Strategic Redirection Saves Retail Real Estate Venture
2012 marks a triple return compared to the recession years
Partners Robert Jolly and Mead Silsbee couldn’t have picked a worse time to launch a business specializing in the retail segment of real estate. In 2005, when the two commercial real estate veterans launched Birmingham-based Retail Specialists, both retail and real estate were booming.
At first they focused on tenant representation throughout the Southeast, working for clients like Starbucks and Movie Gallery, finding prime locations in mushrooming shopping centers. Confident in consumer exuberance, the partners also invested in one such development in their back yard — a retail plus high-rise condominium project in the Lakeview area of Birmingham.
When consumer spending began faltering in 2006 and 2007— the first wave of worse economic news — the Lakeview development stalled.
Then the whole economy froze.
“We had to quickly shift gears, as a matter of survival,” Jolly says. “Our prospects changed relatively quickly, because our clients stopped wanting to open new locations.”
Providing property management and leasing services became the company’s new focus, as the Great Recession dragged on. While the transition was challenging, it did prove fruitful over time, and Retail Specialists eventually began thriving again. “We never talked about throwing in the towel, because we knew we had to persevere,” Silsbee says. “In business, it’s the survival of the fittest.”
Glamorous Midtown Village in Tuscaloosa was Retail Specialists’ first major property management contract. With that success other management and leasing opportunities followed, including the Village at Lee Branch and Brook Highland Plaza in the Birmingham area and the Dothan Pavilion in Dothan. The company now is providing leasing services for the high-profile Lane Parke development in Mountain Brook, which will include a luxury Kessler Collection hotel. “We’ve been getting a lot of interest from national retailers that serve affluent markets,” Jolly says.
He and Silsbee want to grow the property leasing and management segment of Retail Specialists to eventually generate 50 percent of the company’s revenues. “Property management is particularly desirable from a business point of view because it’s ongoing,” Silsbee says.
Unlike many companies faced with the recession, Retail Specialists didn’t have to go through layoffs.
“Because revenues were down, so was their income, but they didn’t jump ship,” Jolly says. “We have tried to create a family culture here, and like a family, we stuck together, even during the hard times.”
The company that started with six employees in pre-recession 2005 currently has 20 employees even as economic recovery proceeds at a crawl.
Retail Specialists continues to provide tenant representation services to major brands and is hoping to significantly grow that aspect of the business as the retail climate improves. The company has relationships with Winn-Dixie, Verizon Wireless, Ruby Tuesday, Hollywood Video, Quiznos, New Balance, CitiFinancial, Chipotle Mexican Grill, Ace Hardware, Zaxby’s, Bromberg’s Fine Jewelers, Dunkin Donuts, World of Beers, Rent-A-Center and Newk’s, among others. “Retail is stronger than it was, but the economy is still recovering,” Jolly says.
Retail Specialists opened a New Orleans office in 2009 after partnering with Joe Mann and John Moss, both of whom have top-notch retail real estate credentials and excellent connections in the New Orleans area. The partnership has proved a lucrative addition for the company. “Following Katrina, there’s been an increased demand for retail as various areas have been redeveloped,” Jolly says.
Retail Specialists relocated its Birmingham operations to Railroad Square last year. Annual revenues have increased from $750,000 in 2005 to $2.6 million during 2012. Even though the national economic recovery is still weak, Jolly and Silsbee are optimistic about their company’s future. They currently are seeking to license the Retail Specialists brand and create a referral network. “Like Coldwell Banker, we’d like to become a national brand,” Silsbee says. “We believe we’ve hit on a successful formula.”
That formula could be simply expressed as being able to serve every player in the game — the retailer and the real estate owner, and, now, also the cities starving for more retail development and sales tax revenue.
In 2010, Jolly and Silsbee kicked off a sister company, Retail Strategies, that works with Retail Specialists to help municipalities research retail needs, design strategies and beef up retail representation in their municipal areas. Retail Strategies currently works with 30 municipalities, primarily in Alabama, including Montgomery, Tuscaloosa, Madison, Trussville, Foley, Chickasaw and Arab. “We see a growing need for our services in Florida, so we’re working to expand Retail Strategies into markets throughout that state,” Jolly says.
Jolly and Silsbee’s ill-fated Lakeview real estate investment went through a reinvention and finally led to the $15 million Lakeview 29Seven mixed-use apartment development, which opened in September. The investors and their partners worked for several years to revise their plans to meet current market demands and doggedly went from lender to lender to get financing for the project. “We could have walked away early on, but we didn’t want to give up on it,” Silsbee says. “We all say that project has had nine lives. We were let down, disappointed and had false hopes so many times, but eventually it all worked out.”
The 54 upscale units in the 29Seven apartments are now 100 percent occupied and have a waiting list. Retail Specialists has signed on a variety of restaurant tenants for most of the retail space available. Restaurants include Jimmy John’s Gourmet Sandwiches, Huey’s 24/7 Diner, Press It Bistro and Automat and P Jack’s Gastropub. “We’re proud we took a risk during a down economy, and we’re grateful we were finally able to find a lender who was willing to take a chance on us,” Jolly says. “We believe the development will continue to have a positive economic impact to the Lakeview area for years to come.”
The City of Montgomery, a client of Retail Strategies, hopes to launch a similar mixed-use apartment project in downtown Montgomery at the southwest corner of Commerce Street and Bibb Street. “They are in the process of a due diligence study, and if all goes well, the project will likely inject new life into the area,” Jolly says.
Before launching off on their own, Jolly and Silsbee were the two-man retail team at Birmingham-based EGS Commercial Real Estate. Jolly, originally from Montgomery, had previously worked with Black and Decker in Los Angeles. Silsbee, a Birmingham native, had worked with Hamlet Homes and Intermountain Mortgage Co. in Park City, Utah, before joining EGS.
Kathy Hagood is a freelance writer for Business Alabama. She lives in Homewood.