,a._.r.‘._....: _, a . ~ ,. ,.. _ as} as? .1 w . #2. 1.335 . .V l, _ £i. Z. K. . ‘ . h \frzwq , . v. 1... . . ‘ .. V . \ w ‘5» hr. . r . . . A f. z.‘ , . V . ‘ . fan‘s.) yo; \i. .. .1... . . , . .~ ‘ I I... Z Y Li 3,, a.u vJKA: ., a. Y.\it \ \Ai‘xq \s!\...~¢,. ., tr... 2 $5.». nits. £42.11? ‘ . . In. . «vs... .. , 7 5 A. . Jf. . , .V... .4“ 1. 3: w t» i. 1.. 1:: . in gtwypcé a. YALIBR REI S HTTH‘IH‘TH ll Hi 11‘»! 1293 014076 1H LIBRARY MICHIGAN STATE UNIVERSITY I H r j— :x‘lx. IV , x. I" H w / .- F w . . .' /'/ ,1 1 I \, // / ' 3 / \ 7 /// ‘ 7‘ 3 / :1» V ( ,Lv‘ 7 -_-.;.I _ I I I ,; — w ‘57" ‘ I i I 15?“?- '5Il§.—M§.3.'.Z‘2‘2R" Waftfil'fi'm as: W 7x5? 3V6: PLACE IN RETURN BOX to remove this check TO AVOID FINES rat out from your record. um on or before date due. MSU Is An Affirmative Action/Equal Opportunity Institution crbbcwnunJD ‘ THE MUTUAL PROBLHA‘: OF THE EMILE}! AND DEVELOPER IN 5311?le GEN???» A Thesis Presented to Dr. Edward M. Barnet ‘Hichigan.5tate University In Partial Fulfillment of the Requirements for the Degree Master of Business Administratiun by Robert F. with 1960 .~ \ \‘g‘ THFQN’ AC £00335? 1.3.5le?? the writer wishes to express his sincere appreciation to D: . Edward H. Barneb, Director of the Executive lievelomenh Programs in Food Marketing hungemant at Michigan State University, for his guidance in the preparation of this report. TABLE OF CONTENTS CHAPTER I. II-EODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . Purpose .......................... Scope and Mathod . . . e . . . . . . . . . . . . . . . . . . Lirfitations.o.............o..oooooo History and Growth . . . . . . . . . . . . . . . . . . . . . Population Shifts and Growth of Suburbia . . . e . . e e e o The Gigantic New Market . . . . . . e . . . . . . . . e . . V Basic Definitions . . . . . . . . . . . e . . . . . . . . o What Tenant Types Go Into a Center? . . . o . . . . . . . . ILL. SHOPPING CL‘II'I‘EE.E.‘\...ARE THE TEI‘LXNVRD A URLB SUCCESS? e . e o o Coexistence with the Amateur Developer .}. . . . . . . . . . Is the Shopping Center Indirectly Guilty of Overbuilding? . IV} SHOPPING CENTER FINANCING...WILL IT EIIMJNATE THE INDEPENDENT What Are the Requirements and Types of Financing Needed? 0 e SourcesofFinencing.................... The AAA Stipulation, Haw Does This Effect the Tenant and the Developer?.................o...... IeaeeReetrictiona...................oo WhyAre Higher Rents Charged to Independents? . . . . . . . Will the AAA Tenant Requirements Contribute to the Growing comantration of Reta-i1 $8188? 9 o o o o o o o o o o o o o PAGE 1 2 2 ~o ex tr tr t» 20 22 30 CELKPI'ER What Measures Can Be Taken to Aid the Irdependent in His "Crisis?" 0 . . . 4 e .V. . . . . . . . . . . . . . . . UtmtAbmttheImwvator? .........t....... V. MERCHANTS' ASSOCIA'I'IUI’Bo..NECEb5ARX OR NOT? . . . . . . . . Merchants‘kssociations .o............... What Can Merchante' Associations Do for the Tenant? . . . Recomrnatiom ......I............... TI. THE SUPEEWKELHSHOULD IT BE IN Tim CENTER? . . e o o . o What is the Supamrketas Place in the Shopping Center? . ‘uhat Problems Confront the Supermarket in the Shopping Center? .o.............o....oo.. 'I'ne I-iscount House and the Super . . o . . e e' e . e . e 0 Does the Supermarket Have a Future in the Snapping Center? v11. SUMMARY . . . . . . . . . . . . . . . . . J . . . . . . . . EEBZECWJPXY........................... APPEIM-XOOOTOOOOOOOOOOOOOCOOOOOOOOO... *o z» La 38 ho ho 1:3 1L8 L8 53. 5’1; 59 61 Shopping centers are a-relatively new American industry whose growth has been stimulated by this generation's movement to the suburbs, seeking the leisure and freedom from congestion that suburbia is said to afford. The American businessman has been quick to respond to this migration of consumers. Development of centers has pregressed at an unprecedented once. This increased interest in locating in a shopping center is not limited to any single type of business. For example, over half of the new supermarkets (55 per cent} in 1959 were elected as part of a shopping center,1 and 308 2 of the 3h8 new w. T. Grant department stores were shopping center units. Chain Store Age estimates that about Ens billion of retail trade will be “v transacted through shopping centers by the end of 1960.3 Although the shopping center is one answer to the shift of repulation and has been highly successful to date, this does not imply that it is th answer to every merchant's problems. As a word of caution, before the image of the grandeur of the shepping center 15 instilled into the mer- chant, it would be well for h1m to evaluate his present business situation, to question its maximum potential and to judge if he has fulfilled his Objectives. The competition is tough, the rent is high, and the restrictions 1"Facts about New Super Markets Opened in 1959," Pre liminagy Report Eggued by the Sugar Market Institute, January 11, 1960. p. 7. 2"Shopping Center Locations Stressed," Redbook's Shogging Center Merchandising, April, 1960. p. S. 3S. 9. Kaylin, "Shopping Centers...HOtter Than Fuer,” Chain Store Age, May, 190”. p. 27. ever present. It is a questionable tool of success for the marginal retailer. Purpose There are many problems inherent in any business promotion, especially one as immense as the development of a shopping center. This study has as its intent to point out and analyze some of the major problems common to many shOpping centers. Fully aware of the fact that any single one of these problems could serve as a subject for a complete thesis, the writer's objective is that this study might serve as a foundation for a more com- plete and thorough study at a later date. Sccwe and Yetho —--a‘-— -—.- Analysis of four major problems and the conclusion based upon this analysis will be presented in this study. The problems being considered are the following: 1. Overexpansion of shopping centers. 2. Financing of shopping centers and its repercussions on the independent operator. 3. The merchant's association and its part in the center. h. The supermarket in the shopping center. I have selected these problems from many that could have been selected primarily because of their present relevance to both developers and tenants. The information presented in this study has been obtained from many sources with secondary injornation providing the bulk of the information. Using the secondary information as a foundation, observations, correspondence, and interviews have provided supplementary data to round out the study. 'Limitations The lhmited number of problems analyzed in this sutdy is the major limitation. Such problems as zoning, planning the layout of the center, engineering, traffic, and parking represent a few of the additional prob- lems which have been ignored. however, as was indicated in the introduc- tion, any one of these problems could serve as the subject of a complete thesis. Thus, to fulfill the objectiVes of this study, only the four problems indicated will be considered. CHAPTER II IIIEPTION The shOpping center movem nt is one of the major changes in distribu- tion which is effecting the retail industry. Sociological and economic changes since the end of werld War II have fostered the growth of a sub- urbia around our large and middle-sized cities. This growth has furnished the retail industrijith a new and dynamic outlet for large scale merchan- dising to areas having distinctive living patterns as contrasted with the mass market existing within these cities. The organization of a shOpping center presents many new problems that downtown.retai1 units have never had to face; parking ratios, snow removal, ‘ etc. Increased awareness of the problems of layout, architectural design, financing, and management all enter into the planning of a center. In the downtown area of a city, the retailer is almost guaranteed traffic since it is pro-established that dwellers in the city shop in the downtown area. But in the shopping center, the develOper must ascertain his market, ’since he must sell other retailers on the concept that the center is ideally located to serve a distinct type of trade from an outlined trading area. The shopping center serves the fringe, the new suburbia, not the trade- establisheo downtown. His to r)" a nd irowt h While stopping centers have almost overnlrht become one of the most important and signilicant marketing deVices in the country's history, they are not entirely new. Their history dates back to the year l907. The Urban Land Institute of Washington, D. C., credits Fdward H. Bouton of Ealtimoze with the first ”shopping center" idea. Bouton set up the Roland Park Co. in his home city in l9U7. This was an architecturally unique store building set back from the street, with off-street parting for the carriage trade. Conversion from grass areas for horses an d carriAge, to black top for automobiles was easy. Jesse Clyde Nichols created the Country Club .laza, for automo3i1e trade in Bansas City in the early 19-0' 5, and the modern shopping center was on its way. The "modern” style of architecture, now Cowman because of its Clean lines and comparatively lowc cost, :Jas born in hush Potter's River Oaks . enter in Houston in 192b.u Then cane the Sears and tne Eards owed oy supernarkets, who left the crowded, nigh rent, downtoun aieas in search for consumer dollars in locati as more canveai- ’a ent tor the surburban shonper.5 1h: large chains discovered the hene ;1ts of supermarkets in the leD‘s and cut their,mem hancr ising costs oy erecting muse stores, maximizing an appealing display of goods and min imiZin" serv:ces. in the same period, the downtown department stores oegan giving thought to establishing branches in the suburbs to follow the migration of pepu elation away from tne city core area 0 _~ __ hUnited States Conrress, Senate Select Committee on 3nAll busi ass, The Impact of Suburban Snepolné‘Lgltg_- on Indenende nt .~etailcrs, report Ho. 1010 0, 80th “0 ongress, lst Session, rhfiShiDZtCR: lovernxent r intizm 0f ice, 1960), p. S. rhma, “Shopfiing CenterS," Barron's, V010 XXXV: N0. 33’ n The shepping center may be considered as being one of today‘s most remarkable retail business evolvements. It is also one of the first established commercial building types which takes into account the American's use of their automobiles as a part of their everyday living habits. "The shopping center's form has evolved from proto- types devised earlier to deal with a spreading conflict between retail shopping and automobile parking. It has grown out of the first moves by astute land developers to build in outlying areas stores on a lot with places for customers to park their cars on that lot and off the street."6 With the growth of population and the vast urban expansion brought about in the vigorous economy since World war II, the shopping center has progressed faster than it otherwise might. The waves of residential building construction has prompted the erection of commercial facilities accessible to the location of purchasing power, mostly in the new suburban areas. fppulation gifts and Growth 532 Suburbia The shopping center phenomenon is appreciated when we understand what is happening in the supporting growth of population. Tte 1950 decennial census showed statistically, that the country's population had changed to an urban predominance. With 6h per cent of the population 6"The Evolution of the Shopping Center," EZE’Communitz Builders Handbook, Members Edition, (Washington: Urban Land Institute, 19EK), Po .0 then living in urban areas, the pepulation in and around cities had grown two and one-half times faster than the country as a whole. During each of the past ten years, the American population has been 7 increasing at a rapid pace of about 1.7 per cent. A continuation of this current rate of growth will mean a pOpulation in the United States 'n 1970 of 210 million, by the year of 2000 a population of 350 million, and by the year 21000, a population of 800 mi lion.8 Though our big cities have grown during the decade of the fifties, they were far outstripped by the surrounding suburbs. Smaller cities grew at a rate faster than the cities over 100,000 population and nany of these, particulary in the South, outstripped their outlying areas. But in general, the fastest growing metropolitan areas-~including both cities and suburbs—dwere in the south and the Far west. Civilian construction, long held back by the demands of World War ll, boomed in the late hO's and early 50's. Building for retail distribution was high on the list of new construction, and suburban locations near the new teeming population centers were most popular. The reason for this is that population growth in this country has taken place largely on the fringe of cities, and alert businessmen have taken their retailing opera- tions to the places where consumers have chosen to live. The following chart shows the tremendous population growth that has occurred in the 7George J. Stalnitz, "Our Growing Population, Threat or Boom?" Business horizons, (Spring, 1959), Po 3?. 8"What the U. S. Will Be Like 10 Years from How," U. 8. News and World Eeport, (November 9, 1959), p. 76. 9 suburban areas: TRENDS IN ChBAfi GRQKTH Change in 12§0_fi__ __12_§ ‘5 Years In suburbs of 168 metro- Up 9,620,300 politan areas 3h,660,700 hh,281,000 or.27.8% In major cities h9,135,000 51,023,000 Up 1,880,000 . or 308% In other urban areas 23,067,000 $1,023,000 Up 1,150,000 or 5% In rural areas h2,77l,000 h1,nh0,000 Sewn 831,000 or 1.0% Total United States ‘iL9;63o,700 i31:5612006 Up 11,827,306— or 7.9 per cent It is projected that by 1976, urban areas will contain three-fourths of all the population. If the suburban development continues at its pres- ent rate, 80 per cent of the expected h6.§ million increase in urban areas will take place in the suburbs.10 In addition it is projected that there will be 70,000,000 registered passenger cars by 1965. With these factors being considered and other related considerations, it is estimated that the h,SCO centers in Operation by the end of 1960, will swell to more than 10,0(0 she "nr centers by the end of 1963, a mere . . . . . . 11 five years from now if no magor econ«~ue crlSlS develops. It is clear that the shopping center industry which is enacting the 9United States Bureau of the Census, Trends in Urban ”rowtn, {Sash- ington: Government Printing Office, 1956). 10Utilities and Facilities for New Residential Development, Technical Bulletin Nb. 27,‘Tfiashington: Urban Land Institute, 1§§§). llKaylin,‘gp. cit. most t emendous succ 53 story of the twentieth century, has come of age and is taking its place among the growing industries of the world. The dilantic New Market The automobile accounts for suburbia, and suburbia accounts for the snapping center. Suburbia also xener1tes the vast new market den ends for oractically everything from baby carriages to washing machines. In the suburban market, your 3 narried counles with growing children are tne cus- tomer 3 whose shopping and conven er.ce needs have to be met. This is not the only market for the merchant to seek out, suburbia is now acconmodating ones entire life cycle. "Develoners wculd like one to live in one cou“t as a child; a two-bedrocm enertnent as a newlywed; then a rage; . use. *inally, when you’re 03% and gray and ycu: uni c:*en are scat: r.7d to the four xix s, fou would no e be;k to a eiurt to se rve out your term as 7 baby sitter.’ Suburbia a fords not only fir;e new customers but better custcrcrs. Suburbia families are potentially hi Ter srencers then city farilies . Pverage inccm is estimated at 3t,;00 a year, fully 70 per cen; nigrer r ‘ o -’ r11. . ‘ 5' . ., .7 than the avers e I. s. famil'.12 .LG casual deuit-‘ourscli 1119 in - ,. s a suburbia has opened the vast market for products sucn as rower tools, 1 sportswear, nursery items, etc. The suburban shopkeeper tee to stone items that often would stay on the shelves in city stores. 12"?rom These C 0 A o ~ ,-~ ' \ Printers Ink, (april (6, 1957), p. 39. 13"Selling to an Age of Plenty," A special report. Business Week, (say 5, 1956:. 10 The shopping center developer-owner must be aware of merchandising because new products and departments in selling may or may not have reper- cussions on sales volume. Where this is the basis on which he is paid rent, he must be awake to changes.in ways of doing business and to the types of market which are his customers. However, new departures in mer- chandising are not likely to be so radical as to eliminate the newly found convenience and mode of shopping in the automobile. The shopping center concept has arrived at a stage for effectiveness in retailing. But building a center and keeping it running profitably are two different things. location and site arrangenent, even based on correct planning principles does not always make up for the intangibles of opera- tion and merchandising. Basic Definitions Before proceeding further, it would be well to define a shopping center. Even thoush shopping centers are widely dispersed throu hout he conntry, the term is often misused. Basically a shOpping center is a group of stores, not very diffierent from those of the ancient market places or of tue typical American business district. however, the developers of these "authentic" modern retail distribution units have tneir own definition of the term. Richard L. Nelson, one of the country's most noted real estate economists describes the modern shopping center as followszlu l. "A tract of land and buildings under single ownership or control, though a center may include an isolated store 111Richard L. Nelson,% e Selection of Retail Locations, (New York: F. w. Dodge Corporation, 19E8). p. J7u.‘ 11 which owns its land and buildings (most frequently a department store, a gasoline service station, or a restaurant). 2. A single building or a carefully coordinated group of buildings having a variety of types of stores tending to maximize the cumulative attraction of the unit as a whole. 3. A facility which includes a large amount of free parking. b. A location which is 'outlying,‘ at least in the sense that it is not the central business district of a commun- ity. There are some exceptions, for e ample, the 'down- town' of Park Forest, a large Chicago suburb built by a single developer, with a busLness district in the center; in all other respects it follows the defini ion of a shopping center and is commonly so termed by the people in the community and in surrounding localities." As the shopping center has evolved, three distinct types have emerged, each definite in their own function: the reighborhood or convenience shopping center, the community shopping center, and the regional shopping center. Usually the neighborhood center is where people go to buy their food, pick up dry cleaning, have their shoes rescled, or gas the car. The community center is one which is built around a variety store or j‘nior department store as a major tenant. Since some stop ing goods are available, the shopper wants to compare price and style, this conplicates sales volume predictions and often opens the community center to the competition of the regional center. It is the regional center, built around a major departma1t store as a core, which provides for a vast variety of'general merchandise, apparel, furniture and home furnishing. Since the regional center offers shOpping goods in great depth and variety, its drawing power is based on its capacity for comparative shopping modified by the factor of time spent in travel with the least amount of irritation to reach the center. This 12 size center comes the closest to reproducing the shopping facilities once available only in downtown.areas. flat. Tenant fines $3.9. into a Center? Whether or not certain tenant types are available for a particular center will depend not only on the size of the project and the quality of the location, but also on merchandising practices and consumer buying habits in the area under consideration. As was previously mentioned, the super- market is considered the main tenant of a neighborhood shopping center and the department store the prominent regional center tenant. The other stores in the particular center will vary according to "rule of thumb" methods which developers and tenants follow. There is no "ready made” rule which can assure the correct selection of tenants. For example, if the area in which the preposed shopping center is to be located contains an extensive number of factory workers as residents, a working mens’ store would supposedly be a desirable tenant. A large number of executives liv- ing in the area would be a criterion for locating an airline office in the center. To insure success in the correct selection of tenants, an economic study of the area should be taken which would point out among other factors, income, home ownership, nationality, and ethic characteristics. A study of this nature, coupled with the experience of the develeer and tenants, can aid in determiring the tenant types of a center and the size store most economically feasible for the tenant. Listed on Table 1 are the indicators for types and sites in shopping centers based on the writers calculation, as taken from the various statis- tics available. 3. meteom uses nupoaoc 039 no one cane on ones he ocquON moaaaemo ccoaoom 0» coo.oa owaom on .o% .am o:o.ooo.a teaouooo.00m .ao .em oco.coa ‘1 H «NCO WC 0 .U. ozone mpnflhm> ho 'lx oaopn .waom uoflczw oaococ .. ~ 9. 1 1| \ l \ he. . coo c .rncoc , a. maaaaemo coo.m mouom OH OHM 06m ooo.ooqaooo.oofi .so .cm ooo.omH 1! buflQSEEou mwiqzmo exatmézm 2H mmaam ( oaoum mane ho uoxamsnocsm oaaooa economuoos.a moaaasma coo.H women a .gm .Um ooo.mauooo.ow .so .cm 000.0: woozcopsuwoz mmOH«QMQHH mo.mgm1 unecoa wcwowow whooosn Edewcfi: meta seam ESEHcaE wumao>< 4 , cw mcmcmm 'L moo: pong 4.... x no.0 coca Aooam mooaw omouobd hvufimu 4. .E c: w r-DY‘YH" (' T‘YTz‘rir‘ “ ‘4“.-‘oil... A34." ”TE-33f TEQI‘lé'u‘I-Tf‘} ASSUPEI‘ bUC-Tiqfi” O lb The shopping center has been a significant factor in changing many shopping habits. It affords the public an easier and better way of making its purchases by bringing clcse toyether, close to hone, and close to ade- quate parking, those lines of merchandise which have the greatest demand. in addition, it offers an ease for shepping, compared with downtown stores, that will be increasingly important in our national retailing picture. Hewever, as in many situations there are often misconceptions that arise among the public, developers, and even alert merchants. There is a popu- lar misconception of the infallibility and huge profits in the development and Operation of shopping centers. Some centers are profitable, but indi- cations are that the degree of profitability is surprisingly low. 5c statistics have been rublished denoting the various failures or profit- ability of centers, however, the rate of return to the develoner is quite low 0 "Very few of the larger centers will yield better than 8 per cent net, free and clear. Tne cost of mortgage money, to include both nrincipal and interest, is now approaching the 8 per cent Figure, so that very little leverage Ls left f‘r the equity money in this invest- ment field."15 The fact that many people think shonping centers are so profitahle hurts the business in manv ways. One of these ways is the View taken by many municipal taxing and critics throughout the country. Tax authorities seem to look on shopping center ownership as being equivalent to ownership of a producing oil well. It is this reason that causes the unrealistic 15leonard L. Faber, "Keynote Address," 1959 Annual Convention Proceed- ings, April 5-9, 1959, (international Council of dhopping Centers, 19595. D. o lb and unfair tax assessments. Unfair tax assessments, in turn, increase the rental burden on the merchants within the center since many leases stipu- late prorressive rent scales which accomodate real estate tax increases. If the leas CD does not call for increases caused by such assessnents, the develoner is burdened with the additional operating er~ense, thereby leav- ing him less funds available for promotion and improvement activities. It is a situation where a merchant who leases from a misguided developer can i suffer, that is, if the taX'problen is not worked out at the tine cf the lease signing. Coeristgnge with the Amateig: revelers: Closely allied with those holding a misconcertion of shopping centers are the «any inexperienced pengle in the business, which is also adding to the overproduction of centers. The situatTon often occurs with a home builder, setting aside a tract of land in the center of his development, for the purpose of creating a stepping center. The builder usually knows little Ebout leasing, nothinr about merchandising, and figures his job is done when he completes the building and turns over the keys to his tenants. The merchant who lenses from this tyre of center must be very cautious. Though he can coexist with the amateur developer, the writer recommends that a prospective tenant, chain or independent, review the followin? out- line dealing with the amateur developer. 1. Determination of the trade area tributary to the Shepp'ng center. Analysis of the area's population changes, both numerically and in percentages for past, present, future growth, translated into maps and figures. Ana ysis of access, highway patterns or future ones, traffic counts and street capacities. 2. Purchasing power for primary, secondary, and remote trade areas. Disposable income in amounts or percentages after standard deductions for Federal income and local taxes, housing costs in terms of mortgage or rental payments, insurance and savings, and transportation costs have been elininated. 3. Measurement of competition-~discornt for composite pull of other competing retail outlets. h. Sales potential, estrnated per annum volume of business, operational expenses, etc. Actually the best riteria for making a sound judgment is good judg- ment itself. Charts, studies, and various analyses are merely tools to 3’ ssist in a decision. Original research will considerably aid a merchant‘s projections of the feasibility of entering into a particular Shopping center. A —'— ‘is the Shopping Cen_er Indirectly Guilty'3£ Sverbuilding? Due to the ranid expansion of the shopping center indistry since the end of norld Mar I], an important question arises; Are there too many shop- ping centers? In general the answer is no! Statistics in Chapter One have shown that pOpulation increases and projected income growth should absorb and utilize the existing and future centers. When asked if there are too many shopping centers, 8. U. Kaylin, Executive Editor 3f Chain Store Age replied, that the pOpulation is likely to catch up with any overexpansion. It must be remembered, that the 10 million new families moving into suburban areas from 1960 to 1975, will be srending $60 billion in retail stores. To handle this volume at an averare of $100 worth of 6 1 J. Ross McKeever, Shopping Centers Re-dtudied, (Technical Bulletin no. 30, Washington: Urban Land Institute, February, 1957), p. 21. 17 sales per square feet of gross store area would require 600 million square feet of building area.17 This will require extensive store construction of which shopping centers will be a significant part. it has been found, however, that there are signs of overerpansion of shopping centers in certain market areas of the United States. Many of these were built because a reputable market analysis was lacking on the part of the developer and leasing merchants. The fact remains that there is just so much spendable income in any municipality or locality. Whether there are too many shopping centers depends on now thinly they divide the total available spendable income of the community. A real problem of overbuilding concerns the financial status of the developer and present tenants while awaiting for the particular center to becone profitable. Eventually, the developer will be foreclosed if the center is his only source of income,'wflil. LLC morenants of competing cen- ters will be tempted to "out each others throats." The only foreseeable solution to the problem of overbuilding is tighter lending requirements on the part of the investors who supply the capital for the actual construction. In addition, merchants themselves should execute better judfment before entering into a center which is located in an overdeveloped shopping area. Possibly, a shopping center trade association could act as a "go- bctween"among developers, financiers, and nerchants to eliminate some of the existin harmful duplication of centers in the future. Financiers ‘ ’ 7 . . . . Homer Hoyt, "Changing Patterns of Urban Growth," Business dorizons, (Summer, 1959), p. 31. 18 deveIOpers, and merchants would use the association as a clearing house to report their planned activites on particular sites. If other interests had plans formulated for a nearby site, the two groups might compromise or ‘oin forces to build a bigger center in order to eliminate the possibility of two competing unprofitable centers. There is one area, in particular, which stands out as an opportunity for potential shopping center buil'ing, this being the urban renewal D?O- gram which is being undertaken in various c0mmunities throughout the country. There are approximately LO projects which have land that may be suitable for Shopping centers of the neighborhood or convenience type. These would represent new centers built in an old area which have {one through the process of urban renewal. fevelonmen s such as the urban renewal projects, coupled with t;e growing population has reduced the Hrohlem of overbuilding of centers. 1 Hr nichard L. Nelson had this to say about the future of the industry: i thinK the opportunities will be as great in the next eleven years, but it .1 on will be much more competitive.’ In reference to the original question, are shopping center tenants assured success. The answer is no! Success for a merchant depends not only upon his merchandising ability which must be exerted just as if he were in a downtown location, but in addition, his success is often dependent upon the capabilities of the deveIOper of the center in which he is a part. A misinformed, inexperienced, 18Richard L. Nelson, "Selecting the Right Site for a Shopping Center in Tocayis Economy," 1959 Annual gonvention Proceedings, 22, cit., p. 17. 19 or amateur developer may tend to lessen the success of the center. Over- building obviously is another factor which may reduce a merchants chance of success. It must be remembered, that shopning centers are not only real estate ventures, but also a merchandising function. Eben this concept is not adhered to by the developer, the tenant suffers. Thexe is more likelihood of a progressive tenant achieving success in a center if the developer is "market orientated" and is interested in bromoting the center as a unit, retrer than as a "get rich quick” real estate venture, which the snooping center industry claims has been the downfall of many centers. 02V)“; T\V‘ «1" “T? “""‘w‘*?V1 “A1. I J.‘1 ‘y'h-‘k -.b§ ‘J';“15.Kl;.£il~d'. . . 'r**' YT“ TH'mT TV: ”"7”71”5“Ufl" VYL~ILJ IT ..~L[J. st\-~ ..‘. L.¢l...._.-L".'vil "Lmerica can no more survive and grow without bf; business tuan it can grow and survive without swnll business." Benjamin Franklin 20 One of the most serious problems facing the shopping center industry at the present time is the trend in financing which appears to act as a discrimination against the independent merchant. It seems that many financial institutions will not lend a develorer funds unless the loan is secured by leases signed by a high proportion of chain operators. The reswlt of this could easily initiate the ocwnfall of the independent mer» chant. Concern was voiced over the situation by a United States Senate Subcommittee of the 86th Congress, which reviewed this problem. The writer, in this chapter, will investigate the background and inilications arising from the Current trends in shOpring center leasing. hiat are the Eeguirements and lees 5 Financing :eeded? There are various factors which determine the extent to which satis- factory financinr can be obtained for a shOpping center. The more impor- . . Q taut ones are the follow1ngzl’ 1. location 3. Economic analysis 2. Tenants and rents L. The developers investment The favorability of the first three factors are determined primarily by sound judgment on the part of the wany’lenders. There are no set rules, because each center is radically different in its size, score, trading area, leases, etc. Each must be considered on its own merits and faults. when the location, tenants, rents, and economic analysis are favorable and when the mortgage market is in a healthy condition, it is nossible that the 1 ya ‘ 0 -V I 7‘ gr -. - ‘ ‘v 9Larry Gruen, Victor, and smith, nhoonwnc rowns v. a. a. {new :ork: o - o e c . “ “W ‘— Reinnold Publisning Corporation, 1960,, n. 5;. A deveIOper of a project may obtain 85-100 per cent of the cost of the project (generally excluding land costs) in the form of a first mortgage, : o o . - . n q r '3 ,.. . _o _I 20 at competitive interest an: Witn suitable repaynint conditions. The actual types of financing for shoo*in center construction are termed mortg ge financing and equity financing. {Zort"'ge finer ing gener- ally consists of either first or second m3rt3afcs at interest rzwte which depend on.the availability of finds and the interest rates curren in the arket. On the other hand, tie equity invest:nent may be represe ente d by ownership of the land and cash investmont a; the var? of tie 1e737.‘r‘ (f, in tue case oi‘cor')ora te cm nersni}, may be represented by in est :ent in r 1' . ‘ ,1 / ‘1 d] preierrec ene,or common stoc“. In addition, beyond these basic types, there are varirus unique ways which have been developed to facilitate the financing of shonring centers Tlese would include, snlit mortyafes by'whi.h nroscective mortgerecs ma? d—--Q..¢ . flin- ' " ‘ " loan on portions of the project ratler than on the project as a whole; oarticiretion in a sir :;le blanizet mortgave by more th n one nS'r-nce com- A“ nany or other mortgages; sale and lease back by which the property may be *- solc to the prospective investor ar d leased back to the developer; sale or croxnd lease of the land, unon whicl the department store and other principal tenant is located to such tenant; and construction of the build- ing or buildings for the use of such principal tenant by the tenant L'nself ratler than by the deveIOber; ground leases, by wh ich owners of pronerty O . 2 Tbid. 21mm” 1:). 5'8. 22 18386 it to a developer on conditions which may rermit the subordination " ' ' 4‘ .9 of the ownersnip in tne land 0; the mortrane.'2 (Q U) ourc e f Financing To fur her present to flee reader the financial workin~s of a shop- ping center, the sourCes and croceedure for chtaininr a mortgafe will be briefly described. The major sources of funds are as follows: 1 solicit 1. Insurance comranies. I-any insu JanCe cc~raiits actus ., ”‘2.“— . equncipal 1 iinanCinr for shot pin ce ters and as a res‘lt. are t: source of i‘unds for shcpoirg centers. 2. Pension funds. Administrators of pension funds of various retail Businesses, industrial contani s an labor unions show must inter- est in the financing of shoppinv centers. 3. Educational institutions. Collere and university reserve and endowments are eiten a milable for rea 1 estate projects. h. Financing syndicates. This source will often take partial or full ownershio of cente.rs andzaill nrovidc the equity capital as well as the know-how re :uired Ior devel crimes rurooses. 5. heal estate comranies. These corporations have slown much inter- est during the‘last ?ive or six years in the acquisititn and development of shOpoing center pronerties. The actual procedure used to anply for a mortgage varies as each institution has its Ow n mortgage aoplication form in wlich the bare essen~ tials of the project have to be stated. In most cases, however, the develorer‘will be required to nrovide a market study. Then too, he will normally be required to provide architectural plans indicating the locations of the stores, the dimensions of the project, the extent of the parking, 221bid. ’li of the stores, the dimensions of the project, the extent of he parking, and other factors. Also inzl cried will be a scheozle of rents indicating proposed tenants, amount of space they will occupy, amount of guaranteed rent, and percentage rent terms. Another requirement is an abstract of the leasing program showing the general nature of the leasing commitments, accompanied by the lease document proposed for use in tenant negotiations. In addition, the developer will ordinarily be asked to provide a profit and loss estimate indicating the amount of rent expected, together with the budeet oi expenses lor tie Lroject and the net income firnres. These will be m: ed byt the f narcint institution to determine the economic value of the oroject in comrerison with the institucinn' s own arurces of ttis infoma tion. The projected center is always anpraig ed b" t 'ue notential 1e ndin3 institution, which may agree or disapree vith tie develoners market st icy and rental estimates. It is the arpiais al of the financinfi institution which determines the decision to ore. ide the requested iirm rcin- To familiarize the reader with the various forms used by develoyers and mortgage brokers, copies of typical forms are found in the anpendix. Form 101 Ar plication for Yortra 8 loan Commitment. This form sets the mortgage terms uncerggnicn clients can work. it is their minimum mortgage acceptance. In sedition it sets forth the brokers commission arrangements. Form HA 102 Mortgnce Kean Anrlhration. .orm HA 10 and mlOL Shepping Center Analvsis anc Tyrical Anal"sis. Form 103 is the means of co.»1ltnb an economic rictnre c-f the Form PA 105 Correspondents Arnraisaj. A companion to Form 103 setting iortn he physical and econonic appraisal of the center. 2h I1 ( I The AAA St tipulation, How Does T?.i sfffect the Tenart an: the .exelo.er Most insurance companies and other financial institutions are inclined to be heavily influenced by the amount of space that is rented to retailers with strong national credit, on the assumption that such renting will pro- vide the nexinum protection for the amount that is beinr loaned. mite insistence that a larb e prooortion oi‘ spa ace be rented to companies c? high credit rating may have a tendency to strait-jacket the developer; it necessitates his rentinc to coiranies 01‘ high c eds t regaroless of w ether local tenants or other tenants with lower credit rating wculti rro ice a better snooping atnosntere and a better complement of shepéing amenities for the cus tone 1" . The financing of shonring Centers with its many stipulations is very complex. The owner-developer of a sdorping center must provide equity capital not only for construction costs but also for the acquisition of land, architecture and engineering fees, financing charges, interos t,l %al fees, overhead, etc., and finally, those costs assoc: ated w:_th the opera- tion of tie completed center. it has been found that a large nercentage of shoppin; center develonments involve the syndicated tyie of operation in which the landowner, the architect, the builder, the develoner or rent- ir 5; agent, and the attorney, coniribute their ser'ices and the land and hope to borrow enough money from a firencinr 'nstitution to nreclude their own cash investment. The eXpenses associated with cone trzction costsa acc mat for the largest share of the equity funds required for develoying a center. local banks 25 provide short-term construction funds and are usually the first source of funds, often by mortgage loan. When the construction is completed the sfort-term lender is naid 01f and the insuxance connany or pension fund holds the first mortgage "The Institute of Life Insurance states that the aggregate financing needs of sheprine centers range from anproximately 3200, 000 to as 1nuch as Cu? million. The average value is believed to be between 1 million and $2 million."2L Shooting center financing takes on big dimensions, as indicated by the previous figures. It is so big that it is almost a universal policy of the major, permanent lending agencies, the t before t:1e" grant a long- term loan on a shop1in~ center, the developer must} :avc obtaineci f; Led- minimum, guaranteed rentals from AAA tenants (tenants with a net worth of at least 31 millionl to cover amortization of the loan (bot r11c1nal L5. *5 arr? 'l'tere; t,, real es"1te taxes. ance, and Irequent 1y PTOId'W1’ fir exrenses.‘3 accordingly, this requirenent c? the permanent lenders usually amounts, in a typical sheppiré center melo .-nt, to about 70 rpr c5nt of the total space that must, be "<"‘.'.1’{T’Y‘€'1‘3 1'," 11116; 1'13 (ed-minimum marantce rentals of tenants of good national rating. The vice-rresident of one of the largest insurance comranies in the country made a study of 10 of company's 8h shopping center loans, taken at random. The cases studied ran from M3Un ted States fonzress, Senate, Ccmmi ttee on Fm-al1 Business, Cheering Centers-~1959, heaxings before Subcommittee, 86th Con5ress, lst Session, (Washington: Government Printing Office, 1959), D. 136. 21 .. 1 . Institute of L11e Insurance, News Release on shopping Centers, (New York: Institute of Life Insurance, November 28, lQSb) 2 . $1. 3. iongress, Ccmmit'ee on Small Business. Shonnir~ Cente§:-l959, 9:. fits . D. 101. [‘0 0\ loans of $500,000 to $15 million. He found that the "name" tenants pro- vided 60 to 7b Per cent of the irconn; the avers e of the 10 cases was 70 per CBHtozé The policy of lending agencies regarding Aliif chain store tenants is sxwewhat flexible, changing from time to time with changes in the money market, 'ith the size and location of preposed centers, and with the skill and reputation o: the indi md gal develOpers. Various articles indi- cate that when money is ti ght, requi.rements are tightened up; then much money is available, usually the requirements are libera ized. In addition, it :as been found trat tF ere is a hiflzer nercenta:e of AAA tenants requi ed in the larger center tLan in the smaller centers and that an unusuall 3006 location and a highly reputable develcner may persuade the mortgagee to take relatively more ten nts with less than AAA credit. However, no matter how the situation is mar anulated, aroun l 70 per cent of tie tenants mus t be oi the Ann caliber, a rati nj whicn tne t"7i:al prepressive inde- pendent merchant is lacking. It presents a real problem and the need for good alternative measures that the inreneniert can take in order to insure his continuation in the retail field. lease Rest ri cti or 18 Lscriminator" practices a'aizs t lirerennent erchants are taking lace in many lines of reta.iling. ixanples are on record of food, drug, '0 and variety store merch nts bein, refused s!“ onpinr carter locati oons beca*:sc they lacked triple A ratinr even thouah in their nart ular locality, the I), ‘Clbid., p. 133. '1! merchants had nroven tnemselves in merchanoising'arfl ownership functions. At the Senate Sulcozmit te efiearinr conducted by the Select Counittee on Snall Eusiness in Are ril of 1959, various nerch ants vo oiced tFeir views at tee hearings. On, more. ant, an operator of thr roe successfll surermarkets in Cklah m. City testified hcwr ne was denied space in shopping centers because of tLe AAA net tor tn requirement. The market owner was a personal friend of the deVeloper and in addition, his xhcloeaicr supplier having \0- '5 .~c ’~ a t‘ I. . f ‘ ’ "1‘. o- ' n1 ‘ ‘ 0 q- «‘3 N .. .' . ‘ annaaL sales of t13i nillion aid total ascet: o1 oier e10 willion agreed . .. L _ . .. . t2”) cos "1 the lez‘. '33. The -;l‘?'.'810[*91" Fa’i to «ten? 2‘1": 1) U8 ceramics oi tut: s l l'r D ‘ w I '~<: ,1. .110 a pa U SJ ’1 {t 01 C. C" (”I L} (D ‘1) ‘3 .Q ' Q CU .mre foot suoermarket was leasen to a national enain, thereby restricting the further engaosion of ' . ' - ‘ .. .1 i t . — ° , 7‘- Lrbe lrtr‘erlc'1t‘lnnt :)~1r'(rn3r'mit otherwise be an era of increased opportunity for thousands of independent businessman in a growinr popula- tion and an expanding economy, will instead, be an era nirked by further concentration of retail sales. The trend is already apparent. In l)kQ //U, 301*Ld.; Do 229, citing *he ?T*h nnual Chain Store fife ”onrtr~*ticn and Nouexniza'ion Survey. receipts of the too 20 retail ckain co panies represented 12 per cent 02 the consumer spending in all types of retail stores.3l While perhaps these facts are discouraging to sane, es ecially tnose who feel they are being discr Winatei acainst, M ehistory of the indepen- dent merchant irbicates that e'en as a tenant in the downtown siopning area, the key to obtain.n' a la cat or wasxnot based entire'y on his sxill or experience as a businessman, or even his ability to may rent, nut rather onfzhe arbitrary requirement of net wortn, set unusually high to meet the unusually conservative derands of one industry, financing institutions. whether they will cha an 8 their wa,s is doubtful. Rs custodians for other peerle's money; financial institutiens are interesfec nrinarily in the security of the lactors of credit, stability, continuality, and manage- ment performance of the various tenants in a center, projected in terms of 20 to 30 years. :uome snOpn‘r*‘center ind mry men feel that the lenders are inn a great disserw ce in oeinc oO strict in placing so much enpnasis on high percentage chain-store leasing. It 13 felt that the success of a shepning center lies in a good representation of both chain and independent *rchants.. Wallace E. Agnew, vice president of the talker & Dunlap, Inc., mortgage banlfi lng firm once mac Be a sta tamer t wh3_cn should be tak en into Iconsideration by the lending agencies:32 "The experienced, local merchant with adequate financing and a good following, but without an AAA balance sheet, will con- siderably out-merchandise the major chain. his total sales 31"Marketiny--Tbe TOp 20 Retailers: 1958 Score," Business Week '. 3 (April 11, quQ), 1". 1.1.50 t. 3. Congress, Committee on Small Business, shepping Centerspnl 959, 913.. Citoy p. 167. will be larger per square foot and lie percentage rental payments at a hieher rate. By his following be will develop traffic and business not only for himself but for the center as a whole. A cagable, successful local merchant is far from the rarity which nest insurance lencinp officers seen to think he is. He can be located; he can be replaced if he dies or is incapacitated; ane he can no a great job of making a center really financially successful instead of only modestly so." Th problem of the "discrimination" toward the independent will prob- ably work itself out as time goes on. Since it appears that the days of the amateur reveIOfier are ceding to a close, the professional neveloper, will no doubt gain the respect of the lending institutions to the point that tne developers judgment of tenants will carry considerably more weifnt than it does at the oresent time. In other wores, instead of the mortgage men relying on the signature of 75-50 per cent LEA tenants, more ‘assurance will rest with the "professional” develoeer. Tnus in the future, the experience, reputation, ability, and equity rosition of tie develoner will become increasingly important. Developers snom;d take every possible measure to insure :hemseives of esteem in the eyes of the money lenders. is aken to Aid the indefennc;t i. His "Crisis." a — ”m .- * -—-‘ _— _— ~ Wfint Lhasuces Can Be _‘___ The froblem of “discrimination” anainst the ineefieneent merchant in the shopping center irdustry can borefully wars itself out over time as indicated in the previous chapter of this rerort, or there are possible courses of action, taken eitner by r~ivate or government activities, which could alleViate this nroblem. The methods available, sone not condoned or even considered feasible by the writer, represent the alternative solutions to this current problem facinr the industry. 3ome possible selutions are L_z as follows: 1. Government nroviding_€inancine. One suggesuion is that tne “-— -- Government provide financ1n3 at reasonable rates as a second char3e on the center. in proportion to the space rented to tenants of nonayprcved crcdgt. In dOing this, it is hoped that the owners r developers of the shorting center might be inclined to rent a somewhat larger share of snaee to the tenarts who cannot ctherwise gain admittance to sporting centers. ftviLHsly, this met.od cf :inancing wonld involve Tovernment iwr Wer~etfion, nlus aid that is not really practical and needef There is O i‘ '9 . r ‘~ ' 0‘15 ‘- a‘ vx ’- . \ \ W \ F}. s - 1-» .. w linx etn nr<°eltly availaelt for shopplng Centers, ceztalnly So.e JCGHS ‘ otter than Government llit:C‘ni would be more reasistic. 2. tnnnlicis (x osicn ret2111tr leisrs. Unoe: tlis systen M-” 9M. 0-0,— ----> a surer market oyerator desirous to enter a center rtvlfi arran~e with one pt. of Tic su'”lie rs w 0 had AAA Qualificztions to gizu eantce his leaks Litn the develoner. in return. tile super market 0“”er a") 1L than make ‘13 Dungases from 'nat sulrlier. Tie syrylier w’ it conceivably be a whole- sale grocer or even a dairv cong‘r W. mere are various other methods used to aid the reta1.ar in the form a: cosigninq of leases. One w olesale cooperative, the issociated flrocers of Seattle, has este: L') i P1 363 a subsic.ialy comrany in order to have funds available to DUCfi un its member stores who wish to enter snorring center locations. In the shoe industry, Shoenterrrise Cory., of St. Livia, which is a subsidiary of the International Jute Company, has a unique plan which tns underwritten some 60’ inoef enc ent shoe stores t eat are new in shopping centers.33 While some individuals yrcbably View +‘ is arrangement as a means of the retailer losing some of his independence, it m‘rat he res ernbered that tne retailer is protected by 3 Fedora 1 1race Commizsicn Pulixui wiich pro- “.itits a ..anufeciurer or wloie aler from forcin; a retailer to handle the ~;noer rritinc slrn1iers merclar ise exc1usiveiy. :‘rw ' .. . . ' ', H. " ’4‘ 3. ima-1 rus:1r ss inxertmenf cozrenxcs. Anctner p0351ole ale to b.“ qualified local tenants world re the use of the newly created Small Ensi- ness Investment Corroration. It is nossibie that a 53.1 loan could be made availabJe under Certain circunsiaxces, to 316 a tenant by lending funds to pay the last years rent or for an :CVancement 10a; purpose wnich often are resuirec ty mortgare men. flowever, the Small 1siners invest zen: Corporation was not cree tea for this tyre of activity, therefore, it is not considered too feasible unle: s it is a desrerate situation. b. Utilization f be arerman Act fine the Robinson-r'tman Act. ——- “*- 1... m “-- .5“..— Under the Sherman Act there have been cases w icn involved a mercnant being denied Stace in a buildinx used by'his cofipctiticn art also beingo {ed t1v his competitors. nae tte iterman Ac ct, the latent monopolist must justify .. I, 111 t‘ne evc usi on of a co'netitor :rom market Wulch ne controls.“ While the number of occurrences of this situation is limited, it may become of innortance in.the future. some business fires, such as Food Fair 33%;:d O 3 p. 96. 3hU. S. Conisress, Conmittee on S~g11 Euslness, tenort No. 1016, 2:. cit., p. 23. Center, a case may be esteblished proving exClusion. In addition, the problem could occur between department stores and smaller merchants. Defiartment stores are becoming significant factors in shopving center development. If clothing mtrchents or other direct connetitive merchants are denied leases because of exclusion, the above-named acts may he effec- tuated, thus shedding new light on the problem. 5. Tax aids tg'bfginninr businessmen. Leonard L. Farber, president of the International Council of shopping Centers, is on record as suggest- ing that the government might give a liberal tax exemption to a businessman during his first years of business onerations when he pressures are greatest and when he runs the greatest dangers of failure. With this arrangement, only the beginning merchants would be aidec; the already established merchant would not be aided in his attewrts to gain entrance into a shopping center. Actually, the idea of tax aids to beginning businesses seems imprac- tical and unrealistic. It would be most difficult for tax agencies to control such a system or to establish the rules to make it function. 6. Lease insurance. A lease insurance program, either by a private insurance company or by the Government may be a solution. By lease insur- ance, a: insurance policy could be written to cover the conditions of a tenants lease for the period of the lease. Under this program, the finan- cing institutions would seemingly have the security they seek and there 36 would tlus be no need for the AAA tenant requirement. Possibly, the devel- Oper of a prepOSed shopping center could then solicit prospective tenants into ris center on the basis of their merchandising ability rather than on their net worth. This type of arrangement, mm} le on the sarxc ce annearin: as an ideal measurement, is more on the netui of a s‘zret.y contrcc t, etch as a lease 1m.:fi, as described in insurance terminology. In actuality, it is innrac- ticrl because, as voiced by the Life Insurance Association of snerica,3S Hithou atteipting to examine all aspects of the yrohlem, w: c_*rcss the orinion that it would not be possible for 111 e snurance companies to engage in such a prorram of lea:;e ins rance under their existint clarters r under the regulatory l we governing the coverages they may issue." 7. lrfifr bonds. The surety industry for many years has had available lease bonds for business concerns. Lease bonds are written with the inden- nity of the principal, and a financ' al ruerer tee o: tFis tyne is generally underwritten in accordance win the financial standinr, business experi- erce, and reputation of the principal.36 The practice of bonding the performance of leases is not widespread, and most of this type of finan- cing has been found to have been written in co: nection xitr lederal leases. Lease bonds are not prominent in the shopping center industry. One thing in particular, lease bonds are usually written for a one- year period only and are subjeCt to close scrutiny on the part of the surety industry. They are not geared to a mass production basis, therefore, it 35 Epjlgog Po 21;. 36lbid., ;. 2;. 37 is doubtful if they could be utilized by potential desyerate tenants. Since the surety'irflustry'is quite particular when writing lease bonds, it appears that the person most able to qualify fer such a bond is the person least likely to need it, the converse probably bein: true also. Rany variables enter into a business over the years, therefore, lease bonis wiich are for short-term periods are not too helpful to a tenant that needs a 10-20 year coverage. 8. Use of FHA system of insuring mortcanes. Tt is felt by the -‘u—d . ~ fiCia measures are taken to insure the indepen- H' writer that if some rt 8! 'VV" dent mercnants entrance irto shopping centers, the rah tyre system should C‘ be inaururated. such a rroyram could orerate rnfler tne swnervision of the ‘ :‘t L-‘f'la ' \.-.J ‘\ Business Administ ation who would have the task 01 evaluating the abilities and potentialities of the arnlicants. Eliie this wozld probably aid the independent in his fight for survival in shopping centers, the complications arising from the plan night not be encouraginf. There seems to be no barriers left to eliminate the overbuilding of centers if many merchants who otherwise would be nonfinancible, would now be able to enter into shogping Centers as tenants. In turn, the success of standing centers and the number of independents already in ttose centers would be serioHSly fieorardizeo. Therefore, as a solution to the indehen- dents dilemma, it is the writers opinion that nothing be done. Time should solve the problem. The lending institutions will most likely ch.n;e their attitude in the near future by permitting the able local independent space in the center if he is recommended by the "proiessional" oevelober, as was previously discussed. 1| Knat About the Innovator? Could it be that the reason why lencin; institutions inSist on bring- inc the chains into the center 13 simnly to prevent them from coming into the developed traoe area afterwarcs in competition with the shopping center? No matter what the tenant selection policies of the shonpinr center are, ‘ I tnere lS always room in the merchanflising world for the afigressive, non- conventional, 10w margin mass retailer. If the center is successful in ireezing local retailing into a mold wh'ch is immune to Chan e, new retailinf :orms or corcspts will probably develop outside the center.' This is because the retailers outsioe the Center somehow have to compensate the Snooper for giving up the Conver‘- ences o: tht center. EVidence of this is seen by the various ciscount hovses which are springing up throughout the country, often times in direct competition with a big shOppin; center. The "discount" innovator has oisturbed the "status owo" of many centers. At one tine the oisc0tnt operator was refused as a tenart in shorpirg cen- Tj‘ I ters; now, he is welcomed. ossibiy in tte Future, a new tyre retailing institution will arise, composed of innovating entrepeneurs who were restricted from tne traeitional shortinr center or who v ild rot sabscribe to tie hiyk rent and centrols which ") are imposee on shorting center merchants. ‘ .y - . . —: y- -‘ .1 ‘ -: . 7‘ rs ‘~. ~-\ . AV- " ‘ 1-. fl': v 1 the net tyie institution results in lHCFcaSGd efiiciencd ane bliniinL L _ 1" 37Morr13 L. efleet, "Tenan' Sexcction P Centers," Journal of Marketinsg (April, 193; x. ) \O merchanoise to the consumer at a lower price, it most likely will b: socially desirable anc well yatronized by the consumer. Then verbe tbere merchants till be able to "diSCfiflifiafc" aWfianL tie traditional chain shopping Center retailer 'ho cesires to be a tenant in their institution. A problem which has been in ezistcece s are lEe “orfii‘Ltc a? the H k)- rst lope“n* centers and wlich has increasinély nrogressed as a matter 0 l1) 0 O .‘3 "'9 f” Fla . 4" I- a ' A I ' u“" . -. L : au- ct, is that o} the mere ants a seeiations. (“1 _‘ '7 V!) 'fi" r‘ ‘, : rt t‘ t v 3a { ~’~,o '3 )~, ‘-"7-\"'fl hf; t v‘ (‘3 V UJTice.k'1|.v -vilocs or- .‘ 0n 28 I-"L'.ln tau. ‘5’ fiefik; [ . .144“ e.“ 11 S -“..\.-.-..Lr ' . 1‘ .. , v. .. ,, ~ . , 1“ t! at additio on:_ rent s.all se pale oner tne :..mn m rent Juen sates reucn ~ '-~ ' A am')1\\fi* 4 f " ' ‘V‘Dil 90w '0 1 (a Hn‘fsb 10"»CAH to h) V+;)“fir‘+ln' : wwn a Lark-l; 4"" Ltlbk” ‘-' lb '4 - ~ A I . '-‘ ‘aJ- " \. ‘Jt. -11:.x~ Q\’~-‘ -LA¢‘. fol. V- ' . . u ‘ 0 I * ‘ ‘1- y». - - r-v A\ v ‘97 tmfitional dcv;ces to increase sis incone. in auc;ti r -ng nuasires tilt ‘bfi-l \ 1 p‘v'f‘“? 1" ‘\ t' 'r' +!-\ : ~(\ ¢\’f)¢\ 1‘.-‘ Hr 195 -‘ .-: 7‘ ‘r‘:-+(‘ {C‘ }~‘.-~‘r‘-r 7 ~-:1r~.‘\‘ K; .,. .v1;_-‘r llldt. 1 Mad A fill-LL; Jul -L...A : ’fC-h.)e IAJ-\) :3d .4... an A ‘4 ’JY -95.) -L‘ -.L' LIL‘W‘ (IG\_Z ‘-J.'.-‘,‘ ‘ ' ‘ D I . ‘ T. 4“ ‘ V ' . -. F ' ‘ '. y . 1. 1 1 . inoc1~1eei :1 tziltin, sales Jo: .umc incnoel DO JUstth‘tue lo; ren,al 78nc . ~ q‘ r e 'L a o ' v ‘ ‘ . V- . v 1' s r - —. ‘ < " ,.. a'ree 1‘.LLS y, r'C txii 0. bt‘f' ' “ ":1“ H. t l 1‘: C'-" if 3 .l‘ J.‘ .I .: “IE?"‘Y‘, ;J .t' t-- 'erf “ u ' ‘ ~ * ‘ ~A -‘ H '1 a . ‘u - ,7 v : V - - Tn a", zue cerelonmunt o: duo;p-u center; 3: much tux: in LLV entire 4" 0‘ \v cal.“ ~‘- : : '\"~' 7* ‘ 'fi ’ ‘3" 7‘ "‘ " " . . l“" f a : f “ “‘Q ‘ 1 7‘ ’ " ‘. “L 0‘ c. ;g~"_\, “1..‘._._b_. 1‘: VJQAA‘ 1rd 4.. AA ’1 1‘? iii t.o-:(,1 t"; (“PM Lx-.1_:.'..\.'.Ao"‘ cL‘n...'.)AJ‘- 91.; v.1 . o ‘ . an I y . . ~ - .n s.» v- . r- -.. n. aw . - H ‘n. -— ~ increaseo interest 1d more anus assor Harm, ma:g’,ts;i:cte Live 49W lo . ‘uv , ‘ 1 \ ‘- . .‘ - -_ . l r .‘.f v-v .., J“ ,—‘ > . .e- “— H -. . 'I‘. 1. v'r : I : ‘ b‘? U'o‘fKTI‘K :2 9t"? .L'Dr‘l.’ .3 LXI-‘4 11’: rid”; s.‘ -15 . L -r‘ 4| A‘: bile ‘J. '1. IQ‘X Ln t L(;._!_r atbemri J tr ‘iw'! -’-) "“‘yfih‘ -. , Y“. /4 van C‘.‘ . .-+ t" -‘.-(" “.q*‘ 1 ‘7' Y” ‘ 3, ‘ rV + n +y~ 1'“ 9 LI“ W ..-.LV‘.. (.1 J. “Av u;\)AL 1' J'An;I'A...:1-..z.) ;. JJ‘JLLL '1-.L.Ao -.l l -.: C .C. ‘j. , ‘. if? ' J ..u._- 17.17 anv- «A; "T a) a 3‘ L1 n~‘p uh ‘. Wen-n. ”"P- ("FM-v.37 'r r"u""“‘~- "‘ ‘ " " """ "7 .91) i, L ~-.L Obfil Lll —...- C) 5J0-” :\ K): k-A-Pt s‘sl f}‘ (I L) .L.‘\.«“5‘.\.“ L&.1 . t) 2.1" . “.4‘- v a“: ';l~| ...L ‘35-) Lk- -’H. ~‘ Cl-.‘.u- O ' ' I. .".’\ ‘ WLECC‘ 0011'? C- (JUNK, arcianss associations. ”ufiu T ‘A '\ V7 1 ‘.‘ ‘ \: 'n V 1 in kg 1‘ --. in ti: early oats oi are shootin, centers, man; lei.uw merchants car- ried on active trade be t.le es a ain:t o: e anetber at VEPiO’S ties“ . -m‘—J 3P): - h rrn a. " e ' "' ' A" ‘ 'V ' ‘ '4 " " ‘ I ‘ 65". I” l r “ ur -,‘ .gx‘ _,- e .‘6 -e ‘ ‘ fl. 2 x - — . ' uaVL‘ ~ails a, m...» ..e.w in ennui: center', .u‘-ui-wctrr:1i strut ‘ ' H-—ow v...— " .. ‘A‘ /\ . r: t “L?“ 1 , (",0 I’ , F § 10 9o ‘ ‘ Q - o a “v1 ~-l\: '- r'. - .— tfuur; tuey were not always dlre ctLy c01“e ayaenst one a otLe: Ln t 'cdn l r1. M Y“ T ' +1.. Jr." ' .V YQL-o " “ rfilfi n‘ t, ‘,.a,\ n P a“ I