Beth Azor is a powerhouse in the retail commercial real estate industry with over thirty years of experience in managing, developing, redeveloping and teaching commercial real estate leasing agents all over the country. During this time she has had "skin in the game", currently owning six shopping centers valued at over $80 million. Author of Don't Say No For the Prospect and The Retail Leasing Playbook, Beth is a frequently requested speaker and panelist at industry conferences.
How did you get into real estate leasing?
My parents were in residential real estate. When I was 18 and going to college, I got my real estate license and all through college, during the summers and breaks, I would help them out in their business and sit model homes and I would get little commissions, which was great money when you're a college student. And after I graduated from college, I got a job as a special events coordinator at a not for profit in Miami, but I was making a whopping eleven thousand dollars a year. So I thought, what could I do to supplement my income? I did residential real estate on the weekends and after two years of working seven days straight, my residential job said, come do this full time because you're making so much more money. By now, I was probably making about $23,000 at the not for profit, but making just over $25,000 on the weekends doing real estate. So I was tired of working seven days a week and I converted over full time to real estate, but did not like the slow pace of residential going from seven days a week working a job I loved with the special events, to now sitting in a trailer at home development five days a week.
There was a young woman there that was helping us out on the weekends, she was in retail leasing and she said, if you don't like this, you should get into commercial real estate. I said, commercial real estate? Isn't that selling land? Isn't that going to be more boring than this? And she said, no, no, no, no, tere's this thing called retail leasing, where developers build grocery anchored shopping centers and we are the leasing agents who go find the bagel shop, the insurance company, the shoe store. and the dry cleaner. And once you help those people, you put them in business. You've helped them reach their American dream.
And you're invited to every baptism, wedding, bar mitzvah, because you're part of the family. And I said sold, I want to do that, that sounds like fun. And that was about 34 years ago. And I'm still doing it.
It sounds like you like it.
I love it. I love the variety. This morning I met with a daycare who wanted to open a 10,000 thousand square foot daycare, this afternoon we're signing a lease with a rotisserie chicken restaurant, two days ago we met with a guy who wants to open an ice cream/donut place. It's a huge variety because you get to meet so many different entrepreneurs. And also corporately, I bought an office building that I recently knocked down and I'm building a Starbucks. So corporately, I work with the larger companies as well. But my love is the mom and pops.
What makes for a great retail leasing broker?
Someone that's not afraid to ask the tough questions. How much is it going to cost for you to open your business? For example, the daycare said $80/sf. And I said, OK, the building is ten thousand square feet. That's eight hundred thousand dollars. Then it's asking the second tough question, do you have the eight hundred thousand. As anyone in real estate, our time is our commodity. We need to maximize that to the best of our ability. So not being afraid to ask the tough questions. Also following up. Once in a blue moon, I'll help a friend who wants to open a location and I'll call a bunch of landlords or shopping center owners trying to find space. And it blows my mind how many people do not return phone calls. So: not being afraid to ask the tough questions, asking a lot of questions, because telling and selling and asking is, and then following up. I think those are the two most important qualities.
From an investors perspective, how do we go about finding the best retail leasing broker out there?
I think by doing your homework. For example, I own six shopping centers and I've been leasing space for 34 years, but I had a situation with a shopping center that I could not lease. And for a year I didn't sign one lease. And I have partners. I was driving in my car going to my 40th high school reunion. And I was listening to a book on tape in the car and the author was saying, what is your biggest problem? And now that you have that in your mind, what are you doing to solve it? Are you doing the same thing you've always done? Because that's not going to work if it hasn't worked. And I realized that my biggest problem was that I couldn't lease this specific shopping center, and I had been doing the same thing I've always done. I've called, canvassed, did broker parties, offered bigger commissions. I've done the same thing and it's not working. A light bulb went off in my head and I said, I need to outsource this to another leasing company because obviously the leasing queen can't get it done. And I need to have my fiduciary to the partnership and the entity that owns the property, not to my leasing fees, which weren't existent anyway. So I called my partners and said, this is going to sound crazy to you, but this is what I think we should do. And they were all for it. They loved that I could put my ego in my pocket and say, it's not happening.
Sometimes you need a different perspective. And they said who are you going to hire? I said, let me do my due diligence. I knew the brokers that were working in the area. I called three of them, interviewed them and met them at my property. And I said, tell me how you're going to lease it. One company wouldn't even do it. They said, we're not going to work for you, if you can't do it, we're not going to be able to do it. So I found out what would their plan be, what were their ideas, what was their deal sheet for the last 12 months. Understanding how many deals they've signed and how did they find them. Did they just get sign calls, or did they go out and actively cold called, canvassed, and prospected to get the deals?
You would want someone that does that, because if someone's just waiting in their office for the phone to ring, it's not going to happen. That's not the way you lease retail space today.
Is there a specific set of questions that are important for us to ask them?
Yes, asking them for a copy of their deal sheet for the last 12 months, or 18 months and then asking them which of those deals were new tenants versus renewal tenants? And then for all of those new tenants, how did you find them? Was it a call in off of the sign? Was it a cooperating broker? Was it a cold call? Was it a prospect, or was it a social media post? So really drilling down on how they found the prospect, because that is going to give you a clear path and understanding as to how they're going to lease your property. Are they just going to put up a sign and expect calls to come in? Or are they going to be extremely proactive in getting the business? Those are truly the most important questions. And then you have to feel good and have an instinctual feel that you can work with this person. And I would also ask that person for other clients that they work for that you can call and get a reference. Are they proactive? Do they call back? How are the negotiations? Do they negotiate on my behalf? Or are they always calling me and saying, well, we should give this guy an extra month's free or some tenant improvement money. Are they a true owners rep? Or do they want to be working on behalf of the tenant? Those would be the questions that I would ask a retail leasing broker that I might be considering hiring.
How often should we be communicating with them and vice versa?
The norm is you should be getting a written activity report once a month. And I think that speaking to them maybe two other times during the month, unless you have an active deal, I do one third party account. I have a Wal-Mart shattered anchored center, meaning we sold 20 acres to a Wal-Mart. And now we're building a Ross Dress for Less, a 7-Eleven, a dd's. And that's my client. I don't own that property, I work for him. And because we have so many deals that we're working on, we're talking around three times a week. But when we've signed the leases and we're not actively working, we at least talk two other times a month and we send him a monthly, in writing, activity report.
How many people do that out there?
The larger institutions that own real estate require the monthly reports. Some of them are crazy and want to talk to the leasing agents once a week on a morning call, which I tell the leasing companies to tell them that you're not going to do that because I don't want my leasing agents on a three hour phone call. I want them out being proactive and cold calling. But probably the more entrepreneurial owners most likely don't require the monthly activity report. And I think that that's wrong because it's really easy stuff to forget.
What was the activity he had last month and didn't he say he was working on that coin laundry for three months, and you're busy, if you own a bunch of properties, you're going to forget. So it's just really easy to have it in writing. That way you get the report and if it looks like last month, and there has been no update after three or four months in a row, you can say look, you're on thin ice. I'm going to be looking for someone else to hire. It's a lot easier to hold them accountable when you have the reports in writing.
Moving on to the retail investors perspective, with their own shopping center, what should they keep in mind in order to be their tenants favorite landlord?
Keeping the property clean, keeping it well lit, a very well lit and safe and secure shopping center is very important. I think my tenants like me, but if I don't get the rent on the second of the month, they get a late fee. Now I've trained them.
Once you train them to know that, they're going to be pretty diligent with that and you're good to go. I'm sure there are a lot of property owners in the market that are OK if the tenants pay by the 15th or 20th of the month. I am not OK with that. A lot of times landlords don't always follow the lease exactly. So if the tenant calls in and says, my toilet is overflowing, well, your lease says that that's your problem.
Being consistent is very important because you shouldn't play favorites and give one tenant one thing and another tenant not the same thing. But for retail, for shopping centers, curb appeal is so important to tenants because it impacts their customers. Keep the property clean, you can put flowers out at the entrance. The colors of the flowers will attract someone driving by's attention. There's a rule of thumb in retail leasing that if you can increase the dwell time of your customer by 15 minutes, it adds $10 to the cash receipt in the store. So last year I invested in piped in music. I have a small center anchored by Panera, there are only about 20 tenants, I don't have a grocery store, it's just a strip center. I put in piped music and I added very nice red, colorful benches. My tenants loved it. And because I collect monthly sales reports from 80% of them, I definitely noticed that the sales were increasing. Now the economy's the best it has ever been down here in South Florida. So I'm not going to say that my benches and my music help their sales. But it might have. And if I can get my tenants' customers to hang out, enjoy the music, and have somewhere to sit and rest their legs, maybe it could have. I looked into Wi-Fi, but that was too expensive.
And certainly listening to your clients, for example mobile to go in the retail world is huge. When Outback Steakhouse goes from two mobile to go parking places outside their side door to 12, you know that something's going on.
I have a Sub guy that does extremely well. He does triple the business of a typical sub restaurant. He had been asking for reserved parking space forever. And I kept telling him no, because I have to give one to one tenant, then other people are going to ask. And I said, Harry, if you get a mobile to go app like Starbucks does, I will give you your own parking place, because I understand now, after talking to my peers in the industry that the pickup, drive in, park, run in, get the sub and get out can really add 20 to 30 percent of your business. So he's working on the app and if he gets it, I'm going to give him a parking space. Another thing with shopping centers: Uber. If you have a larger shopping center or power center, with Best Buy, Office Depot, T.J. Max, and Home Depot, if you don't have an Uber pickup, you're behind the eight ball on that. As our industry changes with consumerism and how people shop, you have to be reading up on that and thinking, how can I do something differently? How can I help my customers get more sales?
What do you think about standalone buildings from on the investors perspective?
Personally, I think they're risky because it's one check. For example, I'm on a tear to go buy as many bank branches that I can because I don't believe in the next three to five years that bank branches will be a thing. And if I can buy a Bank of America, or Wells Fargo with 5000 square feet, single tenant, when they move out in a few years, I can redevelop them and replace them with a Starbucks and a Chipotle, I'm better off because I have two tenants, two rent checks. As I call people around the country, and I'm focused on South Florida, all of my properties are within 10 minutes of my house, there is a Chase that went out, the owner is in Omaha and he thought he had a check forever, a check for life. And I think that's scary when you have one tenant in one building. I think it's risky.
For many years, Walgreens was a very solid investment bet. And now they're going to close 400 stores. And those investors around the country that own a thirteen thousand square foot box have very limited replacement options. They'll have to be knockdowns. There's Dollar General, Dollar Tree, Family Dollar, and some local tenants like gymnastic studios that can take over. But there's less than 10 options for people to backfill Walgreens and certainly not at the rent they were getting from Walgreens. I know there's a lot of people that love the single tenant investments, fast food and medical. Personally, for me, I'd rather have a shopping center with 10 rent checks than a building with one.
Why don't we move into retail leasing tips? I'm sure you have quite a few.
That's my side business. After running my six shopping centers I train leasing agents around the country in how to lease space for big and small companies. I think that the first thing you want to do is understand your market. If I have five vacancies, I want to know the neighboring shopping centers. Do they have one or do they have 20? Because that's going to dictate the rents that I want, and the incentives that I'm giving out. So you have to understand that you can't manage and lease your property in a vacuum. And then once you understand what the market is and what your competition is, the best thing to do is to create a target list.
You wouldn't go on vacation without knowing where you're headed. So you need to say, OK, in this demographic of income, I want high-end Botox, tutoring for my kids, an eyelash place, sushi. You want uses that are going to cater to the income demographic of the area, versus if you're next to my shadow anchored Wal-Mart, we have a convenience store, a Wings restaurant, a sneaker store, H&R Block instead of maybe a personal financial advisor. Understanding your demographics and then creating a target list of who you want to go after. Step three then is to be proactive and go knock on doors in those neighboring shopping centers, or shopping centers three miles away with people looking for their second, third, fourth, fifth locations.
Is there anything else that our audience should know?
I know that you have a lot of listeners that are investors. My new mission for 2020 is I'm unhappy by the lack of women investors in cash flowing real estate. I created a LinkedIn page called Women Who Invest in Real Estate, for women who want to invest or are investing. I instantly had about three hundred members. I started doing surveys. Are you investing? 80% of them said no. I said, why aren't you investing? And I heard the same thing over and over again: scared, don't feel comfortable with the numbers, too complicated, and too risky. I said, well, where are you investing? In the stock market. So you don't think that's risky and complicated? And tomorrow when we have another e coli hit with the lettuce, your Chipotle stock is going to go in the garbage.
I've learned from this LinkedIn page that it's not that women don't want to invest, they just don't have peers that they can look up to. I said, who do you know in your sphere that is a woman that's investing in real estate? They said no one. And I'm going to change that.
WWIIRE (Women Who Invest in Real Estate): https://www.linkedin.com/groups/8851653/