Hartford Business Journal

16 Hartford Business Journal • February 1, 2016 www.HartfordBusiness.com ballpark, with adjoining retail, office and resi- dences, augurs the prospect of more "feet on the street'' downtown — a key ingredient for pro- moting and sustaining retail of all kinds. The city, landlords say, must also play a role by: eliminating grants and other fund- ing incentives to retail startups that wind up closing doors anyway despite the subsidy; and reworking permitting and inspections process- es to minimize red tape. But that doesn't mean, some retail tenants say, downtown landlords can't be generous with rents and lease terms, to promote more retail expansion. The city, under its previous mayor — and in the face of concerns from local landlords and state economic-development officials — negotiated lower property-tax deals with certain downtown landlords, insisting in return landlords offer free or reduced rents to certain eligible retail tenants. "Really, what the city should concentrate on,'' said Trumbull On The Park developer Mar- tin Kenny, "is processing permits as quickly as possible so businesses can get up and running. They shouldn't be cutting checks.'' Stackpole owners Jodi and Ron Morneault are simultaneously downtown retail tenants and landlords: They rent 10,000 square feet to house their men's and women's fashion boutiques on 242 Trumbull St., and a small- er "pop-up'' outlet on Pratt Street, for their marked-down merchandise. But 2 ½ blocks away, the Morneaults for more than 40 years have owned the 257 Asy- lum St. building whose streetside retail space once housed Tuesday's and is now home to startup Sarah's Coffee House. To Jodi Morneault, the answer to boosting retail is simple: The city and state can and should do more to market downtown retail as a destination to the region's populace and to motorists traveling I-91 and I-84, both of which intersect through downtown. "To remind people,'' she said, "who are driving by that they can stop downtown and get a coffee or get a burger … or go to the [Con- necticut Science Center]. That would create more foot traffic. Then more tenants would be interested in renting up the empty spaces.'' Landlords, too, Morneault said, must be prepared to be more engaged with tenants, particularly ones just getting off the ground. She points to Sarah's Coffee House to illustrate. The landlord couple worked closely for months with Sarah's owner Uyen Mai and her business partner on their business model for ply- ing customers with coffee made from imported beans. Despite little upfront capital, the Mor- neaults allowed Sarah's to occupy and begin remodeling the 257 Asylum St. space rent-free well before opening late last fall. The Morneaults also spent $17,000 on a new heating system for their building, which houses residential tenants on the floors above the coffee shop. Developer Martin J. Kenny a decade ago built his 100-unit Trumbull On The Park Apartments on Trumbull Street, facing Bush- nell Park. Nine out of 10 of his units are full, and only 1,200 square feet of his building's 8,000 square feet of streetfront retail space is empty. A Quiznos sandwich shop, Salute restau- rant and a beauty salon occupy most of the approximately 8,000 square feet of retail space, which in addition to the apartments and the attached 650-car garage are the building's rev- enue generators. But that last 1,200-square- foot parcel has been hardest to fill, Kenny said. One solution, he said, is for retail landlords "to be more collaborative with the right concept.'' "If you get a good operator, rather than charg- ing the market rate … some of these building owners need to become partners and invest with the tenant, and get a percentage rent," he said. Kenny did it with limited success for one retail startup. For six months in 2014, pet foods/ accessories retailer Naturally Dogs & Cats tried making a go in 1,100 square feet of retail space in Kenny's apartment building. Kenny waived his $15-per-square-foot net rent, with the pet-groom- er paying only its utilities, he said. "He wanted to understand if his business plan was going to make it or not,'' Kenny said of the owner. "So, we essentially assisted him in setting up his shop. But he realized being in an A-grade space probably was too costly for his business.'' Ultimately, Naturally Dogs & Cats relo- cated to older, less expensive quarters a half- block away, at 10 Trumbull St. According to Kenny, his loss as a landlord was a plus for his tenants and the city. "The benefit is he ended up relocating next door to our building, providing a service that our residents use routinely," Kenny said. Kenny said he has spurned lease offers from retail and commercial operators to fill the vacancy because he didn't believe they could offer anything meaningful to residents in his building and elsewhere downtown. One of those rejected was a mortgage broker. "My tenants are renters. How does that make our property better? Not much,'' he said. Talks are underway that could bring an upscale Chinese dine-in/take-out restaurant into Trumbull On The Park's retail vacancy, Kenny said. Another option is converting the space to a resident lounge, or some other amenity for his apartment tenants. Competitive advantage At 777 Main, developer-landlord Bruce Becker negotiated a graduated property-tax rate with the city to convert the former 26-story office building into a 228-unit apartment tower. Becker, in turn, says he leveraged that lower tax rate into attractive leases for retail ten- ants like Blue State Coffee, a yoga studio and a planned neighborhood market that so far have filled all but 4,500 square feet of his total 28,000 square feet of retail space on the ground and basement floors of 777 Main, plus storefront space in the adjoining parking garage. Becker said he, too, is being selective about whom he signs as tenants. He claims he spurned leasing to a prepaid cellphone pro- vider due to doubts that its business model fit 777 Main's and downtown's tenancy model. "We're pretty careful about finding tenants that are going to be complementary to our other uses and create a synergy with our resi- dents,'' he said. Becker said he has spoken to several unnamed educators about using some of 777 Main's basement space as classrooms. An operator of shared office and co-working spac- es, too, has contacted Becker about tenancy. Becker welcomes prospects that the ballpark, Hard Rock Hotel, plus more apart- ments and office/retail spaces, planned for the downtown-north quadrant, or DoNo, will spur more "feet on the street'', as well as attract more suburban residents and tourists to explore the center-city's retail offerings. According to landlords and state economic- development authorities, reduced property-tax recipients like Becker make it difficult for rival landlords to compete. Subsidized retail rents, they say, also threaten to upset the natural market dynamics. Michael Freimuth, executive director of the Capital Region Development Authority, said he advised city economic-development officials against linking lowball retail rents to reduced property-tax assessments. For one thing, Freimuth said, many down- town landlords have mortgage-loan covenants requiring minimum rents in order to generate enough revenue to service their debts. Another worry, he said, is that a "musical- chairs effect'' arises when subsidized land- lords woo retail tenants from surrounding properties, creating vacancies there. That sets up a perpetual race in which landlords and ten- ants are constantly resetting and chasing the lowest rents — an unprofitable scenario for all, Freimuth said. What ultimately drives up retail occupan- cies and rents downtown is "more bodies with higher incomes," Freimuth said. "If you don't have the clients and critical mass, and a lower income base, you're not going to drive it.'' Small-business appeal Naturally Dogs & Cats was among a hand- ful of retail businesses that participated in the city's short-lived "iConnect'' program that tried filling downtown empty storefronts. Owner Bob Marshall said his startup's new home in 800 square feet at 10 Trumbull St., though 400 square feet less than what it had in Kenny's Trumbull On The Park, better suits his business and pet owners. "It feels more homey,'' said Marshall, whose day job is working for an insurer downtown. "I see downtown as a place of change and renaissance," Marshall said. "I'd like to see more smaller businesses downtown.'' He may get his wish. In recent months, inde- pendent operators Steven Abbate of Bristol and Tom Gauthier of Simsbury opened their Lenses Only eyewear shop at 42 Pratt St., after buying out a previous operator in space that has housed an optical shop for the past three decades. The pair's other store is in Bloomfield. Lenses Only chose to invest $250,000 in equip- ment and inventory, plus pay $1,000 a month to occupy about 700 square feet in the heart of downtown for a very simple reason, Abbate said. "The gamble is Hartford because I'm not con- vinced that retail can survive in Hartford,'' the former human-resources officer for Wallingford franchisor Edible Arrangements said. "But one thing I do know is that, if we're successful, we can help attract other businesses down here.'' With more than 100,000 potential custom- ers piling downtown daily to work, Abbate is confident in Lenses Only's model of selling lenses and discounted brand-name frames, as well as the option for customers to save by refitting new lenses to existing frames. Next door, at 44 Pratt, graphic designer Rory Gale and her sisters have run their Hart- ford Prints! shop selling urban goods and hand-printed stationery since October 2013. "We believe in the city and want to be part of the renaissance of Hartford," Gale said. "This is exciting and important for us.'' Hartford Prints!, like Naturally Dogs and Cats, was an iConnect participant and for a time leased 1,300 square feet rent-free from landlord Northland Investment Corp. Now saddled with an unspecified rent and other overhead, Hartford Prints!' profitability is just out of reach, Gale said. "It would be advantageous for the landlords to think about how to attract more retail, if that means more attractive rents,'' said the third-gen- eration Hartford native who lives downtown. A self-described optimist, Gale said the ballpark and other proposed downtown north redevelopment, including the fall 2017 arrival of more than a 1,000 UConn faculty and students bodes well for merchants like her. Open Tuesdays through Saturdays for now, Gale said adding a sixth sales day would be a high-water mark for both her business and the city. "The day that Hartford Prints! extends our hours to Sundays,'' she said, "is going to be a really good sign for downtown.'' n Sunday sales as an omen from page 1 Pratt Street has plenty of storefronts to fill. The turquoise storefront houses Hartford Prints! Lenses Only is next door. Former McDonald's fast-food court at CityPlace II. Grocer Market 21 failed to make it on Asylum Street. H B J P H O T O S | G R E G O R Y S E A Y

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