Five Questions With RPT Realty’s Brian Harper: What’s the Future of Open-Air Retail?

How have the past two months been for you?

The first priority for our company is the health and safety of our employees. Thankfully, a little after I took over the company a year ago, we put everyone on a virtual, cloud-based system and we implemented a work from home day, which was kind of mandatory at the time for work/life balance. So a lot of people are now asking “Did you know this was coming?!” [laughs] and no, we absolutely didn’t. But as a result it’s been very seamless. We’re all connected and we do Friday virtual happy hours every week. 

We’ve been having a lot of conversations with our tenants and municipalities and are being proactive so we have plans in place for every single asset. We’re also trying some innovations with video cameras and a capacity management system where a green light means you can enter stores. We’re in the early innings, and are partnering with some people in Michigan as our first parlay into it. Then we’re working with our retailers and checking they have everything they need for curbside pick up, and just focusing on being true partners to them. We’ve been studying previous crises and the innovation that has come from each of them. So, we’re really looking at this through the lens of what changes, what hasn’t changed and how we can provide a great result for our employees, our tenants and our shareholders .

We don’t know the timeline of this pandemic or when we can return to any semblance of normality, but what changes can we expect to see in open-air shopping centers going forward? 

A large percentage of our assets are grocery and pharmacy [anchored] so essential businesses that are thriving. Open air — long term — is going to be a great sector. These assets don’t have roofs and people can go park, then have sightlines to the retailers’ front doors to see if people are in the stores or not, plus you can do curbside pickup. The flexibility of a strip center or open-air grocery-anchored center is more convenient than large retail assets. I still believe there are several retail centers that will thrive but I think open air has a good future to it. Now, will the curation of the retailers change? It’s too soon to tell, but we really like the essential businesses and the service business that can withstand any downturn period and all the headwinds of where we are in a cycle. 

What are some of the conversations you’ve been having with your small business tenants? 

Small businesses have been greatly impacted so we set up a concierge program with several initiatives around what we’re doing as a company to help them. We hired law firms to help with the PPP loans as well as future loans; some people are greatly sophisticated but many needed expertise so we provided experts for them to speak with. That’s been of great benefit. A lot of people have their life savings tied into their business and not an abundance of cash in reserve, so we jumped in immediately when the government was announcing the stimulus and put a task team together. Small businesses are the fabric of most shopping centers and the fabric of America.

How about your national tenants? 

The nationals we’re taking a much different approach with, because they’re in a much different place. They’ve had flourishing years and big balance sheets and they have access to the public markets. Our approach with them is if there’s 100 national tenants we’re looking at it 100 different ways — so who are they, what’s their cash position. There’s partnership, of course, but I have been frustrated with a few tenants who have used this pandemic as a reason not to pay rent. Why am I frustrated? It takes our attention away from the small businesses, the people who really need a helping hand. I think the consumers are picking up on this and realizing who the good actors and bad actors are. This isn’t the time to take advantage, It’s such a critical period of time and we’re all in one ecosystem. If a tenant doesn’t pay rent, what does that affect? It affects employees potentially not getting paid, it affects municipalities from a taxes standpoint, it affects vendors not getting paid. All the weight can’t be put on the landlord; there’s mortgages to pay and at the end of the day it is contractual. In the roaring years landlords couldn’t go to tenants and say “You’re doing so well, so pay me three times the rent.” 

At first it was landlords who were [portrayed in the media as] Darth Vadar but now it’s like woah, woah woah… because it’s a big ecosystem. This is a marathon, not a sprint. Those who aren’t partnering with the landlords are going to have great difficulty in the future when it comes to needing something or partnering on something. Whether it’s not renewing leases or defaulting people for not paying rent and giving up profitable stores. I’ve been pleasantly pleased with a lot of retailers and disappointed in a few. 

What’s the most challenging part of your day today? 

I’m a people person and like to see people and be with people. We have two kids and one of our kids has autism. He has been off his routine and it’s been challenging helping him navigate through it. I was just elected chairman of the board of Autism Speaks [on April 1]. It’s a worldwide organization but we didn’t expect this pandemic to change everything as it has. So many individuals and families need our help and there isn’t enough time in the day.