What's the perfect holiday gift for the employee who has everything? If you're Phoenix-based redeveloper Michael Pollack, the answer is simple: Spanish lessons.
All 18 employees at Michael A. Pollack Real Estaterang in the New Year by starting Spanish classes to help them communicate better with the firm's increasing number of Hispanic tenants.
“If you had told me five years ago that I'd need to speak Spanish to do business, I would have told you that you were crazy,” says Pollack, president of the closely held investment company he founded in 1973. Pollack, who specializes in rejuvenating rundown strip centers in greater Phoenix and Tucson, is the third generation of a real estate dynasty that began in 1937 when his grandfather founded the family's firstfirm in then-sleepy San Jose, Calif.
Today, 20 percent of tenants in Michael Pollack's portfolio are Hispanic — and that proportion is growing. Catering to these clients is vital to growth. Latinos now make up about a quarter of Phoenix's 2.5 million population. That's twice theaverage.
Pollack relocated to Phoenix in 1991 after making it big in Silicon Valley in the 1970s. “They entered the market at the perfect time, when everything was at bargain basement prices,” says Robert Kammrath, a Phoenix real estate analyst and owner of Kammrath & Associates. “Pollack Investments has been very innovative in acquiring troubled properties and turning them around.”
Food stores anchor most of Pollack's centers. In Hispanic neighborhoods, that usually means Food City, a division of Arizona's Bashas' Supermarkets geared to Hispanic shoppers. One center in Tucson houses a Laundromat, check-cashing store, hair salon, beauty college and fitness center. Another in Glendale, a suburb of Phoenix, includes a Payless Shoes, a McDonald's, a pizza parlor, and a 99 Cent Only store.
“The center, in a low-income area, was essentially blighted,” says Joe Felix, the real estate manager of 99 Cents Only stores. “Pollack put a lot of money into it and it now looks brand new.”
The firm's average center is 80,000 to 100,000 square feet. Occupancy rates at the time of acquisitions run from empty to 70 percent. Pollack earmarks 20 percent to 50 percent of the acquisition cost for renovations, which then attracts tenants to completely fill the space.
In 2003, Pollack expects to acquire 500,000 square feet, much of that in Hispanic neighborhoods.
On the surface, Pollack says, his shopping centers look much the same, regardless of the area's socioeconomic makeup “The moving parts are almost identical,” he says. “While the Hispanic community tends to look for good, we believe strongly they should have a nice environment no matter what the name level of the tenants.”
99 Cents' Felix says Pollack has set the standard for the Glendale area: “I've seen his centers in more affluent areas and they look essentially the same.”
The main differentiator is tenants, he says. “Nordstrom is not going into a Hispanic market, and Fiesta Market is not going into Beverly Hills.”
Rents are cheaper, too. Space for a grocery store in a Hispanic area rents for between 45 cents per square feet and 60 cents per square feet monthly. A smaller specialty tenant, such as a barbershop, can expect to pay about 75 cents per square foot, says Pollack.
Doing business with Hispanic tenants isn't all that different from dealing with other tenants, says Pollack — except for one thing: “There are some neighborhoods where either you speak Spanish or you don't operate.”
After a little tutoring, that won't be a problem for Pollack and his staff.