Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/566807
26 • September 2015 • Western Real Estate Business www.REBusinessOnline.com THE SUCCESS OF RETAIL IN UNDER-SERVED MARKETS Attracting and then retaining retailers are the keys to fnancial success in underserved markets. By Cary J. Lefton P laza Del Valle is a 14-acre, 250,000-square-foot retail cen- ter in Panorama City. It enjoys a 96 percent occupancy rate, and is home to national name-brand retailers like Wells Fargo, Dennys, IHOP and Sprint, who operate alongside frst- time small business owners running barber shops, upholstery services and an internet café, among others. This bustling atmosphere wasn't always the case, however. The center was only 40 percent occupied when it was purchased by Agora Realty & Man- agement in 1999. It was also situated in a troubled, crime-ridden location. Turning a property like this around to ensure it is a fnancially sustainable enterprise takes a vast understanding of the formula necessary for attracting and retaining retailers in underserved markets. Some of the initial factors for invest- ment consideration are dense popula- tion, high visibility, access to public transportation and an involved com- munity. But that is just the starting point. Design is Important Zocalito of Pacoima is one such example. The frm converted exist- ing, empty buildings situated at a high-trafc intersection into a new 18,000-square-foot retail concept de- signed to cater to frst-time entre- preneurs with small retail shops and restaurants ranging from 265 square feet to 2,500 square feet. From the beginning, it was important to cre- ate a quality community experience similar to any traditional retail center. Architecture frm Perkowitz & Ruth revitalized the retail strip by provid- ing a sense of place and community through clean lines, shade trees and outdoor seating, all in a walkable en- vironment. Agora invested an additional $9 million when it purchased Plaza Del Valle to completely revamp the center. The focus was to accommodate the needs of the diverse, local 75,000-plus population that contained a Latino majority, a signifcant Filipino popu- lation, and African-American, Anglo and Armenian minorities. That efort included the creation of 15-by-20 re- tail stalls and paseos, sourced artwork from central Mexico and a large event space that accommodates up to 300 guests for wedding receptions and quinceañeras. Engaging the community Agora has continued to reinvest in Plaza Del Valle by adding a children's playground, ofce space for local non- proft associations and a large plaza for community events. Trafc-generating programming at the center is also im- portant. Plaza Del Valle is as active as a regional mall with health fairs, holi- day celebrations and more. This is im- portant because many mom-and-pop operators lack the marketing budget of a national tenant. That's where the owner can step in to provide creative, trafc-generating promotions. More than Hands-On The smaller 265-square-foot shops at Zocalito can accommodate frst- time entrepreneurs who are able to open a business at a high- trafc location that is normally reserved for regional and na- tional tenants. When the model works, it's a win-win for both the owner and the tenant. At Plaza Del Valle, for exam- ple, a small pet shop that frst opened in a 300-square-foot micro site has been able to grow its customer base to eventually boast a standard inline 3,000-square foot space. Achieving Successful Co-Tenancy. The goal is to ultimately attract the national credit tenants that may have previously overlooked the location. Widening the exclusivity is one way to make sure the co-tenancy works. It ensures the larger credit tenant won't feel that the smaller tenant may im- pact their business. The larger nation- al tenant oftentimes has a list of items that can't be sold by other tenants. The standards are modifed so the ex- clusives only apply to a tenant larger than 500 square feet or at a distance greater than 300 feet. In the end, it's all about creating a platform where both the national store and small business can survive. The Model Works Plaza Del Valle had one national tenant when the center was frst re- opened, but the mix of current nation- al name brands and local mom-and- pop entrepreneurs is now a beneft to the tenants and, more importantly, to the local community. Plaza del Valle has evolved into a proven, fnancially sustainable model that is mutually benefcial to all stakeholders involved. Cary J. Lefton, CEO, Agora Realty & Management in Sherman Oaks, Calif. Since its debut in 2014, Plaza del Valle has been embraced by the surrounding Panorama City community, creating a place where neighbors are buying from neighbors. Lefton California loans will be made pursuant to a Finance Lenders Law License from the Department of Business Oversight. www.walkerdunlop.com Commercial Real Estate Finance POWERING YOUR PROSPERITY James Favrot Favrot & Shane Companies, Inc. Avid Car Collector Walker & Dunlop borrower since 2009