Linking Retail
ChainLinks Retail Advisors meets with Shopping Center Business to discuss the importance of networking, and how it is structuring its organization for the future.
Moderated by Jerrold France and Randall Shearin

Shopping Center Business recently met with representatives from the national retail real estate organization, ChainLinks Retail Advisors, Inc., at the magazine's offices in Atlanta. ChainLinks has been transforming itself lately, with new leadership and more structure. Attending the meeting were the following members of the ChainLinks current board of directors: Mickey Ashmore (chairman), United Commercial Realty/Dallas; Jeff Kuchman (vice chairman), Mid-America Real Estate Corp./Chicago; Bill LaKritz, LaKritz-Weber Commercial Real Estate/Detroit; Matt Kircher, Terranomics/San Francisco; and Scott Gray, The Linder Company/Indianapolis. Also present were Edward Page (past chairman), Page Partners/Houston and David Schulman, President and CEO of ChainLinks.

SCB: Tell us how ChainLinks has evolved over the years.

Bill LaKritz: My partner, Sandy Weber, and I joined ChainLinks in 1981. There were only six companies involved in the organization at that time: California, New York, Michigan, Texas, Massachusetts and Illinois. The main thrust of the group was philosophical — we fit each other's ethics and we all believed in the client. At the time, retail chains were just beginning to realize the extent of the resources and manpower required to find all the locations their growth plans required. So the concept of the broker having a much bigger position in the decisions of retail chains was new and, therefore, a new market of brokers had to be created since the in-house staffs of these retail companies weren't able to handle all of this growth. Another dynamic was that there were a lot of local retail chains expanding and these operators were looking for new markets. Some of these companies wanted us to go into other states to search for locations on their behalf. Since my company consisted of a staff of brokers who specialized in Michigan, we could have gone into say, Chicago, and driven around. We could see the market and it would look the same as ours, but, for example, we wouldn't know that at 3 p.m. you can't get in and out of what otherwise would have appeared to be a great location — only a knowledgeable expert locally based would know that. We wanted to help our clients capture these markets, but we knew we couldn't be as effective outside our territory as were within it. We wanted to be part of an organization where we could refer a client and know that the client would get the same level of service and ethics that they received from us. That is, they would be treated properly and they were going to get a comprehensive and insightful view of the market.

David Schulman.

LaKritz: Soon after our inception this group of brokers created our bylaws and these sorts of things. We really didn't know where we were going with this — it was all new to us as well as the overall market so we felt our way through as we progressed. In the early years, the administrative individual for the whole company was Kathy Sobiek, who was a strong administrative person in the L.A. office. She was tough and she kept us in line. Later on, Bill Horvath, who had a strong background from the grocery store and department store business and who was a very knowledgeable individual and a great guy, joined us as president. He gave us an element of corporate structure that we needed, and from that point ChainLinks really took off.

Ashmore: As I'm listening to Bill I remember our founding member, Michael Epsteen, located in southern California, telling me the story about the Gap. He was working on their behalf finding locations in the L.A. area when they mentioned that they wanted to expand to New York. Since their experience with him had been positive, they were interested if he would do their work for them there. His response was, ‘We don't know New York.' So out of interest in making sure that the client was represented properly in New York (and any other markets into which they might choose to expand), Michael started this loose association of like-minded brokers to service clients in major markets.

SCB: For a retail chain that's ramping up, a network can be a valuable resource.

David Schulman: We operate as an organization and not simply as a network. A ‘network' is a superficial association of companies and/or individuals making referrals among themselves and sharing only the most minimal information relating to the referral. In the ChainLinks organization, there is a tremendous amount of information-sharing, best practices sharing, and a top-of-the-mind focus on client service. We care about our fellow member organizations and we hold ourselves and them to the highest ethical and service standards. We'll discuss these topics in greater detail later.

Jeff Kuchman.

(left to right) Ed Page, Mickey Ashmore, Matt Kircher, and Bill LaKritz.

Schulman: In 1999, the member organizations of ChainLinks completed approximately 1,500 transactions on behalf of approximately 500 clients. In 2004, those same figures are 5,000 and 1,500, respectively. So, once again, one can see the incredible amount of growth this organization has undergone.

Kuchman: Our internal membership review process occurs every 2 years for every member whether they've been a member for 20 years or 2 years. If they can't demonstrate dominance in their assigned territory, then we will replace that member company.

Scott Gray.

SCB: What are the services that you offer? Do you offer any services other than finding locations?

Mickey Ashmore: The initial focus of ChainLinks clearly was tenant representation because that's what the market at that time was demanding. At present, although we continue to be the recognized leader in that field, we also have core competencies in landlord leasing and representation, investment sales, property management, development services, redevelopment services and asset disposition.

SCB: What kind of experience do ChainLinks members have?

Ashmore: We have approximately 600 brokers spread out nationally in those 53 offices and all are focused exclusively on retail real estate transactions. This is an incredible number, and there are experience levels from beginners to 40 years in the business, so there's a lot of talent. A few of the brokers have worked in-house for landlords, retailers and institutions so we can say that we know the needs of our clients inside and out. Our president, David Schulman, has worked as a retail broker and a real estate attorney, and has held senior executive positions with both a prominent national landlord and a retailer. As I mentioned earlier, although ChainLinks was founded on tenant representation services, many of our member organizations do as much landlord work as they do tenant representation work — and we're very good at it. We do lifestyle centers, mixed-use projects, investment sales, capital markets and single tenant buildings. If it's related to retail real estate, then we do it — the whole gamut of real estate services.

SCB: How many offices do you have and do they cover the entire country?

Mickey Ashmore (left) and Matt Kircher (right).

Page: We're committed to serving the client whether or not the ChainLinks office in that market can. Some of my competitors' best clients are people we have referred to them because we couldn't represent them.

SCB: It's really not regional offices, it's really more of a market office.

Ashmore: I have offices in Dallas, San Antonio and Austin. The Shopping Center Group, which is based in Atlanta but has other Southeast offices, probably has the most offices [of any member].

Schulman: There are many members such as Mid-America which, while based in one city — in their case, Chicago — cover the whole state. That member is not solely committed to the particular city in which they're based — they're active throughout their territory. The board of directors and the membership committee that reports directly to the board set the geographic parameters for each member organization. These can be changed at any time, but this has most often taken place at the time of the 2-year review process alluded to earlier.

Page: If there's a metro area that's not being handled adequately, then that will be adjusted.

(left to right) Scott Gray, Jeff Kuchman, and Ed Page.

Ashmore: We're a client-driven company. We do not let our boundaries and our markets interfere with what the client needs. The culture of ChainLinks is one of sharing. It's an amazing organization in that our people will go to incredible lengths to provide mapping, demographic information, market knowledge and a host of other forms of assistance in order to help another office. I get calls and e-mails all the time asking for information. We want to help each other provide the very best level of service that we can.

Page: Our clients keep the pressure on us and we keep the pressure on each other to stay very cutting edge. Because of open sharing within ChainLinks, if one member sees a tool or resource being utilized by another member — such as a mapping device — then whatever is necessary to pass on that tool or resource will be done.

Kircher: A good example of this sharing culture is what took place recently between Mickey Ashmore's Dallas office and the ChainLinks member firm located in Boston. At the ChainLinks Educational Institute in November 2004, Mickey made a presentation on his firm's technological advances which greatly impressed the principal of the Boston member firm. Mickey sent the individual in his office who was responsible for mapping to Boston on a temporary assignment to teach them. With Mickey's permission, that individual was soon hired by the Boston office and moved to Boston earlier this year.

Ashmore: We facilitated the hiring in Boston and now we are getting these mapping practices throughout a larger portion of the entire organization. A lot of times one of us will be representing a client in our market and that client becomes ready to go to the next market. Retailers in particular want cohesive services; they want it to be seamless. The package we've helped them create is most often the same package they want elsewhere. In terms of the technology, we've become cartographers, demographers and strategists. We truly have to create the materials and the resources that these real estate departments use to go to their committee or board for site selection. Many of the things we've discussed stem from the entrepreneurial spirit throughout ChainLinks. We have 36 privately-owned companies operating with their partners out of those 53 offices. Unlike many of our competitors who operate with regional employees on a larger corporate payroll, these entrepreneurs are spending their own money. They are totally focused on building their businesses in their territory and, at the same time, they're totally focused on helping and building ChainLinks. Our ability to react to the market in every way — including technology — is better than anybody because we truly have the capability to quickly make decisions and get them implemented.

Kuchman: We never go back and ask whether spending dollars on a new technology should come at the expense of our office leasing people or our industrial capabilities. The bottom line is: if it's what we need to be state-of-the-art, then we make the investment. We do it as individual offices because, frankly, we know if we don't, then we're going to show up at the next membership review process with someone asking why we didn't.

Ashmore: There are requirements of every office within ChainLinks to have certain capabilities and we outline those in the membership initiation and review. We all own stock in ChainLinks so we're all invested in it. There's an internal accountability that's self-enforced as well as enforced by the organization.

SCB: Do you as a group go out and try to create business for yourself by calling on a retail chain?

Kuchman: We take multiple approaches to carrying out this function. Each of our member firms carries out their own direct sales efforts; we also have regional teams that will try to create interest not just in a particular market but in a whole region. Finally, we have a national sales team that takes a more strategic approach. These groups communicate with each other and David Schulman, through his regular contacts with the member firms and his participation in these groups, makes certain that we're aware of each other's activities. In many instances we'll take a small armada of people from around the country to solicit business and one of David Schulman's roles is to occasionally traverse the country thanking clients for the business they've given us.

SCB: How is the organization operated?

Schulman: The board of directors and I operate the company on a day-to-day basis. We work very closely together even if we all don't speak to each other on a daily basis. We held a meeting of the board here in Atlanta yesterday, which is the first of four board meetings that will be held between August and the end of this calendar year. We strictly adhere to the articles of incorporation and the by-laws. Everything is documented in notes taken at the meetings as well as through board resolutions where necessary. There are committees set up by the board to carry out critical functions of the organization such as marketing, direct sales, finance, membership, etc. We have councils set up that meet every 1 to 2 months to collect, share and distribute within the organization information on different categories such as restaurants, anchors, specialty stores and landlord leasing. This is one of the ways we involve the younger ChainLinks brokers, and we're about to set up a young brokers council that will focus on the needs, concerns, etc. of the younger generation and serve as a reservoir of talent for more important roles within ChainLinks such as membership on the board or one of its committees. As a member of the board and a participant on each committee and council, my role is to increase member involvement in these forums, make them as meaningful as possible to the participants and the ChainLinks members at large, and ensure that the information generated or decisions taken at each of these forums is disseminated throughout ChainLinks.

Kircher: As was mentioned earlier, one of the active committees is the direct sales committee. Jeff is the chairman of that committee and we've divided our efforts and our focus in two directions: one is to pursue landlord-oriented business, and the other is to pursue the retailer business. Even though we are all in retail real estate, the services we provide in each of those two categories, the language we use with clients in each category, and the reporting systems they each require, are markedly different. So we create teams to approach clients to offer services that marry the skills and market knowledge of that team with the needs of the client.

SCB: When you represent a retailer is it generally throughout the country or is it more of a market or regional representation?

Kuchman: It's fairly rare — not just for ChainLinks but for any brokerage firm — to represent a retailer throughout the country. Much more often it is driven at a local or a regional level and then expanded in accordance with the client's needs as dictated by the growth and/or subtraction of their internal real estate departments.

SCB: How many retailers does the group represent?

Schulman: Currently, approximately 1,500 retailers. We also represent approximately 300 landlords.

Ashmore: We do a tremendous amount of surplus property disposition. We handle big boxes to small spaces for retailers all over the country.

Page: We also have represented some of the top lifestyle centers and town center projects in the country.

SCB: How do you compare retail to other property types?

Kuchman: It goes back to that local knowledge, which seems to be so much more important in the retail industry than in other real estate industries. It's based on the knowledge that you have that somebody else doesn't. It's not about the vacant space with the sign in the window. It's about the space that looks like it's unavailable because the person occupying it opens every morning, but in fact it is available and the reason we know that is because we've been in the space talking to the store manager, observing the level of merchandise on the shelves, and networking with the landlord agent to find out the situation. We're digging up information that our competitor doesn't know. That's the key to being successful in the retail real estate business and that's why that local market knowledge is irreplaceable.

Page: I'd describe it as a product. In the other sectors, property is always a commodity. It's quite often unimportant to an office tenant if they're on the east side of the street or the west side of the street or who else might be in the office building with them or whether they're on the 15th floor or the 23rd floor. None of these factors will make much, if any, difference in how much business that office tenant will generate or its profitability. The same is true with industrial. With retail, every little thing matters and every factor I just mentioned could make the difference between a profitable store or chain of stores and a bankrupt one. That's why local market knowledge is so critical.

SCB: How do you see the retail industry evolving today?

Gray: There's a lot of consolidation occurring but not every category has room for three or four companies. There are many categories in which really only two companies can survive. Wal-Mart, which is a whole subject in itself, has really changed the face of retail simply in terms of their overall growth, expansion and dominance in a variety of categories. Consolidation will continue and I think the pressures from the economy and Wall Street will also continue. Many retail chains are going to hit some bumpy roads and there is a lot of change in various industries right now. But there is excitement, too. Gap has been rolling out a new concept, Fourth and Towne, to compete against retailers like Chico's who have been very successful tapping into the market of women 35 and over. We're seeing a lot of pressures in the video industry right now. There are many lifestyle changes affecting the dynamics of retail such as the aging of the baby boomers.

Ashmore: The grocery industry is where I'm seeing the most significant change. You're either a Wal-Mart, a SuperTarget or a Costco, or you're a Whole Foods, Wild Oats or some other specialty grocer. The typical neighborhood grocery stores are not expanding like they used to, at least not in the Southwest.

SCB: What trends are you seeing among retailers?

Bill LaKritz.

SCB: People are creating their own lifestyles with these franchises.

Ashmore: Exactly. These are executives leaving companies early and cashing out with them, but it's not enough to retire. They're finding something they want. The tenant operating under the trade name Winestyle is a perfect example. They're getting some very professional people as operators who have a love for wine. It's a lifestyle product and they're selling these franchises to quality people who have some business acumen. Our experience has proven that ChainLinks is in a great position to service these types of emerging retailers. With the depth and breadth of experience and talent within our organization, our vast array of services, and our informal culture, we can and do service these entities from their start-up through their expansion.

SCB: What kind of shopping center tenants do you mainly deal with?

Kuchman: We've rarely dealt with the mall business until now. Today, however, mall-based merchants have run out of prime expansion opportunities in malls. Once they occupied the first few hundred locations in the best malls around the country, what is their growth strategy? This has dovetailed into the emergence of lifestyle projects and the downtown redevelopment efforts. Retailers can no longer call the mall landlord, go through a basic portfolio review, and find the next 20 locations. They have to get in the streets and access the talent in the streets. We've seen not only those merchants reach out to ChainLinks, but we're also seeing the mall landlords reach out to us in an effort to understand what their traditional client base is seeking.

Ashmore: In Dallas, we've been heavily involved with the downtown redevelopment. We're representing a major national landlord on some acquisitions they're about to close in downtown Dallas. These are mixed-use developments that will be retail on the ground level and residential above. In Dallas, throughout the entire urban core — and I know this to be a trend in many other cities in the U. S. — there's a strong and still growing movement to return to the urban core. The larger developers realize they need local market expertise that understands whether their projects will work as retail; if so, then who will go there; why it will work; and what the spacing should be. We are doing work for three different mall developers in the Dallas/Fort Worth market from a project side where they use us to help because they're changing the type of product they're building. They really are going to school on a lot of things that the ChainLinks brokers — especially the guys in this room — have been doing for decades. They knew their malls, but when they had to turn it inside-out, they didn't even know how to deal with outside brokers. In the beginning, they didn't want to talk to us or pay us, but that has changed. They understand our value now and it's really a neat evolution to see happening. It's a great respect — which we've worked hard to earn.

SCB: What has changed about making retail deals?

Kuchman: There is a tremendous amount of pressure for our client partners to pick great real estate because the rents are spiraling upward and the competition for space is more fierce today than it ever was before. Not that you wanted to, but you used to able to make a $12 per square foot mistake. In light of this boom that we're experiencing and the resultant higher rents, the pressure to avoid mistakes has increased exponentially. You have to get to the markets faster than your competitors because, if you don't, then you're just not going to expand the way Wall Street or your senior management team demands.

Page: Catering to the ethnic customer is a trend we see. I think Texas just turned the corner to become a minority state, California already has, and there's another one or two. There is a huge block of ethnic customers that has been overlooked and I think there's a huge demand right there.

Kircher: No other sector of the real estate business has the inherent potential for functional obsolescence as the retail product. The most successful retailers in the country are reinventing themselves constantly, so even if an anchor is properly positioned in the asset, as an owner you will want to make sure they're not overpaying on the rent side. From an investor's perspective, if you're looking to purchase a property, then you'd want to access a company with the talent base, local expertise and experience to counsel you on whether that anchor tenant is 3 years away from rolling out an entirely new store or selling the chain. It's more critical than ever.

Schulman: Every industry experiences turnover, but due to its growth in the last few years it seems our industry has seen a larger than usual influx of new talent — both on the retail and the landlord sides. One area which so many companies seem to neglect or fail to execute well is the sourcing of young talent, the nurturing of that talent once it's found, and the preparation of that talent to take over positions of greater responsibility when those positions become available due to retirement, restructuring, etc. At ChainLinks we have an education committee reporting directly to the board. Every other year ChainLinks sponsors an education institute for its brokers. I mentioned earlier the highly successful institute ChainLinks sponsored in November 2004 where the ChainLinks senior leadership conducted education sessions over a 2-day period. We recently scheduled the next institute in 2006. I also mentioned the councils earlier in this discussion. Sitting with us here today are a few younger members of our organization who were brought in to attend a portion of our board meeting yesterday and the roundtable today. These are a few of the many examples I could give of what we're trying to do at ChainLinks to incubate our next generation of leaders.