Anyone who has been through a retail redevelopment venture knows that things don't always go as expected. If only you could see into the future and head off those inevitable surprises. Well, here's the next best thing: practical, time-tested strategies to add some level of predictability on the road to successful redevelopment. At MBK, we have identified 10 essential elements that must be considered before acquiring a property to determine if redeveloping it will pay off.
-
Location, location, location. It can't be said enough that a good location is vital to creating a successful retail destination. While an asset may have failed because it was out-positioned by a stronger mall or its functionality had become obsolete, a well situated project will attract new tenants. Whereas a project that is poorly located can't be fixed.
-
Buy it right. The most critical step in the process is buying an asset at a price that allows for a complete, quality and economically viable redevelopment effort. Band-Aids don't work, so budget for a thorough renovation that solves the asset's fundamental problems.
-
Contract for an adequate period of time. While this may be a challenge, it is vital to contract for enough time prior to the acquisition to analyze the landscape, including the city, REA (Reciprocal Easement Agreement) participants, new users and economics.
-
City Support. A successful project has to have strong city support, both at the planning and political levels, as well as a shared public-private vision. Work cooperatively with city planners and officials from day one to understand their motivations. Are they looking to maximize sales tax or do they desire a mixed-use project comprised of retail and housing? If city and developer visions conflict, it's generally better to pass on the property.
-
Existing anchor approvals. Most redevelopment projects include existing tenants with specific controls over the site. It is essential to determine the willingness of REA participants to approve the redevelopment plans, for without their support the redevelopment objectives cannot be realized.
-
New anchor commitment. Test new anchor interest early. Ascertain new users' willingness to establish a presence in the trade area and, if necessary, their willingness to accept an atypical prototype if the site requires it.
-
Determine an exit strategy up front. If you plan to sell the center once redevelopment is complete, ensure ahead of time that you can develop a quality asset with all the right components. A half-fixed project will not maximize value on exit.
-
The right stuff. Bring in an experienced architectural and construction team early in the process to arrive at the most creative and cost-effective redevelopment of the site. A talented architect will contribute ideas that lead to a cohesive project, while a capable contractor will assist in the necessary cost estimates.
-
Expect the unexpected. It never fails: redevelopment is not as straightforward as new development and the unanticipated always turns up. Provide adequate contingencies in the redevelopment budget to cover the unexpected.
-
Attitude is everything. There will always be twists and turns in a redevelopment project, but as California artist and inspirational writer Sally Huss says: “Dream big, plan well, work hard, smile always and good things will happen.”
Andrew M. Trachman is president of MBK Southern California.