Magazine article Journal of Property Management

Money Grows on Fee$: Mall Managers Can Increase Revenue with Specialty Leasing Programs

Magazine article Journal of Property Management

Money Grows on Fee$: Mall Managers Can Increase Revenue with Specialty Leasing Programs

Article excerpt

The history of "specialty leasing" is said to have begun some 30 years ago at Fanieul Hall Market Place in Boston. The concept was to add an element of surprise to the property's common area, by lining the streets throughout the property with craftsmen and artisans with push carts selling their wares. At that time, additional income was not the driving force.

What began as a way to add local flavor to the retail mix and give entrepreneurs an outlet to jump-start their business, has grown into big business for both entrepreneurs and REIT developers, It's grown into a national business for some entrepreneurs who started out doing business at one or two local malls. Even some national retail chains such as Brookstone and Hickory Farms rent common area space during peak selling seasons. For the developer, most employ a leasing team per mall location or geographically whose sole purpose is to lease the common area space by finding the latest trend in products or the highly desirable "must have" merchandise that jumps out at you as you walk through the mall. The objective is to find products that sell with rents that maximize the value of the space.

For the Chicago-based General Growth Properties, specialty leasing can be found in virtually all of the more than 160 malls the company owns and manages. These programs have grown well beyond the typical "push cart" traditionally used to provide space to entrepreneurs. The company's specialty leasing revenue has grown more than 10 percent for the past three years and has expanded revenue generating activities in the following areas, most of which consist of deals done on a short-term license agreement.

* RMU Leasing. This program refers to leasing space to a business on a Retail Merchandising Unit (a modern day push cart), which is owned by the mall and leased to the business as part of the license agreement.

Typically, the capital invested by a mall purchasing RMUs generate a return on investment in a one-year period, based on the size of the program and projected license fees from leasing the units.

* Kiosk Leasing. This revenue generator refers to leasing space to a business on a Kiosk Unit, which is usually owned by the business. The mall space is leased to the business as part of the license agreement.

General Growth derives approximately 90 percent of its specialty leasing revenue from RMU, kiosk and temporary in-line leasing and the remaining 10 percent from other alternative revenue including:

* Vending. Vending income is generated by leasing space to companies providing coin-operated dispensing units such as gumball and candy machines as well as kiddie rides. …

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