In 2017, 41% of Williamsburg Downs Shopping Center closed overnight as its grocery anchor, Publix, was to undergo a complete tear-down remodel that would take several months to complete. We knew this construction would cause a drop in the foot traffic and subsequent sales for the other 22 tenants in the center, but the impact it had on our own management processes became more valuable than we could have ever expected.
Our inboxes were quickly flooded with requests on how we, as their landlord, could assist. Rent deferments and reductions followed, but closures were eminent as the construction continued. We had to be fair with our tenants, but also could not provide handouts. We had a mortgage to pay, and the undertaking of remarketing spaces while the anchor was a construction site would have been incredibly challenging. Our goal was to retain the tenants we had and discover a means to weather the storm together.
Here are a few of the measures we took to achieve that goal and the skills we leaned on to execute efficiently:
Reduction and Management of Expenses:
- The reduction of CAM expenses went into effect almost immediately. With lower foot traffic, the frequency required for items like waste pickup, parking lot/walkway sweeping, and the duration of parking lot lighting were reviewed and modified accordingly.
- Some of the money saved by reducing CAM expenses was then able to be used on items like “We Are Open” banners and additional safety measures for customers to access the tenants more easily.
- Planned capital expenses had to be restructured. We chose to move certain items that were intended for future improvements to commence in tandem with the Publix renovation. This included LED canopy lighting and pylon refacing for an immediate positive impact to tenants and customers.
- On-site visits were coordinated in an effort to get in front of the numerous questions coming in. This allowed for questions and concerns to be shared, feedback consolidated, action plans/brainstorming, and an opportunity to verify the tenant contact information on file. We were in this together and the tenants needed to see that just as much as hearing it.
- Our records were updated to include the emails and phone numbers for every store manager and business owner. We also collected each tenants’ business hours and any other pertinent information to keep us well connected.
- Regular email blasts made it possible to continuously communicate the timeline, expectations for various stages of the construction, and any other news about the shopping center.
Flexible Rent Collection:
- Every tenant has a different financial situation, so we expressed from the beginning that conversations involving rent would be held on a one-on-one basis. Tenants that were struggling before the construction had to be reviewed differently than those whose sales are closely tied to peoples’ weekly grocery trip.
- Financials were required for review before any rental assistance could be put in place, and personal guarantees were incorporated into leases if not already done so in the older leases.
- As we entered into each new month, rental income was monitored closely to recognize the early signs of struggling tenants.
- In many cases we had to get creative to reach a win-win scenario. Such examples include rent deferment tied to a lease renewal, partial security deposit refunds, and in one instance a lease buyout that would be proportionately repaid depending on the time to find a new tenant.
Managing Personal Risk/Liability:
- Beyond connecting with our insurance agent and discussing the changes with our tenants, we needed to ensure the added safety measures to the center remained uninhibited.
- This included keeping the debris contained within the construction gate perimeter and using brightly colored barriers to maintain safe pathways from the parking lot to the store front in areas adjacent to the construction site.
- We also increased property visits and regularly met with the construction team so we could pass along accurate information to our tenants.
Modification of the Marketing Plan:
- We had to be realistic in our expectations and knew the shopping center was not in optimal condition to attract new tenants.
- In order to maintain marketability, we shifted our efforts to include attractive TI packages that could appeal to tenants with construction timelines that complemented that of the Publix renovation.
- Nearly 15,000 SF of new leases was achieved using this strategy, in addition to relocating two existing tenants within the center.
Most importantly, the hard times did not last forever. The shopping center was thriving as soon as Publix reopened its doors. We suffered only a 2% vacancy loss as a result of the construction and nearly three years later, the remaining 98% of those tenants are still with us weathering the Coronavirus pandemic. This too shall pass, and we should all continue thinking outside of the box to minimize the negative impacts for everyone involved.