Shopping Center Business

MAY 2016

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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Page 212 of 358

PERCENTAGE RENTS 208 • SHOPPING CENTER BUSINESS • May 2016 T he calculation of percentage rent is a tricky subject. Unique to the retail industry, leases involving percentage rent often require retailers to report their sales on a regular basis to land- lords. The methodology for this reporting has been much the same for the past 50 years: retailers have to collect sales figures from each store, divide by landlord, and report the sales — often by email, fax or mail — to landlords. Landlords then have to input the data into their property man- agement and accounting software. That process has become more cumbersome over the years as retailers and landlords have strived to run their operations with fewer employees. Industry veteran Ken- neth S. Lamy, the founder, president and CEO of the New Orleans-based The Lamy Group, has created Exeter Retail DataHub — through his affiliated compa- ny DataPoint International — to resolve the issues of sales reporting on both sides of the equation, as well as make the process secure and less prone to human error. SCB recently interviewed Lamy to find out more about Exeter Retail Data- Hub and its introduction to the market. SCB: Ken, we have known you for more than 20 years. You have a rich background in the shopping center industry. Explain how that has led to the creation of Exeter Retail DataHub? Lamy: Over the last 35 years, I've served the shopping center industry on the land- lord side, primarily through data verifica- tion, tenant sales audit and percentage rent leases. When our clients had contracts where tenants participated in a revenue share or a net income sharing between the parties, we were generally brought in to perform compliance examination services. Along with that, we've done a lot of lease consulting work. Retail leases are our expertise. We've also done restau- rant consulting, lease language consulting work, a lot of data and analytics regard- ing sales and rent within shopping centers and retail formats across the U.S., Cana- da, the Caribbean and even Mexico. That really laid a foundation and really started the journey of interacting with clients with research and development of all size com- panies. The Lamy Group represents many shopping center operators from private small companies with one center to larger firms with dozens, even hundreds of cen- ters. We also represent most of the major leading real estate investment trusts that have open-air centers, outlet centers and enclosed malls, so we really have a great exposure to the business. I started in the industry in the late 1970s, so it was still in the booming development days of the regional mall, and so as the industry grew and the number of national retailers grew, it really gave me the opportunity to be very close to the landlord's back office doing a great deal of work on the audit side. I continue today to visit many chain stores — major retail companies — where we do our compliance audit work verifying store sales and interacting with the people who are responsible for reporting sales. We have to understand and learn the systems they're using, and how they're making their computations. Nothing has changed in my 35 years in the reporting of these numbers, for the most part. I listened to the pains of retailers and shopping center own- ers — there's a big pain point on both sides regarding how sales are still being reported like they were 50 years ago. SCB: How are you working to resolve that pain? I'm assuming we're mainly talking about reporting for percentage rent? Lamy: The pain is really just on how in- formation is shared between the retailer and the shopping center owner. Right now, in most cases, retailers have to send reports for every store to every landlord, and they're doing it in a handful of dif- ferent ways. They're stuffing envelopes still today; they're sending it via fax ma- chine; they're sending an email; they're making phone calls or they're dropping off a piece of paper at the center manage- ment office. It is very inefficient and slow — and it is very costly, primarily for the retailer. It takes human capital away from where they could be deploying it to do more valuable tasks, both on the retailer and landlord sides. Stores have to report sales for their leases in most cases, and then landlords receive those sales reports. At the landlord company, those reports get touched by a property level person, possibly, a corporate level person — as many as four times. That information is touched by as many as four people before it even gets into the landlord's property management and accounting software. Spreadsheets seem to be driving the data, which is a very labor intensive job to create and maintain. There's also a Changing Sales Reporting Exeter Data Hub is tackling the large issue of retailers reporting their sales to shopping center owners — and changing a huge process in the industry. Interview by Randall Shearin Lamy I listened to the pains of retailers and shopping center owners — there's a big pain point on both sides regarding how sales are still being reported like they were 50 years ago.

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