In recent years, there has been a lot of talk about the retail apocalypse due in part to noteworthy bankruptcies, massive store closings, and the unprecedented number of store vacancies across New York City.
Real estate giant Brookfield Property Partners made headlines in 2018 when the firm acquired seven storefronts on vacancy-ravaged Bleecker Street in Manhattan’s Greenwich Village for $31.5M at a time when experts predicted a further worsening of the retail climate. Since then, Brookfield has embarked on an ambitious plan to restore Bleecker Street, the once-vaunted retail corridor now plagued with high vacancy rates and declining sales, to its former glory.
As part of the revitalization plan, Brookfield has created a laboratory for new brands getting a foothold in brick and mortar and a rich offering of art installations and cultural programming.
On April 16, 2019, Hal Coopersmith, Esq. conducted a panel with Duncan McCuaig, Senior Vice President of Leasing at Brookfield Properties, who provides insight as to how landlords, large and small, can navigate the new age of retail, the genesis of the Love, Bleecker, and how to work with emerging brands; andDana Glaeser, Founder of Slightly Alabama, who provides the perspective of a tenant on Bleecker Street, why he was attracted to physical retail to grow his brand, and what techniques he is using to bring traffic to the store.
This panel discussion was recorded in front of a live audience at Lincoln Center.A recording can be found at: https://nylaun.ch/bleeckerpanel
A transcript is reproduced below.
Hal Coopersmith: We did a live event at Lincoln Center in conjunction with the Brown University Real Estate Group to discuss the revitalization of retail on Bleecker Street. A little bit of background. Bleecker Street, a shopping mecca of the Sex in the City era, was hit by a lot of vacancy with stores that couldn’t support the high rent. Brookfield, one of the largest landlords in New York City, bought up seven storefronts on Bleecker Street and kicked off an innovative shopping corridor. On the panel we speak to Duncan McCuaig, Senior Vice President of Leasing at Brookfield, and Dana Glaeser, founder of Slightly Alabama, a tenant on Bleecker Street, about all the exciting things that are happening about retail generally. Before we start, if you are a regular New York Launch Pod listener and have no interest about real estate, this is probably not the best episode for you and I invite you to check something out on the feed. But, if you are passionate about real estate, there are a lot of exciting things that I think you’re really going to love. So let’s go to the episode.
Thank you, Kwame. I also want to appreciate Kwame here. The Brown Real Estate Group would not exist if it weren’t for Kwame and there’s a lot of work that goes behind the scenes. Kwame is also a directory of real estate, a human directory of real estate. There are a lot of new faces here and if there’s someone that you want to meet, odds are Kwame knows them and can introduce you. Really, a lot of hard work behind the scenes is done by Kwame. But like he said, we’re here to talk about retail and retail being dead and there’s a lot of talk about the demise of retail. Maybe it’s the vacant storefronts around New York City. A lot of announcements of store closings. In one week there was an announcement that 300 stores were going to close. That was between Gap, JC Penney and Victoria’s Secret. Then a few days ago, UBS came out with a report that said by 2026, 75,000 stores will close, but that’s the lens that we operate in and Bleecker Street is a great example of the demise of retail and perhaps the rebirth, because there was about a 40% vacancy on Bleecker Street and Brookfield kind of swooped in and changed that around, and don’t tell these two guys that retail is dead, because we have here Duncan McCuaig, who’s the Senior Vice President of Leasing for Brookfield, and Dana Glaeser, who founded Slightly Alabama, a tenant on Bleecker Street. I thought it’d be really fun to have a landlord and a tenant talk about their experience. That’s already getting a laugh.
Duncan: We get along.
Hal: They love each other.
Duncan: Just pay your rent Dana.
Hal: Talk about their experience, what they’re doing, what retail works and how Bleecker Street has gone through a rebirth and this is normally the part where each of the panelists introduce each other, but we have a presentation that Duncan wants to do and we have a video to show what Dana does. I’m Hal Coopersmith. I’m a real estate attorney, and also, this conversation will be put on a podcast, the New York Launch Pod, which is something I’ve been doing. So why don’t you take it away Duncan.
Duncan: I promised Hal a couple of things tonight. I would show up generally on time, wear something semi-respectable. I’m reluctant to turn this into an infomercial on Brookfield, so I won’t be doing that, regardless of what’s on the screen, and I’m not going to babble on for too long. But he has handed a microphone to a real estate leasing guy, so anything can happen. But, the program quickly, and I thought it made some sense, just to set as context and background what Brookfield does, retail wise, very quickly around the world, because I think that lends a little bit of background to what we did on Bleecker Street. We closed on that property or those properties, the seven storefronts about a year ago and we all got a lot of calls and emails and texts saying what is going on? Why is Brookfield doing this? The answers are going to lie in a lot of what we talk through tonight, and so far, it’s actually been a great success. Part of what we’re talking about is creating sort of a test lab for retail. We handle and own some of the biggest retail properties and most successful, money delivering properties in the world, but we thought this was a great idea. Something that we could kind of dive into and create this test lab for retail, and move some of these smaller, really entrepreneurial, nimble retailers from a digital platform to a storefront. So with that, again, this is just background. Hal scared me when he talked about retail dying because we own about $25 Billion worth of it and I am a shareholder, so I don’t want retail to die, but that’s a combination of several acquisitions, namely GGP. Between GGP, Rouse, what we own, alongside a lot of our office properties, you’re up to about 150 million square feet of retail in the United States. Ala Moana Center in Honolulu is 2 million square feet that throws off over $1,000.00 a square foot. These are just some of sort of our, again, biggest, best known retail properties, again setting the background for what we did at Bleecker. Believe it or not, the SoNo collection, this is interesting. This is a mall development. We are so bullish on retail that we are the only developer in the country that is currently actually developing a suburban mall property from the ground up. SoNo is in South Norwalk, Connecticut, a million square feet. It’s going to be spectacular. But again, we believe in retail and we’re putting our money where our mouth is in Connecticut. Brookfield Place, probably a lot of you have been there. That was a fantastic $300 million redevelopment. The retail there was terrible, it was awful. When it was the World Financial Center, the place basically closed at 6:00pm. So when half the complex, and that’s 8-1/2 million square feet, when one big lease expired for half of the complex, one of the big thrusts was to recreate the retail at Brookfield Place and we did that. It’s been a great success, and that drove all of the office leasing that we did above in the office towers. Manhattan West, that is underway. Those are renderings. This is a 7 million square foot development on the West Side, adjacent to Hudson Yards. Most of that retail is going to be opening next year. It’s about 250,000 square feet. Again, it’s adjacent to the office, but we’ve signed leases there with Whole Foods, Peloton, Danny Meyer. We’re curating a food hall there now. We’re going to do that a little differently than what we did at Brookfield Place.
There’s another rendering that’s from the roof deck of Union Square Hospitality’s restaurants. So it’s going to be fantastic. And again, to set the scene, this is normally what we do. We’ve gotten good at it. We create places. It’s massive scale. And then onto Bleecker Street. About a year ago, New York REIT was well into liquidation mode. We’ve all heard that story and we bought an office building from them on 34th Street at the same time, their temporary CEO, who was really just overseeing the liquidation of the company, said, I have some storefronts on Bleecker Street, what do you guys think? We said we’ll take a look, our CEO took a look, our head of retail took a look and $31 million later, we own seven vacant storefronts on Bleecker Street, without yet really a plan of what to do with them, and Bleecker Street, as Hal mentioned at the time was really suffering, so it’s 40% vacant and there were about 30 vacant storefronts at the time. So, our marketing team, our retail leasing team and others sort of sprang into action to recreate this end of Bleecker Street and in it, make a real investment in the community, and in the end game, really reinvigorate a street that’s got so much history. So that’s circa 2000, that’s Sex in the City. People talk about Magnolia Bakery and a lot of the filming of Sex and the City is one of the drivers of the dark period of Bleecker Street. Because following that, you had a lot of chains that moved and you see some of them there, Brooks Brothers, Michael Kors, Burberry, etc. Michael Kors and Burberry were our tenants in some of those storefronts. Polo, they sort of took over the street and it wasn’t all good. There was an article from the Times exactly two years ago calling for the death of retail on Bleecker Street. You see it there, swerve from luck shops to vacant stores and the story was true because there were 30 vacant storefronts and that’s just really showing the location of ours. But again, the stats are on there, 40% vacant, that’s just a staggering vacancy rate that’s not sustainable, and this is some of the imagery of the rebirth. So again, we took on a partner, we didn’t really have the expertise to do this ourselves, but we took on a partner, Skylight Studios, who has become an expert in pop up stores, and really utilizing under-loved spaces throughout the city. So, with this vacancy, we thought it was a good opportunity for them to come in, help us find tenants, curate events, invigorate the entire street scape.
One of their big ideas was to partner brands and artists and I’m hoping that Dana can talk a little bit more about this, but each brand that came in and took a storefront had an artist partner that helped them curate the space, build it out without spending a lot of money. This wasn’t about throwing money at a project. We do that often and we do that well too, but this is not that, and we think that that’s worked out extremely well. There’s a project timeline, and I’m not going to bore you with stats and facts on this, but there’s a couple of takeaways throughout that and one that I would look at carefully is the integration with the Chamber of Commerce and the Bleecker community. Any market that we go into, we strive to be a great corporate partner. We’ve done that in Battery Park City, we’ve done it in London, we’re doing it on the West Side of Manhattan now. If you don’t partner with the residents, if you don’t partner with the local community boards, you’re making a huge mistake. We went about it the wrong way a couple times in history and paid for it. But here, we brought them into the fold very early. There are pictures of some of the build outs, and again, this was about bringing in partners, this was about a massive social media campaign, activation and doing events.
One of the requirements, and Dana can speak to this a little bit too, is that each of these retail tenants needs to hold events and activations. It might be music, it could be just a Thursday night get together to show off some of their wares, but that was important because, the entire street scape, again, really needed to be reactivated. There’s an idea of one of the local artists that joined us and did a tree wrapping up and down the street, brand partner programming. There was one of Dana’s events, that holiday night out actually was this past December and it drove about 73% higher foot fall that night than on a typical Thursday on Bleecker Street. There are some of the pictures from that evening. It was a big success and this is probably going to make everybody’s eyes water. But again, it was the power of the social media that our marketing department unleashed, and again, big, big increases in foot fall, big increases in Bleecker Street’s website, things of that nature. And now here is sort of the rebirth. These are some of the brands that have decided or are thinking about dipping a toe back in the water of Bleecker Street and actually, one of the things that we strove to do was to have the Times come back and do a story about two years later, as the neighborhood really started to rejuvenate. We started with 30 vacant storefronts and we’re down to 9. WWD, Vogue and the Times have all done stories now about the rebirth. So it was all gloom and doom, death of retail, on and on. But now the Times has come back and actually talked a little bit about what we’ve done and about some of the leasing and how I think we’re going about it the right way now.
A typical Brookfield approach to an investment may have been to come in, spend a couple of million dollars, blowing up the storefronts, doing new stores and trying to get $500 or $1,000 a square foot. It’s not about that. We’re taking a very long horizon and, again, this is about moving smaller entrepreneurs from a digital platform, perhaps into a storefront and then scaling them out of that store if everything sort of goes according to plan. So that’s about it, except for this one important picture, that’s my dog Molly. She is obviously very cute and she’s in here. She’s not a big consumer of retail, except for some chew toys and perhaps a snack or two. But my wife and I have promised to take her for a walk on Bleecker Street if she’s good for a week straight. So she has that and that’s why she looks so happy in that picture. So I’ve spoken enough, I think.
Dana: They get a chance to get really close to the actual heart soul and the processes of making our products not just pour into you feel like there it goes. It’s not a hard sales message to say, our stuff is made locally when they can actually see the workshop where it’s made. My name is Dana Glaeser. I own a brand called Slightly Alabama. Slightly Alabama is a line of leather goods accessories. There’s your certificate of authenticity. Bags, briefcases that we make ourselves in our own workshop. And then in addition to our store, what we have is a weekly event series. We built an event space in the back of the store, which looks like an old school dive bar. Now we’ve rounded our corner and then we also have my workshop in the back of the store where we teach classes. And then you’re going to put this on top of that. And in addition to me making products. So basically what we have is the primary store for our retail store. We like to do live music on a regular basis. And we get Emily Dot Band playing. It’s an event space that has been decorated to look like an old school dive bar. So we do call it the Slightly Alabama dive. But it’s not by any means the actual bar. So we kind of took it to the next level. We built this formal program called Sip and Stitch, where we teach you five different products and pick five different classes. It’s a social environment, you kind of hang out and meet new people. I’m not a professional retailer, I’m a designer and manufacturer. So by nature, my workshops in the past have been places of community, it is this evolving kind of space. We’ve already built a really strong community here from the locals that kind of masquerades as a store. Fortunately, as a store we’ve also been very successful as well.
Hal: That sets the scene for what Brookfield is doing and what Dana’s brand stands for. Dana, you mentioned that Brookfield wanted to partner with the community. When Brookfield talked to the community, what were they looking for, you know, with that vacant space that they had 40% vacancy. What was the community saying that they wanted?
Duncan: The community was a little quizzical, just because of our scale and size. But, they were looking for a good partner. They obviously wanted the street to be reinvigorated. They didn’t want to see massive chains moving in again. That obviously didn’t work for the last 15 or so years. So while I think they were a little bit guarded, I think that they were happy about our enthusiasm. We jumped right in, we created a plan and we’re sticking to it. And again, Dana used the word authentic. That’s what we’re shooting for. Again, this is not big box retail. This is a lab to see what works. It’s going to be educational for us and by the way, this is an investment as big as we are. We don’t throw away $31 million. We’re looking for all of these brands to succeed and as I said, scale out of this space or do something creative, perhaps in another Brookfield property that’s the same size, but the neighborhood, really just wanted the street to improve and for, for us to succeed, one was going to lead to the other.
Hal: You also mentioned bringing on partners in order to find the digitally native brands, Skylight Studios. How did you find the brands that you wanted the mix and make sure that those brands would ultimately succeed?
Duncan: Skylight was big, actually one of our tenants. I would say out of the four primary tenants, one of them actually came out of a holiday pop up show we did at Brookfield Place. So we have a lot of deep relationships. That’s Margaux, but, the other three big ones were curated and found by Skylight and, again Skylight’s been a great partner. They’re great with events and they’re great at activating under-utilized space. I can’t say that enough. And again, they have these deep relationships throughout the industry, but we were impressed with how they are able to find sort of the perfect mix. Look, not everybody will succeed. We know that the retail world is still shaking out, but so far so good and they’ve been a great partner.
Hal: And Dana, were you looking for a physical retail store or did this opportunity kind of fall into your lap?
Dana: Yes. We started Slightly Alabama in 2013 out of our kitchen on the Upper West Side. So for two years we built 42 items in our catalog, 80 stores throughout the country who carried our products and a very patient wife. I stayed kind of sane through all of that. From that point, we moved into a factory out in Ridgewood, Queens, where we manufactured everything and began building our apprenticeship program. But then what ended up happening, is that the wholesale market started to change drastically and we started to see smaller and smaller orders coming through. We started to see our own popularity grow, the customers were coming straight to us and the ability to own that customer relationship became my next focus. So we did a pop up shop in Empire Stores out in Dumbo about a year and a half ago and it was hugely successful for us at that point. I was like, this is what we’ve got to do. We’ve got to build our workshop in a place where people can see us doing what we do and we can engage with the consumers, build that relationship and own that relationship and not have to rely on third party brands to our stores to carry our products.
Dana: Then we did a little stint down at South Street Seaport for like a month where we kind of built out the concept on a larger scale, and then literally, we were looking at leaving that space and the day that we were told we were going to leave that space, I got a call from Skylight and they said, do you want to talk about having your own store? So it was kind of really strange and that literally happened. I think Skylight called me and then two hours later, we got the email saying, hey, you need to be out in 30 days for what was supposed to be a temporary pop up thing, and within two weeks, we went through all of the presentations, the concept development on our side, the design work, because I think what was cool about it is that Brookfield said it’s your store. You design it. They didn’t come in and say, or Skylight didn’t come in and say, you need it to look like this. So we had total creative control over everything and we opened the doors in two weeks. I don’t think that’s the answer to your question. But..
Hal: And so now that this is your permanent location, as opposed to a pop up, what did you do to get smart about having a physical retail store? Having that vision to make it a success?
Dana: Well, I’m not smarter on it at all right now. Learning how to be a retailer. I mean, I’m a designer. That’s what I started out as a designer and a craftsman and with a background in branding, so I understood that. But being a retailer, is a completely different ballgame. I mean seasonality is something I don’t understand. Literally working seven days a week on it, but also the first thing I did is, I built a dream team right away. I went to a woman who used to work with WWD and Donna Karan and said, I need you to design the store. Here’s the concept. I want you to design it. And I gave her carte blanche. I said, you design it, I’m not going to question you. And then I went to a person who could build relationships with charitable organizations. I said, this is going to be a key to what we do. You run that. So that was kind of the thing I did was to know I didn’t know anything. I would just want to design bags all day, but trusting those people. And then I have a retail director who came from RRL. He was the head of the store for Will Leather Goods for a while. He had a huge background on that and I said, you run that. So that was really what I mean, just learning the logistics of being a retailer. I have a 2200 square foot store now and we carry 25 different independent brands in there, but I’m just a bag designer at the end of the day.
Hal: So that brings up a good point that Dana is new to retail. He’s learning everything on the go. Retail requires a lot of investment, people, time, resources. What are some of the things that Brookfield has done to make it easier on tenants like Dana?
Duncan: The main thing is understanding that these weren’t chains. We weren’t putting anybody into any of these spaces. And again, saying, you’re going to pay us $500 a foot, it’s not going to happen. So, we’ve worked out a financial flexibility for each of our tenants that’s going to allow them to sort of unleash the creative spirits, as Dana said, and not have to worry so much about the financial end of it. Again, this is an investment. At some point we’re going to recoup it. We certainly believe that, but we’re there not to put a retailer out of business because they’re crushed under the weight of a gigantic rent on day one. So that was one of the ideas. Operationally, these storefronts didn’t require a lot. Hal and I talked a little bit about the scale of my company. This doesn’t require a 20 person staff, which is nice, and we did want our retailers to take some ownership of that. If every time there’s a little leak or it’s dirty in front of the store, they’re calling the landlord, it’s really not going to work out. We don’t have a full time person overseeing this. But from our headquarters at Brookfield Place, we help operationally, wherever we can. We’re there always so that our retail tenants, and again, some of them have huge staffs if you’re talking about a national chain brand, but we’re there to help them flourish and not have to worry about the HVAC or a leak in the roof and that also required coordination and a lot of communication with Condo or Co-Op boards. These are several condos structures and actually a co-op structure. So there were some interesting meetings had with the Co-Op board of the ownership of one of the buildings. But again, I think we’ve sort of crossed that hurdle. They trust that we’re there with good intentions and we hope that the handwriting’s on the wall that the entire street and the corridor’s improving, because a lot of the hard work, not of me, but, Brookfield marketing Skylight, the retailers like Dana.
Hal: So with you being on Bleecker Street, Dana, how has that experience been? Why be on Bleecker Street to begin with?
Dana: Despite the fact that there was so much vacancy there. I mean, Bleecker Street is like the coolest street in New York City to be a retailer. If you do what I do, an independent brand who is devoted to building community and to building family within the store. What I do, I mean why wouldn’t you want be on Bleecker Street? I mean the music history, it’s there. I’m a musician, my father was a musician. We have music programming in there we have a partnership with Rolling Stone Magazine. We have partnerships with artists in there. Music is what we do. Bob Dylan happened to do a few things in that area, right? Right around the corner, two blocks from where we are, a shop owned by a guy named Alan Block was a leather shoe designer in the 60’s. He had a shop there and he would often stop doing business and bring in a bunch of musicians from the 60’s and they would just have these jam sessions. It’s cool to be there and not be at South Street Seaport or Fifth Avenue.
Duncan: Brookfield Place.
Dana: I would love to be at Brookfield Place, just because it’s what we are. We’re jeans and denim, a denim and boots brand. We have a bar in the back. We build community and family and that’s kind of the best street to do that. I couldn’t think of another, I mean I love the Upper West Side, but I couldn’t think of another.
Hal: Well, it brings me to my next point because you mention wholesale orders were going down and that’s part of the reason why you wanted to open up a retail store. Obviously, Bleecker Street makes sense for a nice hub for you, but could you see yourself being in other places, being your brand as a retailer and then where would those places be, aside from Brookfield Place?
Dana: Yes. San Francisco and Tokyo.
Hal: Why there?
Dana: Well, I love Tokyo, but it is a great market for a brand called Slightly Alabama. They seem to love Americana brands. I have a couple of friends who have shops over there that are very similar in nature and that seem to thrive and I feel like that’s a place where we could go and bring a really unique idea, a retail concept to a city like that and they would respond well. We’ve received significant, over the past five years, mentions in the Japanese press, so, there’s that. I’ve never been to San Francisco, so I just want to go there and why not start a store in San Francisco? The West Coast, we have a huge customer base in the West Coast, Texas and California are the two largest customer bases outside of New York City, so I think we could do really, really well there.
Hal: You also mentioned being a designer and not having experience in retail, but you’re doing events bringing in community. Did you think about that ahead of time and how important is having those activations at night and bringing that community in as a retailer?
Dana: It was kind of cool that that’s what Brookfield wanted because that’s exactly what I want. Building family and building. Today, I spent three hours on a motorcycle trip throughout the city with two customers that I didn’t know before I opened the store and we’re hanging out. We have people in the neighborhood who fight over who gets to watch our dog when we go out of town because our dog is always in our store. We have devoted ourselves to building community and building family there. I was not going to build a store or build my life around a business if it wasn’t devoted to doing that, whether it was inside of a retail concept or a fifth floor office building or whatnot, and I knew that while social media is such an important part of retail, and I’m sure we’re going to talk about that today and it’s been huge for us, if you don’t build family and community locally, nothing else matters, it has to be done there and you have to devote all of your time and energy to that. Not to the digital space first and hope that some cool people will hang out with you. It’s got to be there and it’s got to be about that authentic experience there and then that other stuff will start to work. We have a strategy around that and we have marketing plans around that, but that’s not the core of, that shouldn’t be the core of any business, that absolutely shouldn’t be the core of any business, regardless of whether or not it’s retail. I spent 10 some odd years in advertising and marketing and the thing that was missing was family from that space and so I was devoted to leaving that completely building my own business and it was going to be about this or I was not going to do it. Unfortunately, or actually unfortunately, because I don’t get a lot of work done anymore because we constantly have our new friends always in the store hanging out.
Hal: Buying things?
Dana: You know what? They do, they actually spend a lot of money in there honestly, but they’re always in the store and I love them, but they’re always in the store.
Hal: And Duncan, you mentioned that from a landlord perspective, activations were important in terms of bringing traffic to Bleecker Street. Do you see that as an important driver of retail on the landlord side that in order to have a successful retail portfolio, that the landlords need to be active, in terms of generating traffic?
Duncan: Oh, absolutely. What we did at Bleecker was really an offshoot of a program that’s been in place, starting downtown for about 25 years, and that’s Brookfield Arts and Events. It’s actually the world’s biggest privately funded arts program. We do about 200 events a year down at Brookfield Place. Again, that is to drive traffic, drive, activation, bring eyeballs, like Dana said, create the family. Pre-9/11, 10,000 people, and again, this is a different neighborhood. It’s a different retail project. But pre-9/11, 10,000 people lived south of Canal Street. That number is about 75,000 now and with all of the great new retail, that gleaming new, nice retail and all the popups and everything that we did at Brookfield Place, none of that would have been possible without the community involvement. That retail definitely would’ve failed. You can’t just support it with an office population, and you need to bring the neighborhood in. And that’s what we try to do everywhere we go. Again, Bleecker Street is just on a smaller scale. A lot of the arts programming, the music, actually one of the spaces didn’t lease right away, so every Thursday, we had music events free, free to the public. It was really just a microcosm, on a smaller scale of Brookfield Arts and Events, which is what we do literally around the globe. Canary Wharf, we’re going to be doing it and then at Manhattan West, and again, Brookfield Place is our flagship. And again, that’s probably about 200 events a year. So again, we need to partner with our retailers, again some of them are those big brands that we know can pay the rent and then others need our help and we’re always there and happy to provide it.
Hal: Dana, you mentioned that you went to Bleecker Street because it made sense because of the music background. Do you think that what Brookfield is doing here is repeatable in other neighborhoods in Manhattan and throughout the country and how, since they have a different vibe, how can they repeat that success?
Dana: Yeah, I think it’s repeatable in San Francisco and Tokyo.
Hal: Kwame, who do you know in San Francisco and Tokyo?
Dana: You know, I think the West Village, and I think Bleecker Street has this unique story, but it’s not, I don’t think it could only happen on Bleecker Street in the West Village. It’s the strategy and it’s the approach. I would assume that part of the strategy would be on finding another great community and figuring out our street or neighborhood and figure out what is it about that street that we needed to tap into. When we became a part of the project, we had to come up with a mission statement that said, what is your tie to Bleecker Street? How can you make a viable connection? Being from Alabama, it was a little bit difficult at first, but when I thought about the way in which music is going to be a part of my brand forever, that was the easy tie for me. And then we started the brand on the Upper West Side and not very far away. So yes, it’s definitely repeatable. Where? I think the Upper West Side needs.. there’s some cool stuff happening out in Brooklyn too. I mean, the DUMBO area is really cool, but I don’t know that that needs revitalization. That’s a question way beyond my pay grade.
Hal: So back to Duncan, you mentioned that you started Bleecker Street as a lab for retail. What are some of the key learnings that you’ve taken from Bleecker Street that you can apply it to the rest of your portfolio?
Duncan: So again, it’s scalability. It’s the partnership. We’ve really tried to nurture each of these tenants. That’s been key throughout this project. You know, beyond that I think that we’re learning and we’ll be passing on that this is scalable. We think that this is a great learning experience for us and hopefully, tenants can take from this and experience where, again, the idea was not to crush them financially at all to start with, but ultimately, have everybody sort of flying on their own and have this be an investment that’s going to work out for us at the same time. Although that’s very much for the next few years in the background. I hope I answered that properly Hal.
Hal: With that, why don’t we open up the floor to question and answer? Hey guys, it’s Hal again. We didn’t have a microphone for the audience for the question and answer period. So I’m going to do my best to summarize the questions so you can hear the great responses. The first question is, how do you think about rent from a tenant economic perspective and how will tenants on Bleecker afford the rent?
Duncan: When a tenant is struggling, a retail tenant will often convert to a percentage of a sales deal or when a tenant is starting out and without revealing everybody’s sort of financial deal with us, there is no base rent on these. This is purely a percentage that partners us with them and that’s the concept again of not crushing a tenant. The 10% is really a moving target. It really is for restaurants. That’s the health meter. But you know, it’s almost like a circular problem. We’ve done such a good job of leasing to some restaurants, of getting a really high rent, that they’ve actually had to close shop. So that is a balancing act. Unless it’s a chain like a Del Frisco’s, but those are some of the lessons learned that we brought here. We had done, we had sort of talked around and experienced concepts like this before. We did the first food hall in New York at Brookfield Place and two of those tenants had graduated from food trucks. So those were ones that we had to sort of carefully work through the finances first, but it’s a delicate act and if you can work out a deal where a tenant is paying a percentage of sales, then you truly are a partner and all the help that we can provide is going to help get the rent paid.
Hal: The next question was, is the idea that Slightly Alabama will get your support while it grows until they outgrow the space on Bleecker Street?
Duncan: I wouldn’t say that we have a road map set. We’re going to again, partner with our tenants. There’s nothing set. There’s nothing that says, okay, you’re going to be with us for two years and then you’re going to open a big store over here and pay us rent. I think really right now it’s a pretty casual approach and to see how it works, it has to work for everybody. It’s got to be a win win. I don’t know if Dana has a different view on that, but this was not a 10 year plan. This was a couple of years’ plan and see how it goes and if he grows out of that space and it’s super successful somewhere else, but it’s not with us. That’s great. I would love to see it. Dana can also opine on that.
Dana: Well, we have a great relationship with the senior executives over at Brookfield from the marketing team to the global retail team. The thing they do is they challenge me on what is my six month, 12 month plan and how are we going to grow our business. But in an encouraging way, it’s not like we need money, when are you going to give it to us? It feels like an incubator on some level. We don’t have a plan, we haven’t been asked or told that we have a specific plan, but there is encouragement. Obviously, we want to make $1 Billion. Right? This isn’t a hobby, so it’s good to have that kind of nudge in the back, but it’s not pressure. It’s okay, what’s next?
Hal: This question was how does Brookfield find new retail partnerships? Do they seek them out or do they come to you?
Duncan: It’s broad based. I mean, it depends on the project. At Manhattan West for instance, we have two different brokers onsite. One for the restaurants. That was the Danny Meyer relationship. And then we have another broker that’s handling most of the store leasing that did the Whole Foods and the Peloton deals. It’s all of the above. There are good things and bad things about working for or working with such a big company, but a GGP is an endless supply of retail leads, even though they are truly at their core, a mall operator. The senior members of the leasing teams and the management teams at GGP are a constant source of relationships. So look, it’s not easy. I know that our retail broker really scours the globe for these partnerships. They go to London, they go to Tokyo, they’re constantly traveling to try to find a sort of a next cool, progressive, trendy brand, whether it be food, entertainment. We have a term sheet in place with an entertainment anchor following our fitness anchor and our food anchor, which is Whole Foods and Peloton in Manhattan West and it’s a new venture. Retail is a tricky business and a tricky game and so the financial wherewithal might not be there, but it’s a partnership of music, a great restauranteur from Brooklyn and also somebody who’s been in the entertainment world for about 20 or 30 years and they’re going to do a theater in restaurant venues. So it kind of comes from all of the above, but that team is constantly scouring New York City, the country, and the globe really for those next partnerships.
Hal: This question was, can you talk about the thought process behind the development in South Norwalk in the context that Dana said that his potential locations would be San Francisco and Tokyo?
Duncan: Yeah. That’s a different part of the company that is GGP. I can’t answer that question perfectly. My wife and I were longtime residents of Fairfield County and the feeling was that the malls that are in Southern Fairfield County were pretty tired. There was no destination for luxury. It truly is going to be a luxury upscale destination. It’s in a great location. It’s right off of 95. The basis was very low. It’s what we do. We’re good at building and it’s definitely the investment thesis of Brookfield is very contrarion. When anybody is zigging, we go zagging, right after the dislocation in a way in ’09, we were just raising as much money as possible to buy as much as we could when everybody was hiding under their desks. We were out buying things. So, to be building the only mall in the U.S., the leasing has gone really well. You know, those last few 10 or 20% are always tough in a leasing project like that, but they’ve got great confidence that it’s going to be successful. There’s a lot of wealth concentrated in that little circle and it’s right near the Westchester border and South Norwalk is a very cool market. You kind of feel like you could be in Tribeca or Soho when you’re walking around it. So, I think that they took all of those factors into account and again, it’s all about the land and the basis when you’re building a project like that and we’ll know in a couple of years.
Hal: This question was, are brands able to apply to be on Bleecker Street?
Duncan: Absolutely. Yeah. Most of the inquiries are coming through our partner, Skylights Studios, but I think you may have already given me your card if you haven’t, do so, and I will make sure it gets to the right person.
Hal: This question was, is Brookfield providing other services to the tenants like marketing, accounting and financial planning?
Duncan: No accounting or financial, a ton of marketing. That’s really the heart of the success we think. The arts and events team at Brookfield and the marketing team at Brookfield comprise, together, the biggest department in the entire company, so tons of marketing support. Again, the stats are there and it’s been successful and that’s been helpful for the entire street. But beyond that, no, I don’t think there’s anything else. I mean, I don’t think we’re in this spot where we can dispense good advice, we just want to put them in that position to flourish, but as much in marketing and support with their space as they need.
Hal: But Dana, you mentioned that Brookfield was helpful in terms of setting goals. What were some of the support that they gave you in terms of helping to think about your business more critically?
Dana: Well, I mean, I think just asking for our total marketing plan, our revenue plan, like how are we going to get to certain places? It just having those kinds of, those nudges. But, they’ve also been very supportive actually coming in and being my customers. They’ve shopped with us on a regular basis and they come to our events. So that’s actually really nice because when your landlord walks in, you’re hoping that they’re coming in to buy stuff and not to yell at you for not paying rent.
Hal: Duncan’s ready to buy something.
Nathan Stange: I’m curious, along with the demographic, what inspires as far as neighborhoods, West Village, is it downtown?
Dana: Our customers? No. The coolest thing is that when we opened, we were open from 11 to 7 originally. Now we’re open from 12 to 8 because our hours during the week are 6 to 8 and it’s like 99% local customers like live upstairs live across the street. We certainly have tourist traffic coming in and we certainly have traffic from the Upper East Side or Williamsburg or Brooklyn. But the majority of our customers are locals like right in the immediate, within the immediate two or three blocks. Our brand, the way we’re set up is we carry about 25 different brands, they’re all independent designers. The majority of people who walk into our store had never heard of any of the brands that we carry. All of the designers that we carry are all my personal friends that are brands very similar to mine. So when people shop there, they’re discovering something that they’ve never seen before. The majority of our brands, you can’t find anywhere else in New York City also and we often have people, our repeat customer is huge. There’ll be people who live upstairs will come in and spend two, $3,000 over the course of a couple of months on the same brands. So that’s been really cool. That’s when you know, you’ve got a neighborhood place, not just because people hang out and drink free beer, which they do, but because they come back over and over and over again to shop and to find out what’s brand new from Freenode Cloth out of San Juan Capistrano, that’s not available anywhere else in New York City, that we’re releasing on a regular basis. I mean we truly are kind of like a neighborhood store, I think, not just because of the events, not just because of that, but I think people trust us too, one thing that was interesting is we saw that in December, while our revenue for the month of December increased over the previous months, our average ticket, decreased significantly and what happened was we saw we’re a men’s shop and we saw fewer men coming in and more women coming in looking for gifting items, but we don’t have a lot of gifting items. So, then the traffic picked up after Christmas and what it was, guys coming back to shop for themselves again. They weren’t shopping for themselves in December because they were buying for other people, and then they started shopping for themselves again afterwards, and in November, our ticket price average was $200-$250. We were selling $1,800 jackets, but in December, it was like, oh, here’s a pair of socks I’ll buy and so on and so forth. So it was kind of cool. This month we are halfway through the month and we’re trending to be 30%, to have 30% higher revenue this month than we’ve had in any month, our biggest month, which was December and it’s almost all, I mean it’s 100% people buying for themselves. So that’s been really cool to see happen. I don’t know if that answered your question.
Hal: This question was, what are the types of customers that you’re seeing on Bleecker Street?
Duncan: Surprisingly, we actually don’t have good tracking of that, but, the brands all seem to be doing well and again, mostly came off of digital platforms. So, I couldn’t answer that for the other ones, but I’m guessing it’s along the same lines as Dana just outlined, neighborhood city based, along that avenue I believe.
Hal: And have you found different ways of engaging people with the other brands that are your friends to do events around them, to cross promote with your store?
Dana: Well we do a lot of like trunk shows. We fly in the brand owners if they don’t live in New York to do events and parties and they do a lot of cross promoting. One of the brands we carry as a company is called Cockpit USA, which are outerwear and they have a showroom on 39th Street. It’s open Monday through Friday, 10 to 5 and then we’re the only other outlet for those guys, I think in November we did something like $17,000 in jackets with those guys. I think this past weekend we did $8,000 and their product all from them driving traffic straight to us. So it was easy when I had to jump in on this in two weeks and find, one of the things I had to do was figure out how to get 25 different brands in here to fill out, you know, 2200 square feet. When I called the brands up that were my friends, they trusted me and said, yeah, we’ll do this with you, but also when they found out that I was on the corner of Bleecker and West 10th, they were like, hell yeah, we want to have a presence in that space. We’re proud to have a presence in that space. And so they do a lot of cross promoting because of the address.
Daniel Cayne: Are other landlords on the block getting creative or do you find they are still holding out for credit tenants?
Duncan: It’s the former, happily because we’re down to nine vacant storefronts now. So the vacancy rate has dropped by almost 20%, I believe, approaching 30%. So, look, it’s like I said, that was 15 or so years of retail that was sort of miscast for the neighborhood and for that street and didn’t work. So, it’s like I said before, smaller, more nimble brands on them. For now, I don’t think you’re seeing the big brands come back in, which I think may be a healthy rebirth for the neighborhood.
Hal: This question was, how did Brookfield pitch Bleecker Street to its investors?
Duncan: We don’t have a partner on this. It’s actually, it’s owned on our balance sheets. So it was us pitching it to ourselves, but, I’ll tell you that the relationship with New York REIT went to the top of New York REIT. Like I said, they had a liquidator CEO after the financial shenanigans that they had. And the idea was pitched directly to the right guy, Rick Clark, our chairman, and he passed it along to our acquisitions teams and leasing teams and marketing teams and said, could we do something cool? If it’s going to be a waste of time, let’s not do it. But it was a thumbs up throughout and we like to buy things. So, it was a moment in time that worked out. That relationship was there with New York REIT and I think it’s been a great experience. I’m hoping it’s been a great experience for all of our retails, but like I said, it really is an incubator and a test lab and we’re going to learn a lot from this. And again, we can help with the scaling.
Hal: And the last question was, going back to the premise that retail is dead, it seems like there’s a market for one type of retail experience that is very idiosyncratic, highly programmed, very authentic and requires a smaller scale at select locations. And there also seems to be a market for a baseline level of mass market retail that the market will support and need some stores in every neighborhood, just fewer stores than we used to. How would you react to the premise that the overall retail market is just going to shrink and other retail space is going to need to be put to work in other ways or the rent is just going to come down across the board?
Duncan: It’s a really good question. My wife and I live on the Upper East Side and the retail mecca of the Upper East Side I should say. And there is a lot of vacancy up there and you can see it and it’s always on my mind because you want to see things turnover and I’m not sure in a neighborhood like that what that next driver is. I mean, how much more food can the neighborhood support? When you see a great corner space on First Avenue or even York, where I live, you’re hoping that a great restauranteur is going to come in because it’s feeling a little bare up there. It’s feeling like there needs to be some kickstart to that. And I’m actually not sure what that is. It’s neighborhood by neighborhood and there’s, there’s plenty of new residential going in. But I look at some of these older buildings, a corner five story walk-up and thinking, why is that sitting vacant? Is it a family owning it who just won’t capitulate and do a cheap percentage deal with a great restaurant where there’s upside for the owner at some point, break points where they start to make real money or partner with them or build it out for them and do a management agreement. I’m not sure what the answer is in certain neighborhoods, but I think we all know this is a very resilient city. I think it’s going to all come to some kind of conclusion. I hope that’s answering your question. But, we’re focused on neighborhoods. Like I said, you know, it’s Brookfield Place in Canary Wharf and building places. So kind of street by street block by block really isn’t our thing. But I think we all have a big interest in seeing the city flourish and be successful. So when you look at it in that context, you want to see more boutiques come in, you want to see more of the smaller entrepreneurial, you know, near 86th Street, you can get anything you need. That’s where all the chains are. But as you get a little further from that center, you see more vacancy and I feel like there is an opportunity for smaller nimbler boutiques or restaurants, but I think we’re still just waiting for that right now, unfortunately.
Hal: Well, it seems like that the answer is that what used to work isn’t going to work in the future as online sales pick up, as people have different needs. And so needing to innovate and do something different than what worked in the past rather than just, here’s my building, let’s charge rent. What Dana said, built a community, get people involved with what you guys are doing is part of the equation and the rest of the equation isn’t there yet. People are still trying to figure that out, but the answer is that, what used to work in the past just isn’t working in the future. I think that’s a great note to wrap things up on. I want to thank Duncan McCuaig and Dana Glaeser for coming. And thank you everyone for being here.
That concludes this episode of the New York Launch Pod. Let me know what you thought. Please send an email to pod@nylaunchpod.com and visit nylaunchpod.com for transcripts of every episode, including this one. Also, if you are a fan of the show, please leave a review on iTunes and Apple Podcasts. It is greatly appreciated and does help people discover the show.