Doing More With Less
Smart Retailers Can Succeed in a Tight Real Estate Market with Limited Capital
summary-date May 2014
Excerpted from the Digital Edition of Chain Store AgeUnderstanding the value of leases, especially as they come up for renewal, is a crucial foundation of any retailer’s real estate strategy. Woodbury, N.Y.- and Boston-based real estate services provider DJM Real Estate works with retailers to take a holistic look at their portfolios, on a store-by-store basis.
“In some cases, a store may have real estate value, but not be performing well,” said Mark Dufton, CEO of DJM Real Estate, a Gordon Brothers Group company. “It may make sense to exit the location and take the real estate value off the table. Or a renewal might be coming up and the retailer could continue to leverage a store’s market standing where they can get leverage on restoration of the lease.”
To truly understand and maximize the value of their lease portfolios, Dufton advises retailers to follow several specific steps.
“First, retailers need to understand the market value of where they stand in their portfolio of leases,” Dufton said. “Their lease portfolio may be above, below or at market value. What they can do to get control back is a holistic portfolio analysis, so they can understand where they are in the real estate spectrum. They need to look at their portfolio on a store-by-store basis. There are always hidden gems you can leverage.”
Dufton said DJM offers a lease audit product that audits triple net charges as a category-based service.
“I can’t understand why anyone wouldn’t conduct such an audit,” said Dufton. “It’s a no-brainer to look at the biggest real estate problem, which is paying more than you should, and eliminating that. We do a deep dive into each business and examine where the problems lie. Since the beginning of this year, a lot of retailers have been trying to prune the bottom parts of their portfolios, but don’t know what that kind of reduction entails. You need to know the exit costs and develop a strategy.”