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Sometimes Communities (and Consultants) Do Really Dumb Things

By Rickey Hayes, Retail Attractions, LLC

Recently a client city that our company had worked in for two years decided to not renew our contract and go with another “competitor”. Now I know what you are thinking. I bet you are thinking something along the lines of well competition is good and maybe the other firm can do something for the community that your firm wasn’t able to do. And you might be right. But before you really start celebrating your “rightness” you probably need to know the rest of the story.

I use this blog as a platform to educate cities, elected officials, and other folks and organizations on economic development, retail development, quality of life issues, and other subjects that they may need “educating” on. The reader may ask “What qualifies you to educate others?” All educators need two things: training and experience. And if I had to choose as to what makes an educator most effective, I would say experience trumps training every time. I have had years of training, and having worked directly or indirectly in over 300 cities in 35 states, and having been part of, at some level, the facilitation and completion of, millions of square feet of retail, residential (both single and multi-family), medical, office, and other mixed uses of commercial real estate, I have some “experience”.

So back to my story. I am guilty of doing some dumb things myself, so don’t think I am really bashing the group of city officials that I am telling you about. I am not. And I will leave the city anonymous:.to protect the guilty. When I began working for this city, I did so as a favor to the city manager, who was new to the job in that community. This city manager had just left another city, where because of a poorly done retail project, multiple lawsuits, possible criminal acts, and lots of public money was spent helping to clean up a really big mess. I might say that we were not working in the city when this terrible series of events went down. I watched it from the sidelines, and was really interested because the city manager, who is my friend, warned the elected officials time after time that the retail deal was not being executed in a lawful and intelligent manner. The result, instead of working to fix what was out of order and instead of correcting what was wrong, the elected officials fired the city manager. So out of a job, the city manager (who, by the way, has considerable training and experience) was quickly hired by another city. As soon as the manager got his feet on the ground, he reached out to me to see if our company could help his new community. He advised me that this new city had never worked with a company like ours, had no budget for contracted consulting services, but he felt like he could muster both a little money and some support to hire us. We agreed to try and help, and because I had lots of respect for the city manager, I agreed to a much lower fee than I would normally apply to a consulting contract. (that was dumb on my part J). I worked hard for the community, made considerable trips to the community for multiple meetings with staff, elected officials, and developers and real estate professionals, and marketed the city to national retailers, restaurants, and developers. Without going into a lot of details, we received positive feedback on the market from multiple retailers and restaurants, but because the market was “green”, and local land owners were not really interested in selling, private sector investment was slow.

Several predictable things occurred during the process. Most of these things were addressed in face to face meetings with city staff and elected officials, but unfortunately some people do not want to be confused with facts, they are motivated by their “aggressiveness” and impatience. Small markets should be extraordinarily patient, because retail development, even in markets where tenants are climbing over one another to get sites, the development process is s-l-o-w. This particular city made the mistake of believing their market was “special”. Unfortunately, their market was just like every other small market, one in tens of thousands or small markets that are competing for these retail deals. They also made the mistake of believing that creating tax increment financing districts, and being vocal about willing to incentivize retail deals, made them stick out among the tens of thousands of other markets in the race, many of whom had better “data” than they had. Fact is that cities all over the country are beginning to offer incentives and create enticing development opportunities to lure retail and restaurant deals.

What I am saying is that elected officials, city administrators, and people who care about growth in cities, especially small ones, need to realize they have to be on the edge of reason and willing to do things that have never been done before, to set their communities apart. We represent dozens of small markets, the ones who have new retail on the ground and the ones who have retail or restaurant deals working are the ones who have stayed the course for the long haul, the ones who have been patient, and the ones who have gotten serious about getting in to the real estate business. Retail 101:whoever controls the real estate controls the future! Believe that. If your community is small, you need a professional and qualified firm to help you. And let me close this session of venting, by saying, if you are a small community you need more than data, because in most small markets, your data may not be helping, it may be harming your efforts. So by all means don’t be seduced by one of my slick talking “competitors” into paying big bucks for data. Bringing retail to small markets may be the toughest job on the planet, but it can be done. It requires proving your market has potential, defining the target retailers and restaurants that best fill your community’s need, and then doing what it takes to get the deal done. That’s what we do.

Rickey Hayes is the principal of Retail Attractions, LLC, a firm dedicated to helping cities and developers successfully find retail sites, close deals and improve the quality of life for our client cities.

WHAT MAKES US DIFFERENT?

Competition is good. Whether it is on the football field, in the classroom, or in business, competition can bring out the best in everybody. While I know all business is in some form or another a competition, I don’t spend a lot of time worrying about my so called “competitors”. Oh, don’t get me wrong, I know who they are. I know what they offer and what “services” they provide. But I am not in business to “compete”. I am in business to provide world class service to my customers, whether they are city governments, county governments, economic development organizations, developers, retail or restaurant brands, real estate professionals, or private land owners. I often hear communities express disappointment and angst over spending considerable money with “competitors”, and I wonder why city employees are many times gullible to the sales pitch of vendors who promise “data” that will get new retail to their community. In a lot of cases, a community’s “data” is what is turning the private sector off.

Sometimes the real issues in economic development are not dealt with when cities hire companies like ours. Very many times what communities think they need is not what they really need. Everywhere you look these days, in every form of media, someone is selling something. Modern marketing and advertising is so good, many times money is spent on goods and services that simply do not meet the perceived or real need. One of the foundational ways Retail Attractions is different is because our primary work is assisting cities in figuring out what the real needs are. We are not trying to sell your community a slick report or “demographic data”. And I am not trying to downplay the importance of market data, but the fact is that your community’s data may hurt you more than help you if your focus is on the wrong thing. Our goal is the overall growth of not only a community’s tax revenue, but the improvement of the community image and establishing a real world vision for what the community could become, and improving the overall quality of life for every citizen. The first step is always discovering the reality of where we are now. In every city, somebody should realize that progress requires change. A city that wants to do real economic development must realize that, over time, it must do things that make it different than it is now. It must do things better, and become more relevant, more disciplined, better aligned, more strategic. And it must build consensus. The problem is that institutions and organizations, like people, resist change. People and organizations seek stability and resist change.

I try to be an agent of change. Retail Attractions is always working to inject real and lasting change to situations that resist change, it is fun work. The foundational thought and scope of work of every city leader should be to determine exactly where change has to be applied. And knowing exactly where we are is the best way to figure out what needs to change.

Is your community ready to take the challenge?

Call us, we can help.

Rickey Hayes is the principal of Retail Attractions, LLC, a firm dedicated to helping cities and developers successfully find and develop retail sites, close deals, transform communities, and improve the quality of life for our client cities.

Should Your Community Partner With A Developer?

Written by
Rickey Hayes
Retail Attractions, LLC

If your city is interested in recruiting new retail, city leaders need some basic understanding of the process. The foundational thing every city needs to understand is the highly competitive nature of retail development. Cities all over the country are competing for a limited number of sites for certain high demand retail and restaurant tenants. A community that is marketing to the national tenants requires a basic understanding of whether local market conditions are right for retail expansion. A community must evaluate its marketing materials and make sure they are providing the information that retailers and restaurants key on. Bottom line, understand that the retailers usually know your market better than you do. Instead of going directly after the retail and restaurant tenants, many times it is more efficient for communities to establish a relationship with an experienced developer.

The main reason to partner with a retail developer is that the developer has established relationships with retail prospects, brokers, and tenant representatives and ability to roll out a strong and effective marketing campaign to create the right mix of tenants for a project in your community. Besides that, developers must secure financing and capital for a project, manage the construction (including the engineering, site planning, etc.) of the space to be leased or occupied by the tenants and oversee the leasing and management of the center.

Usually retail developers’ investments are heavily leveraged; therefore, minimizing costs are a big deal. The community that actively works to keep these costs down or provides ways to cut costs will be seen as a valuable partner. The community’s ongoing role in the partnership is to establish development processes that make the project viable and predictable.

This includes the following:

A city can also be a valuable partner by streamlining and simplifying the development process. Confusing permitting and review process discourage and impede development and investment, costing the developer time and money. Timely processes that ensure the individuals involved understand responsibilities and deadlines and expedited procedures that guarantee getting the retailers to market quickly are a win-win situation for all involved.

In addition to making it easy to build, a city may actually need to enter into the real estate business.  By that I mean the actually acquiring control of sites. Land acquisition is a critical issue for developers and local government control of potential sites (through ownership, contracts or options) sends a signal that the community is serious about working with developers.

The last but certainly not least ingredient to successful retail development is demonstrating a willingness to provide incentives. A community’s ability and willingness to provide incentives may be the deciding factor in creating a partnership with a developer. Incentives for including infrastructure development or upgrades may be necessary to make the development a financial success. Also the developer and / or the community may each have to offer incentives to attract key tenants.

In addition to being the builder, retail developers often own the development, sometimes they sell the development to investors. As landlords, they become stakeholders in the community with a vested interest to become active members of the local business community. Partnering with a developer can offer many benefits, and may be the right option for your community. Let us help you find the right partner for your city.

Rickey Hayes is the principal of Retail Attractions, LLC, a firm dedicated to helping cities and developers successfully find retail sites, close deals and improve the quality of life for our client cities.