Return on Experience
Invest in the right experience for a shopping center's customers, and you will earn a return on experience. That is the business model driving Fort Worth, Texas-based Trademark Property Co., which celebrates its 20th anniversary this year.
"Do customers love being at the center? Do they come back and drive sales? That is return on experience," said Terry Montesi, Trademark chairman, CEO and founder. Experience is indispensable today when most goods and services are available online, often at a lower price.
"If you deliver a place that customers like to be, you can differentiate a center," Montesi said.
Its tenants agree. "Trademark is unique in that it is retailer-focused and, at the same time, has a thorough understanding of the customer experience," said Wes Cherry, VP real estate, retired, Dillard's.
Building a return on experience: Trademark's renovation of an existing mall offers a good example of return on experience.
Trademark purchased the Padre Staples Mall in Corpus Christi, Texas, in 2008. It was a non-descript facility in a good location.
The middle market trade area had a population of about 490,000. Median household income was $47,982. The community was flat with no job growth. But don't forget the 7 million tourists that visit the trade area annually, bringing the disposable part of their $60,000-plus average household incomes.
"Trademark has exhibited a talent for identifying underperforming shopping centers in good locations, honing in on the critical problems and then developing design and leasing solutions that bring retailers and customers back," said Duane Vaughan, president of St. Louis-based Real Estate Market Strategy.
After buying the mall, Trademark invested $50 million to create an experience that would attract the residents in the trade area and tourists.
There was no guessing. Montesi commissioned focus groups composed of customers and asked what they wanted. "They wanted to be outdoors," Montesi said. "We couldn't do a complete de-malling, so we de-malled a portion and created an outdoor area.
"We also added dining with outdoor seating, a fountain and an outdoor lifestyle entrance. Then we brought the outdoors inside. At the entry to the central courtyard, we put up a glass wall. Throughout the mall, we added clerestories."
La Palmera is green, too. Certified LEED Silver for Core and Shell 2.0, it is the first indoor mall in the United States to earn a LEED certification. The center also received an ICSC Global Award for U.S. Design and Development in Sustainable Design and Excellence.
The design brought in retailers new to the market. New names include Coach, P.F. Chang's, Patsy Grimaldi's Pizzeria, Charming Charlie, Pink, Soma and others.
What is the return on experience? When Trademark bought Padre Staples, sales per square foot were $410. "Today, sales per square foot are over $650," Montesi said. "That's return on experience for retailers and for developers."
Corpus Christi received a return on experience, too — a property tax increase based on an increase of $70 million in sales at the mall and a lot of new jobs: 1,000 construction-related jobs, plus an estimated 361 permanent jobs at the mall.
La Palmera
Location: Corpus Christi, Texas
Size: 986,000 sq. ft.
Developer: Trademark Property Co.
Key tenants: Macy's, Dillard's, White House Black Market, PF Chang's, Coach, Victoria's Secret
Status: Major renovation completed in 2010