75: Reimagining Retail

Foreign.

This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis and Young's.

Tri State Investment Sales Group.

In this program, you'll learn about the world of commercial real estate and find out why it's one of the largest investment opportunities in New York and around the world. Now here is your host, James Nelson.

Welcome to episode number 75 of Real Estate Investing Live from New York. This is your host, James Nelson, principal and head of Tri State Investment Sales at Avis and Young. And yes, this is our diamond anniversary show here and amazing that we've been going strong every week and each story just builds on the next. And if you did not hear that interview that I did with Mark Rose, our CEO in the last episode, go back and give it a listen. He has so much to share. He's going to teach you what you need to know not only to succeed in investing, but also in life. So I want to thank you as always for joining. I really appreciate your comments, your ratings, sharing with your friends. And if you haven't already, make sure and connect with me at James Nelson NYC on Instagram, Twitter and LinkedIn and send me your messages and questions too. I got a good one this week from Adam in New York. He writes. Hi James. Interested to hear more about how AY put together a team with the gravity to pull more great people in. What was the hole in the marketplace? Was it driven by an underserved pocket of the market or by comp structure? Culture counts for a lot, but another portion is how do I make more money? Well, Adam, that's a great question and I do believe that it starts with culture and the right people. And again, my interview with Mark speaks a lot to that. But yes, I did have a vision when I came over to Avis and Young a little over three years ago to build out an investment sales team. And I did have a vision which was to create one unified sales team. And if you know about brokerage and many other places, yes, you have brokers who compete with each other within firms for fees. And I wanted to build one unified sales team where one person wins and everybody wins. And so we have, yes, compensation does have to mirror culture. We have one compensation pool that everyone shares in. That being said, we of course give incentives to those who bring in business and execute because you still have to motivate people. But yes, we saw that the New York market, which is a massive one, at its peak it was doing 70 billion in sales and obviously last year due to Covid, was quite A bit off that, but we are believers that it will recover. And, you know, this middle market space and our sweet spot is really in that 10 to $250 million range. There is a lot of room. That's where, you know, over 95% of the transactions occur. And it's not just Manhattan, it's certainly in the boroughs as well. If you look at Brooklyn as a standalone, I've heard it could be the fifth largest city in the U.S. and yes, it's a very fragmented market where no one firm has a dominant market share. So we do think we're well positioned by having one unified sales team. And the collaboration, I think, is very helpful in whatever you choose to do. So hopefully that answers your question. Please keep them coming. For today's show, we've got a great panel. I'm a proud member of both ICSC as well as the Councilors of Real Estate, and we did a joint panel on reimagining retail. There's some really interesting statistics that I think will be helpful to all of you whether you're focused in retail or not, because it certainly drives activity across the country. And I certainly would not count this asset segment out yet. And there's ways certainly to reimagine this and some creative ways to structure new arrangements. You're going to also be hearing from Jay Norris, founder of Guess how he's helping with landlords and tenants track activity. And I know we also have him scheduled to come on as a future guest as well. So a lot of great content for this show. We're going to have a brief word from our sponsor and we'll get right back into that panel. Thank you.

Thanks so much, Michelle, and thank you for everything that you do for Councilors Real Estate. We're so excited to be bringing you all this presentation today jointly with icsc. It's fantastic that we have of our panelists, multiple members who are dual members. And my only regret is that we can't be doing this in person. And I can't wait until we get back to our in person conventions and seeing you all in Vegas or in New York. And I know we're all hopeful that that's right around the corner. Also, happy St. Patrick's Day to you all. I did wear the green tie for today. If we were in person, maybe we'll be serving corned beef hash, but we will proceed. So in no particular order or I'll introduce actually our leaders from ICSC first and then get to the rest of the panel. Tom McGee, who is President and CEO of ICSC. Prior to joining ICSC, Tom served as Vice Chairman of Deloitte, one of the largest professional service firms in the United states, during his 26 years with Deloitte and he's held major global and US leadership roles. He's a noted business speaker with frequent appearances on cnbc, Bloomberg and Fox Business, and he's here with us today. He has coined the term Retail Renaissance, so we're going to definitely get into that today and what that means. He's also a guest writer for Forbes. Next we have with us John Morrison, who's the 2021 chairman for ICSC. He's the former president and CEO of Choice Properties, REIT based out of Toronto. He has over 40 years of experience with a primary focus on retail real estate. John was president and CEO of Primaris Real Estate Investment Trust from 2009-13 and prior to that he was the President of Oxford Properties Group. He's a Director of the ICSC foundation as well as a Vice Chair for uli. Next we have Deborah Jackson joining us, also a counselor as an ICSC member. She is the Senior Managing Director with Cushman and Wakefield, directing its valuation consulting business since 2013. She has been in the real estate business focusing on retail for over three decades, starting her career at Landauer, which ended up merging Via Grub and Ellis with Weiser llp. She has an extensive background in providing consulting services for retail and other commercial assets, which includes due diligence for acquisitions, sales, litigation support, portfolio analysis, valuation of real property. She's got a really impressive resume and projects that she has worked on, including the Union Station in dc, the Mullet World Trade center and has done work for Westfield. Next we have with us my friend Jay Norris, who is co founder and CEO of Guest, a tech platform that powers the new retail and we're going to talk to Jay today about what that new retail is and he is an innovative leader who uses his creativity and imagination to uncover opportunities in today's challenged retail and real estate industries. Jay has a talent for building relationships and making strategic connections. He's a serial entrepreneur who began his career in the music business for Clive Davis, Arista Records and later founded Tastemakers Media. Jay brought his experience and lifestyle and experiential marketing to commercial real estate. His real estate brokerage career flourished as director at Marcus and Millichev and then Eastern Consolidated, representing retailers, restaurants and office tenants throughout New York. Jay leverages his ability to make connections and utilizes his industry knowledge as he identifies pain points and imagines strategic software solutions. And last but not least, joining us from New Orleans I believe, although in this virtual world he could be on a beach for all we know. Louis Sterling has been active in real estate acquisition, development, brokerage and operations for the past 45 years. He founded Sterling & Associates in 1981, a commercial brokerage and property management firm based in New Orleans. They have investments all throughout the Gulf South. He's been involved with the acquisition, development and management of over 15 million square feet of property. So it'll be great to get his perspective from the landlord side. Although he's retired from that company since 2017, he continues to serve on their advisory board. His current activities include leading the Sterling family office, Sterling Capital Advisors and Malbus Plantation Incorporated. He's also a fellow CRE and has served on our Executive Committee Board of Directors and chaired the Finance Committee. So thank you Louis for your service there. Okay, so with that Tom is going to give us a backdrop some slides that he's prepared with a really fascinating survey that the ICSE membership helped generate. So we're looking forward to to hear that and then we'll get right into the discussion.

Thanks James and good day everyone. It's a real privilege to be with everyone and it's great to have this opportunity to collaborate with cre and we in fact do have a lot of joint members. So it's great to be with all those members. Today I'm going to share a series of information I think will provide some context to our conversation today. One, about kind of the consumer outlook, two, around kind of the business outlook and three, just some core facts about the industry. And obviously retail is an industry that's talked about all the time and is in the media. And there's a lot of different perceptions and perspectives around where retail is. And so I want to share a little bit of perspective in regards to what the real facts would say, what is the data underlying the industry. I do want to provide just one kind of main talking point which is that ICSC is generally optimistic about the future and particularly as we look to the second half of 2021 and into 2022, there is a significant amount of pent up demand. We do believe that retail is going to perform strongly and you've already begun to see that in the early part of this year with pent up demand, with personal savings rates significantly up, with a tremendous amount of capital that's been pushed into the system, particularly in the U.S. economy through U.S. government intervention and involvement. We do feel like there's a strong foundation post pandemic that retail sales will rebound pretty significantly. So with that, let me first start with just kind of a snapshot of the consumer and what is the consumer saying to us? And so Larissa, if you wouldn't mind turning to the first slide. And ICSC over the course of the pandemic has regularly provided input in regards to consumers outlook. This is a summary of the 16th survey that we've done since the pandemic began almost about a year ago to this day when closures became pretty commonplace. And generally these the results are telling us a pretty good picture right now. I would tell you over the course of the last couple of months, particularly as vaccine rollout has accelerated again, particularly in the US that the outlook has improved significantly. So first, just from a general sentiment standpoint, 35% of consumers believe the economy is better than it was a month ago. So when we asked that question previously and these results are as of last week, 35% believe the economy improved over the course of the last month. The majority of the rest, the other 65% believe the economy has remained stable from where it was a month ago. A clear majority believe the economy will improve in the next 12 months. And a clear majority believe businesses should be open in their state. There's some interesting facts here in regards to looking forward. 68% would support if the virus was to spike another series of lockdowns in their state. About 50% are currently engaged in normal out of home activity right now. This is a particularly important data point. The next one and it is something that you'll see consistent throughout the slides. 82% expect businesses to maintain health and safety precautions after people are vaccinated. And almost 50% would increase spending on retail goods and at restaurants if and when they receive stimulus payments. And obviously the stimulus payments are beginning to be deposited in people's accounts today. What are consumers doing? 36% are shopping in a physical store for non essential goods. Obviously the clear majority of folks are shopping in stores for essential goods. That number has been growing consistently. And so by shopping we don't mean just one, you know, one visit that people are consistently beginning to browse and shop in stores for non essential goods. About 35% are dining indoors at restaurants and 29% are shopping inside at a mall. And again post pandemic or post being a person being vaccinated. 85% expect to continue to wear a mask in public places. And what that means was that when they the question was asked in the context of when you are vaccinated. So that's not suggesting that others have been vaccinated yet, but when you are vaccinated, 85% will continue to wear a mask in public places, 85% expect to continue to social distance, 81% will avoid crowded places, and 71% will only get together indoors with people living in the same household. Again, that's not post pandemic. That's once they've been vaccinated. And that's, I think these data points are increasingly important, are very important because it suggests that while vaccination will ramp up and we will begin to feel better that the behaviors that people have become accustomed to during the pandemic will continue for some period of time. Now, what are businesses saying? If you wouldn't mind turning to the next slide, Larissa, we did a survey just recently and did a report that you can find on icsd.com that talked about outlook for the next really two years from a retail and a consumer and a commercial real estate leader's perspective. And I just wanted to share some samplings of some, I thought, interesting data points from that report. About a third of small retailers implemented Click and Collect. And I would have to say that all of us should be pretty amazed at the performance of small business throughout the pandemic and how quickly small businesses adapt it. They have obviously gone through a tremendous amount of disruption. No sector just generally has been more disruptive than small businesses in our industry and in all industries. And I think small business has done a pretty good job despite some pretty significant challenges to adapt. 88% of shopping centers were being used to fulfill online orders, reconfiguring parking lots, et cetera. And then importantly, and nothing speaks to Omni Channel more than this statistic, 99%. So virtually every retailer fulfilled online orders to some degree in their store. So literally every retailer used their store in some way to fulfill online order. So Omni Channel and this concept of conversions is really here. And of course, the acceleration of trends that existed pre pandemic really took hold during the pandemic. And then as you look to outlook and safety, nearly 6 in 10 commercial real estate leaders expect a return to pre pandemic levels by the end of the year, pre pandemic levels being foot traffic within retail centers. And 55% of retailers expect to return to pre pandemic levels by the end of the year. So pretty strong. And then 80% of small commercial real estate firms are likely to continue the use of Plexiglas barriers, et cetera. Back to this concept again, this is post pandemic. They expect to have those safety measures continue to be in place. And so both from a consumer standpoint and from a business industry leader standpoint, I think you see some pretty consistent trends. One, a fair level of optimism, an expectation that, you know, we will get back to some sense of normalcy from a business activity perspective post pandemic, but a real clear expectation that a lot of the health and safety measures that have been implemented during the pandemic, and I would also say things like curbside pickup and click and collect, et cetera, are going to continue post pandemic for the foreseeable future. Some trends like curbside pickup I think will be here forever. Now I want to switch gears a little bit and just give you some raw data. And these are facts that are not meant in one way or another to kind of be positioned positively or negatively.

I'm just going to give you the.

Raw facts about the industry as it exists today. So if you would turn to the next slide, Larissa. And this is the composition of retail sales. These are US Numbers. And on the bottom what you see, these numbers, by the way, come from the U.S. census Bureau. They're not ICSE produced numbers. These are the government's numbers, the government's data. And ICC has a very close relationship with the U.S. census Bureau and works with them to disaggregate information. But these are official government numbers. And on the bottom you'll see the first line being total retail sales as they reported, including gas and auto, excludes F and B because restaurant F and B sales are never included in retail sales as reported by the government. And the second line includes auto but excludes gas. And the third line excludes auto and gas. And of course F and B. That line in my mind is the most relevant line because it really takes out auto and gas, which isn't really specifically relevant to what we're going to talk about today. And then you see the deconstruction of some elements of retail sales and F and B and you can get a sense of the size of them relative to the overall retail sales environment. And I share this with you because there's some pretty important things that were happening pre pandemic and then things that happened during the pandemic. And first and foremost you can see by that green line, I guess it's more of an aqua line, this not true Irish green on St. Patrick's Day that you saw a pretty significant growth in F and B from 2016 to 2019. And that was a very huge obviously trend that was happening in consumer behavior. And as I'll show in a second, a big trend that was happening in shopping centers to react to that consumer behavior. And then of course the bottom fell out during the course of the pandemic because of social distancing measures. And then look at the bright red line. And that's true pure E commerce sales. And so these are, this is the number from the US government and what you see as a percentage, clearly E commerce sales were growing at a fairly rapid rate from 2016 to 2019. Still a relatively small number as it relates to overall retail sales. And still even in 2020, a relatively small number to overall retail sales. About 11% of Line 3, but a huge growth, not surprisingly, because of social distancing measures. And then when you look at the, you know, the gray line at the top, you can see general merchandise grew a little bit in 2020, and that's where essential retail would fall. And then look at apparel and you obviously see apparel being relatively flat for the most part from 2016 to 2019, but a huge drop in 2020. And so the point of all this is that while there's a story about retail, when you break it down a little bit into sectors, even at this high a level, you can see kind of the impact of the pandemic. And so it's not a one size fits all, it's not a one story for every subsector within retail at all. And then if you turn to the next slide, this gives you a sense of just physical retail shopping centers and the distribution of GLA gross leasable area. And what was it composed of? And as you look back in 2014, you know, almost three quarters of GLA was related to classic retail. 6.9% to food and beverage and 19.5% to non retail, non food services. You know, whether it's gyms, healthcare, entertainment, anything that's non retail, non food. And then look at 2020 and a huge change and remember how big this industry is. I mean, we talk about physical retail that every town, every community across the US and Canada and across the world. And as you look at the change in the curation of the mix of GLA over just that relatively short period of time, you see a huge shift away from traditional retail and towards F and B, now at 8.3% in 2020 and towards services now at 26%. And that was, you know, quite frankly, an industry wide strategy. That was something that the industry was doing to react to consumer behavior and consumer demand. And they were doing it very effectively. Of course, those two at the top of the bar chart there, services, non retail, non food, and F and B were the two most significantly hard hit by the pandemic. And so the strategy of moving towards food and beverage and moving towards services was well thought out and well being well implemented, but of course was, you know, significantly impacted by, you know, the pandemic for obvious reasons. So what does that mean for occupancy? Which is something that is obviously talked about all the time if you go to the next slide. And so this is the, this is the picture again of occupancy costs, the raw facts. And as you look at the industry overall, you can see a drop in occupancy from 93.4% in 2016 to 91.9% in 2020. You know, a meaningful drop, but certainly not the bottom is not falling out of the industry. But then if you deconstruct it between open air and malls, you can see that the majority of that drop in occupancy has happened in the mall sector and not all malls, clearly. And we all know the distinction within the marketplace of different types of malls. But that is where some of that go back to the conversation about retail sales and apparel and where we saw some of the stresses in the system that is particularly most acute in the mall sector, where a lot of those types of retail resided. And then finally, if you go to the next slide, this just gives you a sense of openings and closings. And we're in the time of the year right now, particularly in the first quarter of every calendar year, where there's a lot of media around announced openings and closings. And I wanted to give you a picture of what has happened over the course of the previous five years. And as you can see, back in 2016, basically, openings and closings were about the same, and you started to see that that gap grow in 2017, closed a little bit in 2018, widened significantly in 2019, and then obviously significantly widened in 2020 due to the pandemic. And so there is some stress in the system. But again, go back to where we're seeing stress in retail sales, the drop in retail sales and the sectors that are most challenged within the industry. And then I just thought it'd be interesting to show you kind of the decomposition of the last six, both in from August to January, of announced openings and closings. And it's important to stress the word announced because announced means announced. It doesn't mean actually effectuated. And so particularly for those closings that are presented here for 2020, that does not necessarily mean that they've actually closed the doors yet. It just means that they plan to have some closing. And then finally, if you go to the last slide, another item that's talked about a lot is at this time of the year, particularly in the first quarter, is retail bankruptcies and the related impact upon store closures. And obviously you can see in 2020 was a particularly challenging year for retail bankruptcies. Again, a lot of that driven by the pandemic. And you can see the impact upon store closures of those bankruptcies. So that's a subset of the announced store closures on the previous slide. 70 bankruptcies announced in 2020 that related to about 4,974 announced store closings. You can see pre2020, the number of bankruptcies were relatively similar year over year. And then if you look at what stores or what retail is being significantly impacted by those announced bankruptcies and store closings, you can see the decomposition apparel and footwear. Again, back to that, you know, the decomposition of retail sales. That consistent theme, very little impact upon discount department stores, grocery, etc. Again, not all retail. The story around retail is not all the same as we're in the first quarter of 2021. Bankruptcies in January were actually relatively small, not just given the environment we're in, but even relative to historical levels over the course of the last decade or so. There's only four announced retail bankruptcies in in January 2021. So I shared all that information just to provide some context to today's conversation. I thought it'd be useful and hopefully informative. Again, ICSC and please go to icse.com I know that these slides will be available on CRE's website. Post the call today. But we have a lot of other data and information that you're welcome to get@icse.com and access at any time. But we are, despite some of the challenges in the industry, back to the common theme I shared at the start. We are optimistic that as we migrate out of the pandemic and the vaccinations continue to accelerate, that retail and quite frankly be the overall economy will be relatively robust in the second half of 2021 and into 2022. So with that, I'll turn it back over to you. Thank you.

Thank you, Tom. That was fantastic. Thank you to your organization. Just incredible information to set the stage. And before we talk about where we're going and how to reimagine retail, we have to talk about where we've been and a lot of that Data and survey is real time, so we really appreciate it and for our audience. And we're over 500 strong right now. Thank you so much for joining us today. And I am looking at the Q and A function. I know we did answer some of those questions during it. But yes, there will be a recording of this presentation that, you know, so much great content here that we'd be happy if you shared with friends. And you just heard from Tom that you can go to the ICSC website to get copies of the presentation. Tom, the only other question I saw came in is just how big was this survey? How many people participated just so they can get a sense of the audience responding?

Yeah, it's about 1,000 people. And again, we've done the Coronavirus consumer survey is 1,000 consumers every two to four weeks. And the business leader survey was 400 business leaders kind of effectively evenly distributed between consumer real estate and retail.

Fantastic. You definitely gave us the pulse there. So thank you for that. And John, I know you had a big part in the preparation of this as well, being the chairman of icsc. So after hearing. It definitely seems that many would think that Covid was the demise of many of these retailers. But for some of these challenged retailers, Covid was actually only accelerated the demise. So again, while we're still trying to figure out what happened and then we can get to the future, what issues do you think contributed to these pre Covid struggles? And then how did Covid ultimately impact these struggling group of merchants?

Well, that's a great question, James. And I think when you looked at the statistics that Tom put up in terms of the. The merchandise categories that suffered the most during the pandemic, it's really no surprise. But these are also merchandise categories that are that suffer all the time. And the reason I say that is because if you think about apparel and fashion, it's a very fickle industry. And so the success rate over a long period of time is very challenging for certain retailers. So you always have to stay fresh and you always have to stay on top of your game. And two bad seasons could put you in a lot of financial distress. And so, you know, I think the pandemic, like other crises that have happened in the past, exposes certain businesses to their weaknesses, be it a financial crisis, for example. And this one was obviously different because this was a situation where governments told businesses they had to close. This is what wasn't a lender saying, look, you either, you know, pay your loan or I'm shutting down your business, or a retailer saying, Look, I can't operate anymore because my debt levels are too high. And so, you know, I think this pandemic certainly exposed the situation with a lot of retailers. I mean, Tom talked about the direction that retailers were going, you know, pre pandemic. And you know, it really wasn't anything new because any retailer will tell, tell you that they'll use whatever method possible to get the goods in the hands of the consumer, be it online, be it bricks and mortar, click and collect delivery, whatever it takes. And a lot of them, the majority of them will tell you delivery is an essential, but it's not a money maker, it's a money loser. They can't make money at delivering goods to the consumer home. And so, but they have to do it. And so, you know, the pandemic has obviously exposed certain businesses in the retail sector that were probably weak to begin with and it just accelerated everything and put them in the situation that they're in.

Great answer and certainly explains the, to all that great information that we just received. And I want to get to that optimistic place that I know we all want to go to, but to get there and just kind of dealing with the real reality. You know, Louis, talk about how you've been dealing with some of your struggling tenants and how to help them get through this. I know in our call in advance we were talking about, you know, sometimes you want to be helpful, but you can, you know, you're at the lenders, the lender needs to have involvement as well. So maybe talk a little bit about how you've been navigating these challenging times and how you're helping, you know, tenants get back on their feet. Louis, you're still on.

I had to, I was on mute. Sorry. The key word is flexibility.

And.

You know, given our portfolio in retail is predominantly open air centers, we do have a freestanding drugstore and some freestanding, say drug drugstores and some other freestanding type of retailers. But to specifically answer your question, flexibility. And the biggest challenge has been the small, small restaurants, neighborhood restaurants and you know, they just, you know, they're usually under capitalized anyway and you have to just, just work with them, hold their hand, try and use your best judgment on who's going to survive this anyway. You know, who's really operationally is the kind of tenet that will survive. And they of course also play a big part in this. The really entrepreneurial restaurateurs. They're instantly tables outside, chairs outside, deliveries. You know, they make it like really easy for the customer to keep Buying their food. So. But flexibility is a key word on that financing. That's a whole. I could take up the whole program talking about.

We can definitely. Yeah, we'll definitely circle back on that. And I know Jay definitely, you know, he's got a new technology platform or I shouldn't say it's that new, but on ways to help landlords and tenants and I want to get to that in looking forward. But while we still set the stage, Deb, you know you do a lot of work in the shopping center space and many of them were clearly evolving even before this pandemic. So maybe a little bit about that evolution and then, you know, if you then want to help us kind of make the pivot here in talking about some of the retailers who have repositioned to move forward.

Thank you. Thank you, James. It's true. Similar to retailers, shopping centers themselves have always been evolving. Clearly where we see the demise of some is that they didn't have sufficient vision or capital to get there. Capital is key. So those that have evolved have evolved with changing consumer preferences in response to competition and also anchor and specialty tenant closures. So we've seen a lot of effective reuse pre pandemic. And what were those uses? If you lost an anchor, it was office. And a good example is Fairlane Town center in Dearborn, Michigan where Ford took 200,000 square feet office hospital space. Richmond Mall in Mansfield, Ohio, which was replaced a long vacant anchor with Avita Healthcare and then lifestyle centers. Saratoge has gone around the country and has reused a lot of former Seer space. But I think one that was particularly somewhat exciting was the collections at UTC at Westfield UTC in La Jolla. So you had an ugly box that all of a sudden opens up the entire center. But successful. There are many, many, many examples of successful centers that have been evolving and had the capital to do so. I think one great example is Ballston quarter in Arlington, Virginia. It started its life in 1951 as Parkington Shopping Center. It was one of the first major centers in the D.C. area. It was redeveloped in 1986 as Ballston Commons. Sort of an urban, more fortress like looking structure. But it was well located, it was well visited. And then as people changed the market changed. It was redeveloped again between 2016 and 201819 and it's now called Ballston Quarter. It took the second Macy's, which you didn't need, and they made that into a 22 story multifamily project. The specialty space was redesigned with a streetscape approach and a pedestrian Bridge was created to connect all of the office workers and hotel guests that could come across this busy street and go to the center. There are hundreds of centers in this country where that has happened. What happens to those that aren't responding? Well, if you don't respond, eventually you're going to be an alternative use. You're not going to be a shopping center anymore. So we're seeing a lot of creative uses. And so one of the things you had asked me to talk about is where are we seeing some changes? Well, I think what's important moving forward, and I think that Tom mentioned this in his presentation, is that the retail world is somewhat circular, that you have to have your feet in all areas. You've got to work out things for your consumers so that you are digitally savvy, so that you have a bricks and mortars way of showing goods. But what has happened is that we've seen that evolve over time too. And the owners of shopping centers that know that this is, you know, avail themselves of what is going on in those needs, they're going to be more successful as well. So who's expanding? Well, you know, in the physical stores, it's the, you know, it's Starbucks, it's dollar stores, it's discount stores, it's grocery stores, it's automotive. But online retailers, sometimes it takes them a couple of years to realize that the online experience is not the end all that you need to have an experience that works for everyone. And so we've seen a lot of really exciting things that have gone on. The showroom concept is really, really exciting to me. Blue Nile Jewelry, they have about eight stores right now. They'll have 55 physical showrooms in three years. I think also the ones like Indochino, where you can go in, you make an appointment, in two weeks you can have your suit. They have over 50 locations. Ball and brands. The luxury bedding, they only have three, three showrooms, but they are in 21 Nordstrom's. And we spoke about this earlier, that's an exciting thing too because the Nordstrom, you know, if you read the press, oh my goodness, you know, are they going to be around in 10 years? But they are also innovative in what they are doing. Target is putting Ultas and Apples in units in their stores. You want to keep, you know, your shopper in there as long as possible. And if you want to go to the physical store, you go to the physical store. If they don't have what you like, you know that you can get it delivered to your home. If you order it and you need it right away. It's beneficial to both the retailer and the customer to be able to do the click and collect. You know you can. It costs less for the retailer and you get your goods quicker. So I think that there are a lot of innovative things going on, but I think the key to shopping centers and retailer success is innovation. It's reimagining, it's seeing the future and keeping your finger on the pulse of the consumer.

Could not agree more. I'm glad we picked the right name for the topic of this presentation today. But yeah, you gotta evolve. And Jay, I know that that's what you've been doing your whole. So maybe tell the audience a little bit about your technology platform that's allowing landlords and tenants to come together and launch some of these new tenants and get them on their feet during this challenging time. And then maybe the same question I asked Deb is what are some of the bright spots? What are some of the tenants who are taking this opportunity to grow?

Okay, that's great, thanks. I want to thank everybody for having us here. As James mentioned earlier, my name is Jay Norris. I'm the CEO and co founder Guest Platform. What is guest and who is Guest? Guest is a team of retailers, property owners, hospitality experts and technologists. And what our overarching mission is is to foster trust and transparency amongst property owners and their tenants for the ultimate goal of helping all businesses thrive. And that's what our vision is guys. And you know, let me tell you what we built and talking about innovation here, what we built is a third party verification platform that provides a property owner with a view of their tenants daily sales performance all on one unified dashboard. See it? I guess we believe that commercial real estate ecosystem is comprised of a lender, as you guys mentioned earlier. Lewis didn't want to talk about it. Lender, landlords and their tenants. But you know, we are all driven by consumer spending habits as Tom mentioned earlier in his presentation. And so what our team has decided to do was to build a performance analytics tool so that all the players can benefit and make qualified decisions moving forward with utilizing pragmatic and real time sales data that we provide. Now to answer your question, there's numerous ways these are happening. You've been hearing about pop ups, they're happening all over the place. As Deborah mentioned, they're happening everywhere. But now we see an influx of digitally native brands who have never tested brick and mortar, seeing this as an opportunity to dive into the market. Right now we're seeing that A lot here in New York and all centers all over the country. They're creating new specialty leasing divisions, incubator labs, and you're seeing all these kind of these test environments going on. But also we're seeing that, you know, you can utilize our platform to test and then land on a fixed rent deal after that. So a lot of. A lot of property owners want to use our platform for that, and so they can get that transparency up front in a short term and then figure out how to move forward.

That's fantastic. And I had the chance to demo your latest technology, and it's amazing where both landlords and tenants can see the performance by day, and you can structure a lease around it to try to get them to the point where they want to lock in. For the tenants also to know, hey, I got 10 locations. What are the best performers and how do we grow on that? So really exciting to see on that.

Yeah, no, excited about that.

So, Tom, just again, thinking about moving forward and how we do this, I will say that the one thing about your survey that was a little troubling to me, when you've got over 80% of the people saying that they, even with a vaccine, they don't want to come back into large groups. And for me, and maybe I'm just being a little Pollyanna, thinking once the vaccines are out, everything goes back to normal, but I'm thinking about how we're gonna go do what we do at your convention in Vegas. I mean, the whole point is being out there with tons of people running into people, not just at the convention center, but at the events, the parties, going to hear great speakers that you put on. So how are we going to do that if the majority of people are saying, look, we don't feel comfortable even post vaccine gathering en masse and thinking about how these venues are going to accommodate large numbers of people.

It's a great question.

I actually was quite surprised by those results as well. But I think if you ask the question in somewhat of a vacuum, you're vaccinated and you're not confident yet that, you know, a large number of other people are vaccinated, you might answer it that way. You know, quite frankly, there's also still restrictions in place in the way people, you know, can behave, etc. You know, I kind of. I'm very. And maybe I don't want to be Pollyanna, but I'm fairly optimistic that once we get to, you know, a high percentage of people vaccinated, that we're social beings and we're going to want to be back and interact socially. And I just look at the behaviors of people when they've been given a taste of, you know, some relaxation and restrictions of social distancing, you know, at very anywhere in the world, quite frankly, you've seen people flock to get back out shopping and going to restaurants and so forth. So I'm fairly confident that that will return. But I do think, I do think some of the aspects which are probably good things, quite frankly, you know, the visible and nature of sanitation and sanitation stations and hand wipes and, you know, some level of queuing up and so forth is probably a smart thing. And I don't think that, I don't think some of those less obtrusive things will go away because it's been a year and it's been a dramatic year. I mean, this isn't just a year, any normal year. I mean, we've been what we've gone through as a society, as a global society. And I think this is all over the world is not something that's going to go away easy, that those habits are not going to go away easy. But I think the broad sense of people still wanted to get together and congregate and so forth is, is ever present. And I'm, and again, I'm a fat, you can tell by the presentation, I'm very much a fact based kind of guy and a data kind of guy. And I also, when I look at the long term things, when you look at demographics and things of that nature, you know, millennial growing, millennials beginning to raise families, buying homes, those types of things that drives consumer demand more than anything else. When you buy a home, you get married, buy a home and have a kid that you end up buying a lot of stuff. And you're starting to see the millennials do that in droves. And quite frankly, suburban living and those types of things have really become valued throughout the pandemic. So I think all of that will contribute to, quite frankly, positively contribute to retail going forward as well, once we get past a, you know, obviously a pretty dramatic period of time in global history.

Thank you. I really like that answer. And I think what would be interesting, I mean, and again, the fact that you've been doing this survey throughout, you know, to check and see, you know, how that comfort level, you know, really shows in the numbers as we move towards herd immunity. So, yes, I'm hoping for that portion of the response. It's just a snapshot at this moment, moment in time. So, John, the other thing is local jurisdictions. Well, really governmental jurisdictions. And it's great that we have another international panel with us today and thinking about what's going on in Canada versus the U.S. but here it's a very state by state. And I was talking to a friend this week who was down in Florida, supposedly going to a socially distance conference, and then he shows up and everyone's in a packed room with no masks. And it's just, you're going to see different things happen. But how does. I don't think it's safe to assume or fair to say that everything's going to kind of roll out the same way, state by state, country by country. So how much does governmental intervention play into this recovery?

Well, James, I think it plays a lot. I mean, obviously it was the World Health Organization about a year ago that said that declared a, a global pandemic. And none of us have been alive since there has been a global pandemic before. So this is, this was something really new. And as a result, at both the federal level, the state level, the provincial level, wherever you are, the government stepped in right away and said, okay, then we need to lock down everything. And you know, it's interesting your question because I've seen the stories or read the stories about different parts of the United States. Florida, for example, I guess it's spring break down there right now. And, you know, younger people are having fun not wearing masks. The last time I checked, the pandemic has not been declared to be over. So we still are in a pandemic. People are still getting Covid. People are still dying from COVID Yes, people are getting vaccinated, but we're not there yet. So I think I share Tom's optimism.

That.

We are going in the right direction. We're really hopeful that we can hold our recon conference in December. And we're hoping that people that come are obviously vaccinated or are prepared to protect themselves. But the government's obviously have had a lot to say about who can do business and who can't. And so, you know, you look at Canada and United States, I mean, the border shut down. It's been shut down for a year. So you can fly back and forth, but you've got to quarantine yourself. If you come back to Canada for 14 days and you've got to stay in a hotel for three days, a lot of people don't want to do that. So, you know, until they start to. And the messaging keeps getting to be mixed. It's very inconsistent. And I think it's confusing people beyond belief. And until they get their act together and I, and I understand where they're coming from because the information that is coming out from the medical experts that are doing all the testing and what have you, I mean there's just this recent dialogue with the AstraZeneca vaccine. People are confused about blood clots or no blood clots. Should I take it or not take it. So a lot's going to have to happen before things stabilize.

Louis with everything going on, there's no doubt been disruption. But disruption also creates opportunity and thinking about the new world of retail. Are you still a buyer and if so, what would you be looking to redevelop or build today?

Well, I don't think we'd be looking to build anything today unless it was pre leased. From a retail perspective, we are building medical buildings. We have our portfolio historically when we started the business it was probably 99% retail and over the years we've migrated to probably about 50% retail and then we have pretty much every other kind of category. And where we are redeveloping and re tenanting our portfolio is a lot of non traditional retail where clinics or other type of service users. So I wouldn't, you know, when times turn like they are today, it's like we kind of drill down and refocus on the existing portfolio and make sure that we do everything that is possible to keep it as healthy as possible. And so that's where we are in that we're sort of divided up into two categories such as this presentation. One is all right, what's the future going to look like? Where are we going and what do we need to do to stabilize? Keep the we're pretty lucky in that I think 90 we're back to 95% of what our revenue was as far as rental income was pre Covid but and we had a good balance of loan to value. Our portfolio was probably about 55% debt and so we and we had a lot of cash reserves. So we were in a good spot for something bad to happen versus other people. We didn't have very many CMBS loans. We have a few which to me that's not really user friendly for stress in the marketplace. CMBS is not the way to go. So from what are we doing today? Fighting the fight of the pandemic which is to me we got as everyone said, it's not over yet. It's not been declared over. And I think this fight is going to be going on from a property perspective at least another Year, because there's still no clarity. I mean, we have Belk in our portfolio. We had JCPenney in our portfolio. They both are bankrupt. I think Belk was bankrupt for two.

Days.

And I don't remember how long. But they're both out of bankruptcy. But as far as the financial institutions are concerned, they're still bankrupt. They put them on the watch list or the, the big red X for at least 12 more months. So when you go to refinance a property, even though they're out of bankruptcy, they're treated as if they're in bankruptcy. So there's all sorts of complexities in the daily fight now. Where's the future? I think the future, and we've all touched on it, we have to be prepared for smaller boxes. I think tenants, they're looking for flexibility now because they don't have the answer. They just know that they got to.

Change what they're doing.

So. So we know we have to be flexible. So what I think, I think parking lots are going to look different. I think you got to have to have more reserve spaces for pickup. You know, those aren't going to go away. I think smaller boxes just, you know, we were moving that way prior to Covid. I mean, we've touched on that, too. There, there's. There's this whole Covid thing has, has accelerated a lot of the changes in the real estate industry. You know, we had already started. I think we have some Tesla charging stations in some of our parking lots that, you know, we had like 10 spaces. Boom, they're all set up. Well, I think, you know, that was moving that way anyway. I think the whole dynamic of how you use parking lots and the whole functionality is just going to be completely different. Tenant mix is going to be different. And when you start playing with all those things, then all of a sudden you start playing with lease provisions. And what do co tenancy clauses look like? What do. I mean, it gets. It starts sitting on loan documents. Lease documents. And God help you when you have to deal with zoning and planning, because they're usually working way behind as far as. Because tenants and landlords have to be really nimble and quick and reactionary to what consumers are doing. And consumers are fickle, as the discussion on apparel was a few minutes ago. So again, there's a lot in what I just said, and you can drill down on probably 100 of those little tidbits. So I'll turn it back over to you.

Perfect.

Michelle. I know. I mean, this has been fantastic. I know we're coming up to 2:30 for our end time. And I just, I'm so grateful to our panel here. You all have just been fantastic. I mean, this has been an amazing discussion and you know, it's certainly been a challenging past year, but this certainly has made me feel a lot more optimistic for the, for the future. So again, as I said from the beginning, I hope I'm going to be seeing you all very soon at one of these upcoming conventions and I have no doubt that we'll get there soon. So Michelle, you want to take us out with any last thoughts?

Well, again, I concur, obviously, and I echo, this has been a great, great session and I'd like to thank you, James, for your quality of moderation here to moderate this, this session. I'd like to thank so much our panelists and our speakers, Deborah Tom, John, Jay Lewis.

There's no question that retail is always evolving and we need to evolve with it.

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