris Ressa 27:04
Yeah, I think when there’s massive prices, whether that it’s an event like COVID, or something less than that, maybe the GFC, whatever it might be, and not that the GFC was not traumatic, it just didn’t have the, medical implications that COVID did but we have these massive economic premises, one of the things that happens is, whatever the contract is, whether it’s your contract with your cell phone provider, your contract with your gym, lease, it’s like the contract is thrown out the door, and people are starting over or push the envelope to start over. And at that point in time, one of the things that really comes into play is like, all the groundwork that ended prior, did you get lucky, or did you work hard and set the foundation to create a contingency plan? Do you have a network of relationships to help them through some of this because it’s usually a rocky road. And I learned that both in the GFC and COVID. So really interesting and I thought the story was going that you were going to get the swim school to take the balance of the space if they wanted 75% in space, and then you brought him to 70. After all that work to sign lease, they got CUP I would have thought that they would’ve jumped on it. I was surprised, I thought that was where the story was going.
Roxy Klein 28:48
So, ya know, it got me back, you know, just in the realm that you never know what’s gonna happen. And that’s what I love so much about our industry is, every day is different.
Chris Ressa 29:01
For sure. I imagine the owners today keep that building. He’s not going to sell at least I imagine.
Roxy Klein 29:10
He doesn’t have intentions of selling it at this point.
Chris Ressa 29:13
That’s typical for the owner operator. Well, really interesting, I’m curious. Why did he decide to build the building? He just had land and thought it would be good? Most owners didn’t do that.
Roxy Klein 29:27
Yeah, that’s a really good question. And I really don’t know the exact answer because I wasn’t working at the firm during that time of that whole work came about but if I had to speculate knowing this owner, he knew he had land and he knew his land was fronting Foothill Boulevard. And he figured you know, if you build it, they will come type of motto.
Chris Ressa 29:54
Got it. Well, good for him. Good for you. Great story. Thank you for sharing Okay, take us to the last part of the show, its called retail wisdom. Ready Roxy?
Roxy Klein 30:07
Yes.
Chris Ressa 30:08
Question one. What extinct retailer do you wish would come back from the dead?
Roxy Klein 30:13
I really wish Souplantation would. I went to Souplantation very frequently when I was a child, fantastic memories. They had fantastic chicken noodle soup. There’s really nowhere you could go to get chicken noodle soup as good as Soupplantations. And it was a shame that unfortunately COVID wiped them out.
Chris Ressa 30:37
Gotit. Good one, question two.
Chris Ressa 30:42
What is the last item over $20 You bought in a store?
Roxy Klein 30:46
My glasses.I went to Warby Parker. You know, you’ve been hearing about Warby Parker. And I figured let me try them out. And I was very impressed. I thought the optometrist that I saw there was fantastic. Their prices are phenomenal. I have very bad vision. And their their prices are extremely fair. I would recommend Warby Parker to anybody like me that can’t see.
Chris Ressa 31:15
Got it. Last question. If you and I were shopping at Target, and I lost you, what aisle would I find you in.
Roxy Klein 31:24
I would probably be in the candy aisle. Although I’m not in the candy business anymore. I still enjoy looking at the new products and buying sweets to enjoy every now and then.
Chris Ressa 31:37
Got it. Just to go back to that any candy that or any one product that was a big hit. You guys were like wow, I can’t believe this.
Roxy Klein 31:52
So we had some unusual products. They were a little bit on the weird angle. And we did sell one of them too. It’s Sugar. And that ended up in all of their locations. And we also sold a lot of products to Think Geek, we came up with products specifically for them. And did products such as for Think Geek.
Chris Ressa 32:25
wow, what product was in It’s Sugar?
Roxy Klein 32:31
It was something I need to just say that I didn’t come up with this one. My dad came up with this one. So I don’t want to. I don’t want a whole bunch of you giving me a hard time because this one was not my idea. But what it was was a urine specimen container filled with yellow liquid. And it’s yeah, it was it was pretty disgusting. But hey, if people are gonna buy it and give you money, you’re not going to complain.
Chris Ressa 33:07
That might be the clip on the first part of the episode.
Chris Ressa 33:15
And what was the name of this candy company?
Roxy Klein 33:18
That product was called Sandy candy and the candy company was called Can you imagine that?
Chris Ressa 33:24
Awesome. All right. Well, Roxy, this was super insightful. It was great to finally meet you. Thank you so much.
Roxy Klein 33:32
Thank you. I appreciate it.