“Placer supported what the tenant was telling us and gave us the insight and confidence that we needed to engage in a conversation about a reduced rate. It gave us neutral information from a source that’s alternate from the tenant and allowed us to proceed without feeling we were giving something up or leaving money on the table."

-- Trish Gonsalves, Director, Leasing

‍The Challenge

A medSpa waiver reveals an under performing anchor seeking relief

Like any successful leasing representative, Trish Gonsalves knows how to work with tenants and prospective tenants on sometimes difficult situations or negotiations. Trish is the Director of Leasing in Northern California for Gerrity Group, a shopping center owner based in Southern California.  One of the centers she leads leasing for is an open-air power center with a gross leasable area (GLA) of 160k+ square feet in the Northern California area, with multiple big box tenants.

Trish walked us through a challenging situation not uncommon in the landlord rep space: getting a restriction waiver from an existing anchor so they can sign a new MedSpa. The twist came in the response back from the anchor tenant, which was due to renew at a higher rate at the end of the year:

1. The anchor claimed to be struggling and asked for rent concessions and money for additional tenant improvement (TI) funds.

2. If Gerrity would agree to the rent concessions and additional TI request, the anchor would
a. approve the waiver restriction on the MedSpa and
b. renew their lease (a year early) at a lower rate.

The catch? The big box retailer wouldn’t share sales. Trish was on her own.

How could she know whether or not to grant the rent relief and renew the box (and sign the MedSpa)? Was the tenant misrepresenting their situation, and using the med-spa waiver to their benefit? Was the store truly under performing?

An under performing tenant meant the possibility of an empty box and, worst case, triggering “co-tenancy failure” for other tenants. In other words, she had to get this decision right.

‍The Solution‍

Using Placer to know the true performance of the big box anchor

As a Placer customer, Trish was able to benchmark the big box anchor against other locations in its chain, and against the one other store of that chain in the Gerrity portfolio, for which they had sales. She used Placer to look at it from two different angles, both of which supported her decision to give the rent reduction:‍

She compared foot traffic for the struggling anchor with the foot traffic of a sister store in their portfolio, and for which they had sales.

‍Gerrity had two of the anchor tenants in their broader portfolio, including the one in the Sacramento area. While they didn’t have sales for the store seeking rent relief, they did have sales for the other anchor, which was also in Northern CA. As shown below, the store asking for the rent relief had only 25% of total visits in the preceding 12 months than the other location, with less loyal shoppers (1.56 to 1.85 visits) and less visits / sq ft, a normalizing metric to see across markets.

Learn more about Metrics

Given the comparison store was doing well, seeing their Sacramanto store with 25% of the traffic was a cause for concern.

She looked at the anchor’s rankings locally and for the state to understand the store’s performance within the broader chain.

To understand the store’s performance as part of the overall chain, and to gauge their willingness to pay the contracted rate, Trish pulled the rankings of the store in question, and found that it was ranked in the bottom 3% of all stores in the state and country, far lower than the store for which they had sales, which was top 80% nationally.

Learn more about Ranking

Taking both of these Placer data points into consideration gave Trish confidence that the retailer was indeed struggling.

When asked how the Placer data helped as she entered into the negotiation process, and what their goal was overall, she explained: "We didn't have to assume or question the story the tenant was sharing with us. While I requested sales, the tenant still didn’t want to report them, so this data definitely gave us some comfort entering into negotiations. Our goal was to retain the tenant at market economics, and to land the MedSpa deal, and Placer helped with that."

The Outcome

SUCCESS: Retain the anchor, sign the MedSpa, and realize over $1.3M in increased value

With the insights into their tenant’s performance, Trish and the team at Gerrity moved confidently to

1. Grant the rent relief to the big box retailer
2. Renew them for 5 more years
3. Sign the MedSpa to a new lease

Granting rent relief may not seem to be an ideal outcome. However, had they not moved on the deal, Gerrity felt it likely that they would have kept the big box store until the term expired at the end of 2022, and ended up with an empty box and no MedSpa. Instead, Gerrity came out ahead by retaining the tenant and using their restriction waiver to sign the MedSpa, as outlined below.

With all the value Trish and the Gerrity Group gained from this one deal, imagine how much they can benefit as they continue to harness Placer’s insights for future deals.

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