From Where I Sit S3E1 Transcript: Brian Finnegan, CEO & President, Brixmor Property Group

Brian Finnegan:

Retailers are making 10, 15, 20-year investments, right? And there's obviously different economic cycles during that time. They're making those investments today with more data than they've ever had on their customers. And they're getting more and more of it every day. And not only do I think it allows them to serve their customers better, it allows them to make those stores as productive as they've ever been.

Tom McGee:

Welcome to From Where I Sit, the award-winning podcast where we explore the forces shaping America's built economy. I'm Tom McGee, President and CEO of ICSC. This season, I sit down on camera with the leaders shaping the future of the built world, commerce and technology. From emerging trends to groundbreaking innovations, we'll explore what's driving change across our communities and the broader economy. Let's get started.

Shopping centers have been anchors of communities for decades, supporting commerce, but just as importantly, bringing people together. Open air centers in particular are an enduring part of the American landscape, woven into communities from coast to coast and creating places where people shop, dine, gather, and connect. Our guest today, Brian Finnegan, has spent nearly two decades helping shape retail real estate through his work with Brixmor Property Group, where he was named CEO earlier this year.

From its headquarters in New York, Brixmor operates 346 open-air shopping centers across 29 states, seeing approximately 900 million visits annually. I've had the pleasure of knowing Brian for many years through his leadership across the industry and of course his involvement with ICSC. Early in his career, Brian volunteered with ICSC's Next Generation program and has since taken on several leadership roles, currently serving on the ICSC Board of Trustees and as chair of the ICSC Foundation Board of Directors. Brian's also a great friend.

Brian, welcome to the show.

Brian:

Tom, thanks for having me. Great to be here.

Tom:

Yeah, it's a real privilege to have you, Brian. And you know, as we start our conversation today, as I made reference to, you succeeded Jim Taylor as the CEO of Brixmor. And of course Jim was a dear friend of both you and I and tragically suddenly passed away earlier this year. I know I miss Jim tremendously and think about him, quite frankly, on a daily basis. Jim was such a kind and genuine human being. And, you know, and that was the way he was described kind of consistently as people memorialized him across, you know, social media and so forth. I know that he meant a lot to you too. Just, you know, as we start this show, maybe any reflections or memories of Jim you want to share.

Brian:

He did mean a lot to me. There's a picture of us hanging in my office when we had the great opportunity to ring the stock exchange bell before New York ICSC. He loved ICSC. I think some of our best times together were around actually his first day of work at Brixmor was at ICSC LAS VEGAS. And one of the things he used to talk about then is just he saw, got to know the team, got to meet, see the relationships we had with our retailers. And that really for him was an awesome entryway to the company and he's sorely missed. We miss him every day. He made a tremendous impact, not just on Brixmor, but as you said, throughout the industry. And I think anybody who was on LinkedIn who had any small involvement with the industry just saw the outpouring of support for him and his family. So we miss him dearly. He'll always have an impact here. He certainly will have an always have an impact on my life. And again, some of the best times that we've ever had together were on the road at ICSC shows. And even it wasn't just the Vegas ones. Like he would he'd go to the regional shows, he'd spend time with the team, he'd spend time with retailers and he loved that. He loved that part about his job. And he loved the organization. And not just with you, but he made so many friends at the organization and his time at ICSC. So we miss him, but we'll continue to carry on his legacy here every day.

Tom:

I know you will and I know he's quite proud of you and you mentioned that ICSC meant a lot to him, but he meant a lot to ICSC as well. And he was always just so generous with his time and always present. When you were talking to Jim, he was always present in that conversation. There was a lot a lot to learn from from that, for sure.

Brian, you're now CEO. You started as CEO in January. So let's talk a little bit about your career. You've had a, you know, a rapid and series of different leadership roles, but you started in leasing and I think in 2004, around that time period at a predecessor of Brixmor and now CEO. Talk a little bit about your career journey. How did you get from there to the CEO seat?

Brian:

Yeah, it's interesting. So I've been here close to 22 years, but I've had a lot of different jobs and have been a bunch of different places while I've been here at Brixmor. I started in the industry at a brokerage in Philadelphia. Actually a friend, a very huge Philly sports fan-

Tom:

Big Philly sports fan, I know you are. That's about the only thing about you that I can't comment on.

Brian:

I know. I was going to apologize for LeBron coming to us at some point in this conversation. But no, I had a friend in Philadelphia who I grew up with who partnered a brokerage company there in Philadelphia, and he had just gotten into the business randomly after college. And at the time, there was a lot of development going on really around the industry, and he was working with restaurants and tenants, other tenants that were expanding, and he had his first experience at ICSC LAS VEGAS.

And I was working at a family company at the time. I wasn't sure what I wanted to do long term but I really liked the industry and where it kind of for me, just seeing the fact that I had no idea how shopping centers were built, how tenants made decisions, what ownership structures were. But I remember when I was first thinking about joining, I was at a party and my aunt had talked about a new restaurant that opened up in their neighborhood and how much they loved it. And I started thinking to myself, like, wait, that's the stuff that Brian gets to do every day, my buddy of mine. So I got into brokerage and then over a course of a couple of years, developed some tenant rep relationships. And then I put a few restaurants into what was a predecessor company at Brixmor, and joined them in late 2004. as a leasing rep. I moved to D.C., had a small portfolio, and then was fortunate to be there as the company expanded, as we were bought by a large company and we grew over the next several years. So that led me to different spots around the country and different roles in redevelopment and asset management, management roles in California. I got to spend some time out there as well. So as Brixmor grew, I had the opportunity to kind of grow with it. and ultimately was able to come back here and head up leasing 10 years ago, shortly before, before Jim joined the company, about a year and a half before Jim joined the company. So the company's been really good to me. It allowed me some fantastic opportunities, not just professionally but personally, to live a lot of different places, to meet a lot of new people, friends that I continue to have throughout my life. And it's been great. It's been a great run here.

Tom:

And Brixmor, for those that aren't familiar with the company, has just a wonderful culture. And you mentioned the company up been good to you. And I know one of the things that's so special about Brixmor is the people that are there. And everybody that I have the privilege of interacting with Brixmor is just a high quality, a great person to deal with.

Brian:

Well, going back to Jim, I mean, when he was establishing the culture, I mean one of his big ones, and it's still on the door, is that great real estate matters, but great people matter far more. And we really believe that here. And the teams work more like a team of operators. And that being with that team, I mean, even in the seat I'm in today, I feel very fortunate that like I grew up with a lot of the people that are still here today. I love seeing people grow in the industry and have opportunities to make their mark on whether it's a different part of the business or somewhere in a different in a different part of the country. So that's been a good benefit to me as well.

Tom:

I mean, one of the things about commercial real estate, particularly retail real estate, is it really is a people business. And so I that that phrase that, you know, property manners but great people matter more is I think so true, so true.

Brian, coming up through kind of the leasing side of the business and how do you feel like you develop a lot of relationships with tenants and so forth, through that process? How do you feel like that's influenced your philosophy as a CEO?

Brian:

Well, I think when you're leasing, I mean you have the ability to put the puzzle together, if you will, the merchandising mix together. And as you know, this is a this is an asset class where it matters who your neighbor is. There's a symbiotic relationship between the type of uses that you put in place and you really start to understand early what creates value, right? How your tenants can succeed at a shopping center, tenants that can complement each other and how that ultimately creates value at the real estate level. And that leads to, whether that's in reinvestment, whether that's understanding acquisition opportunities, how you position your retailers to succeed, ultimately is how you drive value and growth at your center. So I think for me, that aspect of understanding where retailers wanted to be, understanding different markets and working in different markets across the country was very beneficial to me as well. but that allowed me going forward to as we grew and as I sit in the role today as a company that focuses heavily on reinvestment, that's that's our key business strategy and will continue to be our key business strategy in terms of reinvesting and bringing our assets to their highest potential. I think being on the leasing end really helped me get to this point and help me make some of those decisions. I also think that business aspect and just as you get to different being in sales and being in leasing, as you get to different parts of your career, it's just a different sale. I've always thought about it that way or just a different interaction. and so that being in sales certainly helped me early in my career and helped me as I certainly advanced.

Tom:

Yeah, a better appreciation of the things that matter to your tenants, your customers.

Brian:

Yeah, absolutely. And again, the ultimate the value in the success of the shopping center is if your tenants are doing well and they're driving a lot of traffic, they're going to perform more sales, they can ultimately pay more rent, allows you to reinvest in the center more, and then ultimately seeing how you can maximize the potential of an asset. That's really what our business is about.

Tom:

Right. And I think understanding how the tenants perform and how you can put them in the best position to succeed is important. Before we leave the topic of you assuming the seat of CEO, just and we'll talk about the industry and Brixmor strategy, one final question. What surprised you the most about being a CEO?

Brian:

I think like a lot of things, it's just that the pull on your time and where you spend your time. I I'm sure you see this as being a CEO, particularly as I've been here a long time. I came into this seat. I was COO and president of the company. but just as I got into the seat, I've always had to try to be intentional about prioritizing my time, but doing that a lot more as I came into the seat earlier in the year. So still spending the time with the team in terms of driving the execution of our business plans, still spending time with our tenants. But also as we've been buying more the last few years, it hasn't been core to our business strategy, but really half the acquisition activity that we've done as a public company, and we bought 1.7 billion since 2016, half of that's been in the last two years. So spending time with our chief investment officer, Mark Horgan, on the road, meeting owners, talking about that strategy a lot. But just I think that. pull on your time is something I've had to be much more intentional with.

Tom:

Time is a finite commodity. And you also have a young family. You have three kids. So you have lots of demands on your time.

Brian:

Yeah, I think a lot of people do. I'm really lucky. That aspect of still finding time to coach hoops like you did growing up is important to me. So that's fun too. Yeah.

Tom:

Probably the most important thing in life is that. For sure.

Brian:

Sure. And they keep me in check. I mean they definitely-

Tom:

You're a girl dad, I know. I can appreciate that. I'm sure they do-

Brian:

Yeah, they definitely keep me in check.

Tom:

Let's talk about the industry now and transition into kind of retail real estate. And you know, if we were we look back 10, 15 years ago, the narrative around our industry was pretty negative. and there was a perception of the retail apocalypse and nobody was going to shop in store anymore. And obviously today that narrative is quite a bit different. What do you think 10 years ago or 15 years ago, all those naysayers got wrong? What was it? What were they missing?

Brian:

I think they were missing how productive the replacement tenants were going to be versus how unproductive the tenants were that were in place. If you think about a lot of the businesses that went away, whether those were, whether it was Sears, Kmart or just like the litany of bankruptcies, the level of non-investment that was happening for so long, how irrelevant they were becoming to consumers, and what we ultimately replace those tenants with.

And whether it was the shift to more health and wellness, whether it was the shift to value, everything you're seeing with the grocery space, how through trial and error a lot of our great tenants really were able to capitalize on an omnichannel strategy, leveraging the store to be able to optimize their online sales and really meet the customer wherever the customer wants to meet them. Because what's interesting, Tom, like I was going back, somebody asked me a similar question. Like our leasing stats didn't really change that much. And we were still leasing a lot of space over that time. But there was just this perception that everything was going online, that a lot of the businesses that didn't invest and weren't relevant to the consumer, that that was what was happening towards all of retail. And it just wasn't. And so as that transformation was happening and we've seen it in our portfolio for sure, and the fact that there was just such a slowdown in new development, you just saw these centers become much more active, much more relevant to consumers. And that's really what led us to where we are today, which is really in a fantastic spot.

Tom:

You’ve had kind of a confluence of factors. Obviously the pandemic, you know, accelerated a lot of things that were happening and kind of needed to happen. You never want to say a pandemic was a good thing. And but it really did allow the industry to move forward much faster than perhaps it would have moved forward in the absence of kind of that crisis that required things to happen.

Brian:

Well, I also think it showed the durability of the asset class. Yeah right. If you think about it overnight, we lost half our tenants, half our tenants closed overnight. And if there was anywhere that showed not just the resilience but the necessity of the asset class, it was that because what you found out is not everybody wanted to stay at home. Right. Right. Not everybody wanted to pick- Yes, it's convenient to get things delivered, but sometimes you want to go out and pick stuff up. Sometimes you just want to get out of the house. And I also think that convergence that we're seeing today of consumers that are much more mindful of how they look and how they feel. that convergence of consumers really demanding more of the suburbs in terms of the quality of restaurants and the quality of services and the quality of retail that they get. That convergence has really allowed us to attract some of the best merchants that we ever have to our portfolio.

Tom:

There's a there's a lot to unpack there. Obviously, you know, one of the things you earlier said, there just hasn't been a lot of new development, you know, really since the Great Financial Crisis, there's been very little net new square footage of retail put on put in on the market. A lot of that has to do with the pandemic. They really learn to use their store network for things outside of traditional shopping. There are many fulfillment centers as well. And that last comment I think is underestimated, which is the impact of the suburbs. I mean suburban retail has become a pretty hot commodity. and people are spending more time at home. You know, the hybrid work model has had an impact on-

Brian:

Well, we're just sitting we're sitting here in New York City, right? Which is among the highest return to utilization rates of office, right, in the country. And it's still 30% less than it was in 2019. Now, just think about what that does for your habits to the day and a half a week that you’re at home, in terms of how full your refrigerator is, where you get your cup of coffee, what that does to your workout habits. And so that just creates more trips. And then as folks are home more and there's some level of hybrid work that has stuck, it's what are you demanding? And I think about just the options that are in the suburbs today versus when I was a kid, it's light years better in terms of the restaurants, in terms of the services, in terms of the level of retail. So and I think what has also changed over time is that if we were at an ICSC 15 years ago, the concept of putting a fitness use next to a traditional retailer or a fitness use next to a gym, we would get it done, but it would be more challenging today than people are recognizing that the people that go into the gym are also going to pick up their groceries and they're going to get their coffee and they're going to stop in to pick up a new shirt or a pair of shoes. So I think that aspect of the synergy changing a bit between those types of uses has been really helpful as well.

Tom:

And I want to delve on that in transition into Brixmor and your strategy and some of the things you're focused on. But just the final comment on the industry as a whole. I mean, I think we'd both acknowledge that we're kind of in a supply-demand mismatch right now, i.e., the demand for physical retail, particularly well positioned suburban retail real estate is greater than the supply of it. And we're kind of in a functional under supply. How long do you think that's going to last?

Brian:

I think it's going to be for some time. I mean, as we look out and you see any level of data in terms of new construction starts, I think you're out several years. And whether it's the price of land for other asset classes, whether it's just the availability of land and even the nature of that new development today, because there are some large format retailers that we know that are great partners of ours that are expanding, like Kroger and Walmart. But those are coming in and really following some of the population growth that has already happened. And they went several years without opening new stores. So there's holes in some of those markets for what they need to deliver the consumer, meaning to deliver a 100,000 square foot store where they haven't done that in the past. So you may see some of those with some pads, and there certainly are pockets that is happening, but anything material at scale, we think is several ways off. And even there's just some structural issues with getting anywhere close to the level of new development that we saw, say, 20 years ago.

And even if even if there was a massive development boom, which I agree, for all the reasons that you articulated isn't likely to happen. But even if you had shovels in the ground today, it'd still be several years before that, you know, that inventory became available on the market.

Brian:

And also to that point, to your demand standpoint, I mean, the retailers want a surety of execution, right? They want to be able to get those stores open and they want to be where people are. So I think from that perspective, that focus on getting creative and figuring out different footprints to be able to utilize what little space there is available, you're seeing retailers do that. So I think just they're not going to just wait on a hope

Tom:

Yeah, they want the certainty of what's there. Let's talk about Brixmor now. And you had mentioned the significant level of investment that that you're making in your existing portfolio, redevelopment and so forth. Talk a little bit about the scale of that and then and then maybe touch upon how you determine where you're going to invest and what you're going to invest in as you as you allocate capital.

Brian:

So this has been really core to our strategy for the last decade. And we didn't get into the full history of the company, but we were a company that was underinvested in that expansion that I talked about of the growth in the company that was done before the financial crisis. We were we were owned by private equity. And when we went public in 2013, we had a portfolio of older, well-located centers that had been underinvested in. So as we went upon this strategy over the last 10 years, there was a focus on, hey, we're the markets that we want to be in. And let's exit some of the markets that we don't see the ability to grow or we don't have a large presence. And then how can we put capital to work to bring these assets like I was talking about earlier to their full potential? So we've invested about a billion three in the portfolio to date.

And we've delivered hundreds of projects, whether those are whether those are outparcel projects, redevelopments, we call anchor repositionings, where we've repositioned anchor space and from repositioned the box, reconfigured boxes. And so we've touched about 40% of the portfolio, and you've really seen a dramatic transformation. We've taken our in-place rents from $12.50 to over $19.

We're growing our same property NOI but over 5% at the midpoint this year. And so as we think about how we're positioning the portfolio of growth, that accretive reinvestment is a big part of that. And so as we look forward, we're even more excited about what we have coming down the pipe. We've got a billion dollars in our active and what's underway today, and our future pipeline, and that involves Half a dozen projects with publics. We're doing repositionings with them and new stores in Florida and the Carolinas, massive repositionings of centers in in New York, in Plano, Texas, and suburban Chicago. So the opportunity continues to be there. And the other thing that we've been doing is from a growth perspective on the acquisition side, we've been finding opportunities in a very competitive environment to be able to put the platform to work. So we bought four centers thus far. We just closed another one, actually, our fifth centers thus far this year. Two of those in Long Island and College Station, Texas, went immediately into that redevelopment pipeline. So for us, that will continue to be a- whether it's a reconfiguration of space, whether it's additional density, we're seeing municipalities be much more accommodating in terms of allowing additional outparcel buildings for us to densify in our parking field. So that's been a big benefit to us as well. And it'll be a continue to be a core strategy for the company going forward.

Tom:

Congratulations. That's a lot that you've accomplished in a short period of time. You yu made one comment around densification of you know outparcel pieces of property, parking lot, etc., municipalities becoming more open to that. Do you feel like that's an untapped opportunity just across the industry that needs to be focused upon more as we deal with this supply-demand mismatch? That maybe part of the solution could be adding more square footage on existing properties as maybe parking requirements kind of get minimized.

Brian:

Look, I do. I think anchors definitely want the parking in front of their store, whether grocery stores or large format retailers, they want their visibility. But even they have become much more accommodating because they see the traffic that a Chick-fil-A, a Starbucks banks are bringing to the to the property. nd you see municipalities, they don't want these huge parking fields. They were built for a different time. And we have a very flexible footprint. So we are seeing and they want those higher quality restaurant uses in the suburbs as well. That's what they want for those communities. So I do think that's on tap potential. It's something that as we're negotiating our leases today, we're ensuring that we have the flexibility to be able to not do whatever development that we could potentially think about today, but what could be coming down the pike and giving the retailers the protection that they're looking for just right in front of their store.

But I think you're seeing both the retailer and the municipalities be much more flexible. And that's allowed us some great opportunities and we'll continue to go forward. And I do think it's something that across the industry folks are going to continue to take advantage.

Tom:

I mean, it makes perfect sense as people ride share and other things are occurring that you just don't need the volume of parking that historically, you know, the parking ratios that historically guided a lot of developments. You made reference to something earlier too, just about the new types of the tenants that are being attracted to your properties that didn't necessarily look at open air centers initial as their primary place of location ten years ago. Talk about how, you know, the new tenants that are coming into the open air space that are looking at your properties as an attractive place to put their put their locations.

Brian:

Yeah, I think first that those higher quality restaurant uses, whether they're quick serve restaurants, I do think that concept of people carrying a lot more of what they're putting in their bodies. So whether that's the Cavas, Shake Shacks, Sweetgreens of the world, some of those options we've been thrilled with. And then what you're seeing there is just those elevated brands look to open air shopping centers. You're seeing William Sonoma and Pottery Barn open. We've done our first handful of deals with them open in grocery anchored shopping centers. You're seeing operators like Warby Parker, higher quality uses like Lululemon open stores in grocery anchored shopping saves. And the reason is they see their customer coming out of some of those higher end grocers. So what we've seen is and what I get excited about is when you create that environment of a higher quality grocer. 80% of our rent comes from grocery anchored centers. We've grown a lot with Whole Foods and Trader Joe's and Sprouts. When you're able to bring an anchor like that in and then curate a merchandising mix around that with higher quality food and beverage and more elevated brands, elevated service. I think that's what we're excited about. And we can see that really happening across the portfolio. And then you still have our core tenants.like the TJXs, Burlingtons, Rosses of the world. And those stores look the best they've ever been. And you go into those stores and the quality of the merchandise that they have on the shelves is the best it's ever been. And so I think that concept of consumers looking for value in apparel is something that has really helped those operators. And it's certainly helped us in that junior anchor space. And then the last thing I'd point to, and back to that concept of caring about how you look and how you feel, you think about the health and beauty operators like Ulta and Sephora have just continued to do fantastic. So leveraging that as well as part of a merchandise mix, beauty's become more essential for sure. As you could tell with how good the two of us look on the screen here. but that that piece, that piece, we've been growing a lot with those operators too.

Tom:

Yeah. you know, one of the things that I often say is that first of all, retail's a fiercely competitive industry, but there are some things, even with the advance of technology, the omnichannel environment, etc., that are that are somewhat timeless in in retail. One, you have to have good merchandise, two, you have to price it right. and three, you better have good service and a value proposition. And I think those retailers that tend to do best over a long period of time focus upon those three things very very chiefly. You know there's a couple of things relevant to what you were talking about and I think that concept of the suburbs being important you know people being spending more time at home is you know it just puts a premium on location and proximity to home and also speed.

You know, recently we did the “Shopping in the Age of AI” report with McKinsey. And one of the chief findings of that was just how important speed is, that retailers have to just come to grips with the fact that consumers are better informed and they expect to be served quickly and efficiently. And speed is so important. And of course being close to your consumers like your neighbor and center is, you know, plays into that concept of speed.

Brian:

And that concept of speed, I mean you talk about technology. When we were hearing from the head of real estate at Walmart, Hunter, he was talking about the technology deployments. And that's the number one thing it's about is speed. Right. It is and we think about that as well. And from a retailer perspective, back to being close, I do think it's that concept of meeting the customer wherever the customer wants to meet you. If the customer wants to meet you on the phone, great. If they want to pick up in store, great. If they want to get delivered from the store because of your proximity and you can deliver it and have some aspect of your store layout, this last mile distribution. But the store being kind of the center of that, I think is really important. And to your point, the retailers today that that have good merchandise that that are able to connect with those consumers are the ones that are going to continue to succeed.

Tom:

There's still this fixation in the media and other places around, you know, e-commerce versus physical retail, which channel is doing better, which channel is the source of growth and so forth. But at the end of the day, there's only really one channel that matters. It's called the consumer channel, I need to serve my consumers. Certainly, retailers are becoming somewhat agnostic in how they get that product to the consumer, except that the store is really central to that. And I mean, that's their opportunity to engage with their customers and we know from the Halo report and studies that we've done how important the store is and not just traditional shopping, but also be commerce as well.

Brian:

100%. And it's also, Tom, that piece of the halo effect, they have more data than they've ever had on the consumer. Right. So they know what's shipping in a market. They know what's getting ordered in a market. They know what happens when, to your point, the state the study that you all did, when they open a store, what happens to the online registry, right? And having that data today, I think it allows those retailers to make those stores even more productive. People don't often recognize in a business like, retailers are making 10, 15, 20-year investments, right? And there's obviously different economic cycles during that time. They're making those investments today with more data than they've ever had on their customers. And they're getting more and more of it every day. And not only do I think it allows them to serve their customers better, it allows them to make those stores as productive as they've ever been.

Tom:

In the introduction I mentioned that, you know, 900 million visits annually to your shopping centers. So you obviously have some perspective on where the psyche of the consumer is right now. Where do you think the American consumer is right now?

Brian:

Basically, they are doing things differently than they're saying. I think if you looked at every survey, there have been and there certainly are consumers that are struggling. There's certainly pressure from oil prices, gas prices, inflation, but consumers continue to spend and consumers continue to come to our shopping centers. And you've seen a number of positive retailer results just over the past few weeks.

So I think what they're saying and what they're doing is a bit different. So if you think about our portfolio, traffic was up close to 4% again last month, it's been up every month so far this year. You look at how that's translating to our operating results. Our renewal rent growth has been in the mid-teens for three years. We're at- small shop moveouts this year are going to be at record lows for the portfolio. Again, I say that in the context of the consumer because that's where we'd see it come through if there was any stress on the retailer. So I think the consumer, like I said, health and wellness has become more essential. I think that value across the income spectrum is important. That's why you're seeing TJX brands succeed in higher income markets and middle-income markets.

I think that's why you're seeing operators like Aldi go into higher income suburbs. So I think from that perspective, value is important. but thus far the consumer's been very resilient. I think consumers are going to be much less apt to give their gym membership up in a downturn today than they were 10, 15 years ago. So that aspect of a cautious consumer that is spending more potentially on experiences and going out to eat than they are on say physical, like pure physical goods, I think is something that we're certainly seeing a bit. Yeah.

Tom:

I mean the consumer, you know, our data would align with what you're experiencing. You know, the consumer certainly is- there's stress amongst consumers today, but they do continue to spend. And I often- and if you kind of go back and look at history, as long as the employment market continues to hold up, people feel confident in their job, they'll continue to spend. If we were to see a deterioration in the job market, obviously, you know, logic would suggest that we're going to see, you know, some impact upon consumer behavior and so forth. But so far, the job market has remained stable and by historical standards quite strong. So the consumer continues to, you know, be resilient in the face of some true inflation. I mean there there's no dispute it.

Brian:

Absolutely. And to your point, the consumers, some are stretched and I think they're definitely cautious. There are some macro headwinds, but to your point, strong job market, strong household net worth still. And so I think from that perspective, the consumer is resilient. It's something that we continue to watch, something that we continue to talk to our retailers about.

But what's been very encouraging is you do look at some of these retailer reports recently and you continue to see strong traffic, you still see strong comp store sales. So from that perspective, the environment remains pretty encouraging for us.

Tom:

We can't have any conversation amongst leaders without talking about technology and the impact of AI. I mentioned, you know, our recent report in collaboration with McKinsey around “Shopping in the Age of AI,” and it found that the store was still going to continue to be central to consumers, even as the age of AI, you know, is expected to be pretty significant. On the real estate side of the equation, though, as opposed to the consumer side or the retailer side, what impact do you see of AI on leasing and the mechanisms and processes around running a commercial real estate entity?

Brian:

Well, it's something that I've been extremely impressed with the team on here in the last eight months is we've accelerated our deployment, just the curiosity, the receptivity to new tools. And it's been really interesting to see how people are using it. Interestingly, some of our most junior folks are coming up with some of the best ideas. But it is around that concept of speed for us. How are we thinking about it in outcomes? How do you get leases signed faster? How do you get tenants open sooner? How do we make more informed decisions? So we've been spending a lot of time on the legal side in terms of cutting down the time it takes to draft a lease or go back and forth with a tenant. On the leasing side, it's been great for our leasing reps to be able to quickly come up with a rendering of what a certain tenant will look like in a space to be able to create custom efficient canvassing routes for themselves based off of AI to hit some specific uses or tenants that they want to do. I've been really impressed with just how it's made people's day-to-day more efficient, how they've been drafting LOIs faster. And I think we'll continue to deploy it for us. It's just about outcomes. I think you can get into a place where, hey, how many tokens are you using or this looks shiny, but what is the time that we're saving and how are we able to execute faster is kind of our true north as we're deploying a lot of these tools. But I've been blown away in terms of- we have a lot of information. You mentioned we have 900 million visits, we have 8,000 leases across the portfolio, and we have a lot of data points and being able to be able to distill that information to be able to make good faster decisions to get our tenants open a lot sooner is really the focus. So I continue to be amazed at the new tools that are coming out and how folks are deploying it, but we want to be at the forefront of that.

Tom:

You know, I think there's this tendency to think of AI as- obviously there's the concern around AI in regards to disruption of jobs and etc. But also there's this fascination that AI is going to result in robots walking around everywhere and cyborgs and so forth and some of the obvious benefits of AI are things like what you just talked about, you know, simple business processes and doing them much more efficiently and capable than you have in the past.

Brian:

I think I'm more of an AI optimist on this because I do think while the job displacement and the impact of that is certainly a question. I also think somebody can come into an organization today and make themselves as relevant as ever new. If there is a comfort and a curiosity with these tools, they can create a lot of value out of the gate. And we've seen it here. And I would encourage any young person that's listening to this, to show what you can do with these tools because I think that some folks are going to be comfortable with them and others won't. But I do think it's here to stay. I mean, from that perspective, it's definitely here to stay.

Tom:

Not turning back the clock. That's the one thing about technology. It's only going to advance and get better. And it's often said that, you know, we sometimes overestimate the impact of technology in the short term and underestimate the impact of it in the long term. And I kind of think that's probably true with AI in in some respects. That certainly was true with the internet. You know, how we ended up utilizing it was a lot different than we, you know, at the beginning in the late 1990s how we were using the internet, how it's being used today.

There's a lot going right in retail. What worries you? What could go wrong?

Brian:

I think there is some of those natural headlines with the consumer. I mean, I think some of those things, if there is some level of a pullback with the consumer, it could lead to a pullback in store openings. It's certainly something that we think about. Like what we talk about internally though is complacency, is thinking, hey, this is such a great environment. Making sure tenants are just going to come to us and still approaching things with that mindset that we did when things weren't so good. Which is ensuring that we're getting the best retailers in, ensuring that we're setting our leases up for whatever could come next to your point, what you may underestimate in the future. So I think some of those macro things are always there. It's kind of what you can control and what you can't control. So what we're really focused on is not being complacent is continuing to execute our plan and to continue to take advantage of or really lean into what has been a great environment for us, which we still see a lot of runway for, while keeping an eye on what some of those macro risks are.

Tom:

Before we leave this topic, just obviously one of the things that's in the press recently is just interest rates, you know, some stress in the bond market or some concerns arising in the bond market, long term rates being higher for longer, etc. Any observations around those topics?

Brian:

I mean, we've always had a mindset in terms of that rates- we’re not banking on lower interest rates for our business plan. It's something that we certainly look at from an acquisition standpoint. and from a balance sheet perspective, we've have- our maturities are termed out from a compelling standpoint. We feel like we're in pretty good shape there. And it will be interesting ultimately to see what happens there from an interest rate perspective going forward, but there's certainly been some stress in the market recently.

Tom:

Brian, I mentioned you are serving as the chair of our Foundation and the Foundation strategy is focused upon, you know, bringing students into, you know, our great industry, into the commercial real estate and particularly the retail real estate industry. You've done a fabulous job under your leadership of really advancing, you know, those initiatives. We have 60+ university partners and have grown the Foundation significantly. As those students now enter into the industry and- so place yourself back as 22 year old Brian or 25 year old Brian, what advice would you give to those kids about a career in this industry?

Brian:

Well, it kind of goes back to like your simplicity on retail. Like we're all talking about technology and what's new today, it's kind of simple. It's like show up early, stay late, do the jobs that nobody wanted to do, come to the office. Those things you can make yourself recognized today. I think this is an amazing industry. And I think the part of the reason that I love it is like we get to interact with the businesses the public interacts with every day. We get to create those great environments that we're talking about. We get to help great businesses expand. We get to help drive the job market. But that that level of just showing up and not expecting out of the gate that you're going to get the two levels up after a year. I think if you go in and you have that level of work ethic and you show up, ultimately you can continue to create value for yourself every day.

So I have been blown away over the past five years, six years my involvement with the ICSC Foundation, just the level of talent that we're attracting here. It gets better and better every year. We continue to have incredibly strong intern classes that we partnered with the ICSC at Project Destined. And I've been so impressed with young people today in terms of just how well spoken they are, in terms of how confident they are. So I think the future's bright from that perspective. but I think it's a lot of the simple things that probably you started with your career in terms of coming in, giving a100% and do the jobs that not everybody might want to do out of the gate.

Tom:

Yeah, some of those things are, again, to your point, they are timeless. You know, giving 110%, doing the doing the hard jobs and throwing yourself into it. I often tell people when people say, yeah, I want to get promoted, I want to get that job and that job and that job and I say, well, the most important thing right now is to be really good at the job you are doing because that's how you're going to get recognized for that next opportunity. And be present in that moment.

And if you're doing that, generally the place that you're at is going to recognize it or somebody else certainly will.

Brian, you've been incredibly generous, by the way, with your time and attention, so thank you. I should just say thank you for your leadership of the Foundation. I mean, you really have been tireless and dedicated to not just ICSC and the Foundation, but the students themselves and-

Brian:

Well, I would just say, I mean, look, I owe this organization a debt. and I think the ICSC for me, when you were talking about earlier in my career, I probably would not have gotten that opportunity at Kramont had I not been doing Next Gen. I moved to California. I didn't know anybody. I met Kyle Matthews at an ICSC event out there, a Next Gen event. And I think ICSC has been there with me in my career and the Foundation is one of the most gratifying things I've done in my career to be able to be involved with young people as they're getting into the industry and then be able to see their success. It's been a lot of fun.

Tom:

As we enter into our closing moments, two final questions. One, best piece of leadership advice you ever received.

Brian:

Somebody told me early that that the person representing the Subway franchisee could be the head of real estate of Walmart and approach that person the same way. And I've seen that play out. So this is a relationship business and how you ultimately carry yourself, how you deal with yourself in transactions and interactions, will be remembered down the line. So that's something that's stuck with me very, very early. I didn't appreciate how small the business was in terms of the people. Like we run around, we see a lot of the same faces all the time. That aspect of that certainly has stuck with me and something I definitely share to people and I think has served me well over the past several years of my career. Treat everyone with respect.

Tom:

Yeah. And that's the right thing to do. but it's also an important thing to do in business. If I recall correctly, you're an avid, I know you're an avid exercise guy, but you're also an avid reader. So what are you reading right now?

Brian:

I just finished The Power Broker, which was which was incredible. It's the story of Robert Moses, who was probably the most powerful unelected official in the history of the U.S., certainly the history of New York. If you've driven over a bridge, if you've been on a highway, there's a good chance that Robert Moses was responsible for it. And I'm reading this book now, Citizens of London, about the Americans that were key to the British and U.S. relationships in the lead up to World War II, which is pretty fascinating. Edward R. Murrow's time in London during the Blitz and how they were able to kind of set the stage for that partnership going forward in World War II. It's a book I got from Dave Bujnicki over at Kimco. But I'm getting through it today. It's been a good read too.

Tom:

They both sound fascinating. I've been meaning to read The Power Broker. I'm fascinated by the story of Robert Moses and what-

Brian:

It's intimidating. It's 1,200 pages. But don't be intimidated. Break it up. Just think of it as like three or four books. Okay. Because it's an amazing-

Tom:

No pictures or anything like that in those 1,200 pages.

Brian:

No, it's the 1,200 plus the pictures, but no, it's a good one.

Tom:

Thank you for not only being here today, but thank you for your leadership and involvement in ICSC. And thanks to all our listeners.

Brian:

Great. Appreciate the time.

Tom:

Thanks for joining me on From Where I Sit. Follow the podcast on Apple, Spotify, YouTube, or wherever you get your podcasts, and share it with anyone interested in the future of the built world, commerce, and technology. I'm Tom McGee. Thanks for watching and listening, and I'll see you next time.