STRATEGIES FOR CREATING VIBRANT COLLEGE TOWN RETAIL - PowerPoint PPT Presentation

10 PROVEN STRATEGIES FOR CREATING VIBRANT COLLEGE TOWN RETAIL International Town & Gown Association Eugene, Oregon | May 31, 2017 Adam Ducker | Managing Director

ABOUT RCLCO Strategy Implementation Feasibility Transaction  Market Demand Analysis  Valuation Services  Entitlement Support  Corporate  Financial Optimization  Public/Private Partnerships  Project Team Formation  Portfolio  Fiscal & Economic Impact  Structured Finance (Public &  Development Concept & Design Private)  Asset  Consumer Research  Stakeholder Engagement  Mergers and Acquisitions  Green  Product Segmentation,  Management consulting  Capital Formation Strategy Positioning & Pricing  Amenity Programming  Work-out & Restructuring • Universities • Corporation • Medical • Families International Town Gown Association ITGA, 12.5.12 1

UNDERSTANDING COLLEGE TOWN RETAIL THROUGH A PUBLIC/PRIVATE LENS International Town Gown Association ITGA, 12.5.12 2

INSTITUTIONS INCREASINGLY SEE CAMPUS TOWN RETAIL AS “MISSION CRITICAL” Hamilton Initiative (Colgate); Hamilton, NY International Town Gown Association ITGA, 12.5.12 3

PERSPECTIVE OF LEGACY/PROFIT BALANCE INSTITUTIONAL OBJECTIVES HIGHLY VARIABLE EVEN NOW Redevelopment Objectives • Vibrant neighborhood for young faculty and graduate students • University office space • Hotel and conference facilities • Positive financial result • Compelling design statement Easthill Plaza, Cornell University International Town Gown Association ITGA, 12.5.12 4

UNDERSTAND LEGACY/PROFIT BALANCE STRATEGIC PLANNING PROCESS – DESIRED OUTCOMES High Legacy/Low Profits High Legacy/High Profits Easthill Plaza Low Legacy/Low Profits Low Legacy/High Profits International Town Gown Association ITGA, 12.5.12 5

CLASSICAL AND MOST DESIRABLE TOWN/GOWN COMMERCIAL SPATIAL ORGANIZATION Commercial Zone Gown Town International Town Gown Association ITGA, 12.5.12

MORE TYPICAL “IMPERFECT” RELATIONSHIPS Imperfect/ Non- Gown Town Commercial Connection Existing Retail Developable Town Gown Land International Town Gown Association ITGA, 12.5.12

KEY CRITERIA FOR CREATIVE VIBRANT RETAIL CRITCAL STEPS TO “SEEDING” REDEVELOPMENT Criteria: Not at All Assessment Best in Class – Clean & Green – Arts – functional infrastructure – University – porous and inviting – Historic Character – preserving and enhancing – Housing – diverse, eclectic, well operated and right priced – Entertainment & Retail - compelling options appealing to various audiences – Office Space – function, interesting, and affordable options The public partner creates the conditions for economic development The private sector creates critical mass, an Action Plan “sets the table” for them to do so International Town Gown Association 8 ITGA, 12.5.12

INSTITUTION CAN “CREATE THE CONDITIONS” PRIVATE SECTOR RESPONDS TO OPPORTUNITIES Reasons for Lack of Development Limitation for the Community Engagement: Institution Today? – Area not on developer’s radar for sophisticated Yes developers – Lack of compelling market story (no demonstrated Yes market success) – Ineffective local government No – Availability of land/redevelopment sites No Yes – Financial feasibility gap (real or perceived) Improving – Regulatory hurdles International Town Gown Association ITGA, 12.5.12 9

10 Strategies for Enhancing the Quality of Retail in Your College/University Town International Town Gown Association ITGA, 12.5.12 10

SUMMARY OF STRATEGIES MAKE THE CASE 1. ADDRESS LIFE SAFETY ISSUES/EMBRACE THE BIKE 2. ORGANIZE THE RETAILERS AND TRAIN THE RETAILERS 3. FIND THE ENTREPRENEUR (OR BE HER/HIM YOURSELF) 4. PROGRAM, PROGRAM, PROGRAM 5. “PACKAGE” MIXED-USE DEVELOPMENT OPPORTUNITIES 6. BRING THE UNIVERSITY “DOWNTOWN” 7. CONTROL THE RETAIL AND COURT THE BROKERAGE COMMUNITY 8. BUY SOME VICTORIES 9. 10. PLACEMAKING MATTERS International Town Gown Association ITGA, 12.5.12 11

1. MAKE THE CASE DEVELOP A “PITCH BOOK” R ETAIL L EAKAGE /S URPLUS FOR 10- MINUTE W ALK A REA Leakage Surplus Food Services & Drinking Places Building Material, etc. Shoppers come into the area to EAT Sporting Goods Motor Vehicle & Parts Health & Personal Care Stores Shoppers Clothing and Clothing Accessories leave the area to buy Furniture & Home Furnishings Stores almost everything Electronics & Appliances Stores else Miscellaneous Store Retailers General Merchandise Gasoline Stations Food & Beverage Stores -$25 -$15 -$5 $5 Surplus / Leakage ($ Millions) St. Elizabeth’s Campus Development; Washington, D.C. 1 2 International Town Gown Association ITGA, 12.5.12

1. MAKE THE CASE ANSWER KEY QUESTIONS FOR THE RETAIL COMMUNITY “Diagnostics” Who is the Retail Customer? How Much Retail can the Market Support? What Kind of Retail? “Development Solutions” Where Should the Retail Go? Target Tenants? Clustering? Parking? Leveraging Anchor Stores “Implementation” Shopping Experience/Branding Plan Implementation Framework Near-Term Marketing and Action Plan International Town Gown Association ITGA, 12.5.12 13

2. ADDRESS LIFESAFETY ISSUES. . . AND EMBRACE THE BIKE Winthrop University; Rock Hill, S.C. International Town Gown Association ITGA, 12.5.12 14

3. ORGANIZE THE RETAILERS CREATE A BUSINESS IMPROVEMENT DISTRICT Albany, N.Y. International Town Gown Association ITGA, 12.5.12 15

3. AND INVEST IN TRAINING THE RETAILERS (EVEN THOUGHT THEY SHOULD DO THIS FOR THEMSELVES) International Town Gown Association ITGA, 12.5.12 16

4. FIND THE ENTREPRENEUR OR BE HER/HIM IF YOU HAVE TO Lower COST/PUBLIC PROFILE Higher Lower POTENTIAL IMPACT Higher “BID Executive University As “Starter Fluid” JV Partnership Deal Structure Director” Developer C/U coordinates C/U “controls” C/U sets the branding, C/U buys and “plan” and defers Description land/assets, JV marketing, develops buildings to marketplace w/developers recruitment Legacy Potential/ Limited Modest High Highest Control of Outcome Level of Risk/ Limited Modest High Highest Financial Benefit Facilities/Real Quasi Autonomous University Mechanism TBD Estate Dept LLC Foundation Colgate – Hamilton University Winthrop Univ. Washington Univ. Cornell University Precedent Initiative International Town Gown Association ITGA, 12.5.12 17

5. PROGRAM, PROGRAM, PROGRAM TURNING COLLEGE TOWNS IN RETAIL DESTINATIONS Mix of Retail Expenditures by Market Audience 5% 25% 35% 20% 15% Local Area Households Students Local Employees Visitors Other International Town Gown Association ITGA, 12.5.12

6. “PACKAGE” MIXED -USE DEVEL. OPPORTUNITIES NO MORE FACELESS STUDENT HOUSING PROJECTS Not This; U.S.A University Village; USC International Town Gown Association ITGA, 12.5.12

6. “PACKAGE” MIXED -USE DEVEL. OPPORTUNITIES STRATEGIES FOR RISK SHARING IN THE RETAIL ELEMENT o UNIVERSITY-OWNED: Developer shoulders primary risk and commits to buy a “retail condominium” from the developer at project delivery, the university leases the space directly to tenants with the assistance of retail broker Pros – total university control; Cons – requires significant capital outlaw o MASTER-LEASE BY UNIVERSITY: University commits up front to lease the entire space from developer for set length of time and re-leases individual spaces to tenants with the assistance of an outside broker Pros – significant university control without major cost; Cons – university bears the market/leasing risk o GUARANTEED REVENUE: Developer leases space to tenants but University guarantees a minimum amount of revenue and covers the difference if the developer is unable to lease the entire space. Pros – unlikely to result in major cost to university; Cons – loss of control on tenanting, potential developer resistance, university still bears market risk o OUTSIDE INVESTOR: Instead of the University bearing the risk of leasing space or guaranteeing revenue, an outside investor takes the risk. Pros – unlikely to result in major cost to university, little market risk to the university; Cons – complicated. Unclear as to control on tenanting, potential developer resistance (yet a third party to deal with) International Town Gown Association ITGA, 12.5.12

7. BRING THE UNIVERSITY DOWNTOWN BUT MORE CREATIVELY THAN JUST THE BOOKSTORE Eddy Street Commons; South Bend, Indiana Center for Contemporary at VCU; Richmond, Virginia International Town Gown Association ITGA, 12.5.12

8. CONTROL THE RETAIL EVEN IF YOU DON’T OWN THE REAL ESTATE Conventional Broker Driven Approach Marketing disconnected from ownership Fixed rent leases High retailer startup cost/strong risk of failure Tenant mix contracts to “fuel” providers Doesn’t reverse pattern of “compounding under investment” Proactive Approach to “Seeding” the Retail Improved aesthetics/safety University takes greater control (owns/master leases) of the real estate Performance based rents allow shared risk Hand selected tenants help transform neighborhood Existing and new retailers organized as BID International Town Gown Association ITGA, 12.5.12