Ancillary Retail

MAY 2018

Ancillary Retail magazine is the retail industry’s resource for ancillary income markets. Ancillary Retail will provide relevant news, best strategies and practical tips to help developers and retailers grow and sustain successful businesses.

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30 Ancillary Retail | May 2018 Federal Realty Mines Next-Generation Talent for Exciting Pop-Up Tenants Mike Kelleher says the keys to specialty leasing are flexibility and relationships. By Lynn Peisner T he next great product could be anywhere, just wait- ing to be discovered. A conversation overheard in a coffee shop about a small business owner selling flip-flops out of the back of a tricked-out Jeep Wagoneer in Cape Cod piqued the interest of the team at Federal Realty Investment Trust. A few years later, that grass roots small business, Wears Woody, now occupies pop-up space at sev- eral centers in Federal's portfolio, not to mention a current road tour en route to several properties. Pop-ups with interesting stories like Wears Woody com- plement inline store merchandise, create customers and incubate new retail concepts that can turn into permanent tenants and, ultimately, drive up sales per square foot and increase NOI. But getting from A to B in the entrepreneurial pop-up world is not always a straight line. Finding the "just right" temporary tenant requires a great deal of legwork, fi- nesse, an open mind and, most importantly, flexibility. That's where Mike Kelleher's expertise comes in. Kelle- her has been leading Federal's specialty leasing — in- cluding pop-up spaces, carts and kiosks — for the past 10 years. In addition to working alongside national brands, he trail-blazes in search of retail concepts like a talent scout searches for the next great undiscovered sports or movie star. It takes patience and curiosity to find tenants that are au- thentic and exciting and that gel at a particular center with its specific market demographics. In an ideal scenario, for example, a shopper might come to a Federal property to visit the Apple Store. But along the way, that tech-savvy shopper bumps into an investor raising money on Kick- starter for an innovative new virtual reality headset. Shopping center owners that want to have the most ap- pealing pop-ups and temporary tenants now curiously find themselves playing an active role in discovering and incubating fledgling business ideas like these. "We watch 'Shark Tank' every week, and we always look at Kickstarter," Kelleher says. "We're out there on social media, e-blasts, we run print advertis- ing. Even the old-fashioned way of basic prospecting is still very productive. If I'm traveling, I take a lot of time to go to retail districts and just walk those areas." Once sourced, these types of tenants require a new kind of hands-on leasing skill set that differs greatly from perm leasing. "The landlord's job today is to be a partner," Kelleher says. "We've seen what works and what doesn't work. A landlord who just does the deal then says, 'ok, good luck' will experience a high rate of failure. We may be the only ones who don't have a rate card and who don't have specific budgets for a retail space. I tell people this every single day, and I'll say it 20 times today: Rent is the last thing we're looking at. Yes, ultimately we do this so that we can collect rent, but how can we do the deal so that the tenant is where they want to be, they're in the right size space and they have everything they need to be successful and meet our merchandising mix just right? After all that is accomplished, then we do the rent. That's the thrust of this business." In addition to incubating smaller, up-and-coming busi- nesses, particularly those moving from online or an Etsy shop to bricks and mortar, Kelleher is seeing an increase in established national brands using pop-ups to test mar- kets before they commit to a five- or 10-year lease. National names also sometimes look to short-term leasing because they only want to be in a given market for a particular sea- son. For example, Restoration Hardware brought its annual warehouse sale to Assembly Row in Somerville, Massa- chusetts, for six weekends starting on Memorial Day and running through July 4, 2017. Kelleher and his team were able to turn a conversation with the retailer about available Wears Woody pop-up display at Linden Square in Wellesley, Massachusetts. MANAGEMENT PROFILE Mike Kelleher Federal Realty Investment Trust

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