FEATURE ARTICLE, OCTOBER 2008

NEW TENANTS HOPE TO DEFINE LEGACY
Legacy Village engaged in aggressive re-tenanting to change the tenor of its client base.
Kevin Jeselnik

Legacy Village, a 600,000-square-foot lifestyle center located outside of Cleveland in Lyndhurst, Ohio, opened in October 2003. It was noteworthynot only as an architecturally unique destination with more than 60 percent of its stores were new to the region and/or state, but also for facing the challenge of opening right across the street from Beachwood Place, a successful luxury mall.

Randy Goodman, principal at Cleveland-based brokerage firm Goodman Real Estate Services Group LLC, had been involved with the property since 1999 and was able to convince Mitchell Schneider of First Interstate Properties to step in with his partners and buy it, only to face a lengthy and tough rezoning process. The team signed Crate & Barrel on as lead anchor, and the retailer began work on the development of its first store in Ohio.

“Because of the challenges, the developer was left with a very short construction window to get the center open in time for anchor Crate & Barrel’s announced opening,” says Bobby Benjamin, associate broker at Goodman Group. “Along with principal Richard Edelman, Randy Goodman and I did the initial leasing for Legacy Village through the opening; in 2004, I became sole agent for the property up until 2007, when the leasing and management was assigned to Bayer Properties from Birmingham, Alabama.”

Along with Crate & Barrel, The Home Depot EXPO Design Center, also new to Ohio, was signed as an anchor for the opening of Legacy Village in 2003. Two years later, it was closed as part of The Home Depot’s program to shutter approximately 16 of its existing EXPO stores.

“The performance of the EXPO in Legacy Village was good, but the cost to occupy the location was very high relative to the store’s other locations,” Benjamin explains. “When The Home Depot began to look for a local broker to assist its national broker, Corporate Property Dispositions LLC, which is now part of The Shopping Center Group, in finding tenants to sublease this 93,000-square-foot anchor building, Goodman sought and obtained the assignment.”

The Home Depot had developed the EXPO store in-house and held a long-term ground lease for the property, and needed the aid of a local broker to quickly identify potential tenants to fill the vacated space. Benjamin worked with Keith Valentine of Corporate Property Dispositions LLC, with a key contribution from Home Depot’s attorney Jim Jordan of Sutherland, Asbill & Brennan LLC, to sublease the vacant square footage to new tenants.

“At first it may seem like a potential conflict that Goodman Group could work for The Home Depot while simultaneously representing the landlord of Legacy Village,” Benjamin notes. “We were able to get all parties involved to agree to waive any such conflict based on two key aspects, our firm’s experience and knowledge of the center.”

Benjamin relied on his past experience with big box disposition, having worked for Kmart for many years, just before it filed for Chapter 11. He also utilized his current relationship with Wal-Mart Realty, for whom he leases vacant stores.

Urban Active Fitness and Nordstrom Rack have re-tenanted anchor space within Legacy Village in Lyndhurst, Ohio, that was once occupied by The Home Depot EXPO.

A willingness to divide the EXPO space for multiple tenants allowed greater flexibility in the quest to fill the building. Benjamin negotiated the first lease, for a 48,321-square-foot portion, to a licensee of Gold’s Gym (Global Fitness Holdings) in 2006. The tenant opened in 2007, then Global severed its Gold’s affiliation and re-branded the gym as Urban Active Fitness.

“They are very pleased with the membership level at this upscale showplace, which has an in-ground pool, a juice bar, granite bathrooms and a mezzanine with running track,” Benjamin says. “It stays busy day and night.”

Relying on experience and existing relationships allowed Goodman to identify other potential tenants. Benjamin targeted Nordstrom Rack, which was a retailer with which he had an established relationship. Working with Tony Sekora of Nordstrom, Benjamin negotiated to bring the store to EXPO’s now retrofitted and redesigned space.

“I was aware they like to be as close as possible to a full-line Nordstrom store, and there was one across from Legacy Village at Beachwood Place,” Benjamin says. “We contacted Nordstrom Rack, showed them what we had to offer and made the deal for the retailer’s 40,144-square-foot unit, which is its first in Ohio and a statement to Legacy’s draw.”

Nordstrom Rack is set to open early this month, which is also Legacy Village’s 5-year anniversary. Both the Rack and Urban Active subleases involved long negotiations and complicated approvals, with contributions from not only the local Lyndhurst authority, but also from the state of Ohio, certain key co-tenants, the landlord group led by Mitch Schneider, and Legacy Village manager Marcie Gilmore. Goodman Real Estate Services Group LLC provided the fulcrum to keep these events, which could swing either way, in balance and moving toward completion.

“The end result for The Home Depot is that its leasehold obligation, on paper a giant liability, has been turned into an asset,” Benjamin says. “For Legacy Village’s ownership, its cooperation has resulted in two additional viable anchors coming in to replace EXPO and drive more traffic to the shopping center. It has been a great example of the challenges and potential for success found in disposition endeavors.”

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