Challenges in Retail Development

I was quite disappointed that I could not be present to Mrs. Jessica Joly’s presentation; I was looking forward to hearing the details and outcome of the Westlake Commons project, of which she served as the development manager on behalf of Styles.  I watched the video online, and I felt it was a well put-together presentation. Mrs. Joly shared an educational experience on the severe problems one can encounter on a project; the development she told us about took an unexpected amount of time, including a complex due diligence process, and ended up costing much more than it was expected. Construction was originally estimated to be in the $6MM range, and ended up costing upwards of $14MM. Her cautionary tale reminded me that even an experienced developer can encounter unforeseen circumstances and setbacks.

We had the opportunity to be familiar with this project beforehand, as it was an optional extra credit in the Real Estate Development I class. Having had to consider some of the obstacles that she did, I had great interest in Mrs. Joly’s conclusions; her ability to transform a well-located former car dealership site into a neighborhood shopping center, anchored by Publix, was an intriguing process, and I believe a sensible one.  This is the newest plaza built over the past three years in the Hollywood submarket in Broward County, where vacancies are below 5%.

Mrs. Joly explained the challenges of the site approval/pre-approval process during due diligence, securing an anchor tenant, and closing the deal. The construction aspect and navigating the regulations were no easy task to accomplish. Relocating utilities, traffic lights, and then the discovery of underground pipes during the construction process were among the issues that she had to face, all while still make sure to deliver the plaza on time, leasing the remainder of the property, and turning it to the asset management team.

Styles is one of the largest integrated real estate companies; as a well-known developer, investor, and asset manager in a variety of real estate, including office, retail and residential. When there are barriers to a project, they expect their employees to think on their feet, as a good developer would do, and deliver to their expectations. It was impressive to see that kind of work and motivation through Mrs. Joly’s experience. Furthermore, her example reminds me that the truly successful are those who keep a calm mind and compensate for unexpected problems with responsive solutions.

On the topic of unexpected expenses, I read an article from an Ohio newspaper about an unforeseen cost, though this situation was resolved much easier than that of Mrs. Joly. The department of Public Works in Canal Winchester was developing a site on property that the county had believed was theirs for years, in fact, they had even built a fence and gate on it. However, while reviewing maps, the county noticed a discrepancy and ordered a survey, upon which they discovered that the land in question actually belonged a real estate company which owned a golf course next to the county land. The county was forced to make an offer on the land in order to keep their project on schedule, but they were fortunate to benefit from the generosity of the owner: the real estate firm requested only half of what the county offered, in addition to the waiving of the inspection fees for a planned clubhouse on the golf course. While this should stand out to any Miami person, when a company is willing to take less money, I feel it also showed an intelligent move by the firm; there is no harm in gaining good will from your community, especially local committees. Though this was a small obstacle for the county, this was in some ways a windfall for the real estate firm, gaining an additional $10K for land that they had not been using, and of course, endearing themselves to the local council.