Miami International Airport will open retail shops for traditional leasing
By Paola Iuspa
Wanting out of the retail management business, Miami-Dade's Aviation Department plans to lease up to 18 shops inside Miami International Airport by year's end.
Initially seeking bids for six retail shops, Mayra Bustamante, assistant aviation director for business management, said her department would pick three companies to remodel and manage two stores each for five years.
Bids for the first round of sunglass, apparel, toiletry and music shops totaling more than 5,000 square feet, are due May 22. Winning bidders will be required to upgrade stores before opening for business next March.
Under previous procedures, the aviation department signed agreements with retailers who received a flat fee and 5% of sales. Other profits went to the airport, which was responsible for inventory costs, insurance and used county personnel to maintain the space, said Adrian Songer, Miami
International property manager.
Before seeking the next 12 merchants, the aviation department needs to write specifications for the type of retail business they will be seeking. Duty-free stores and food & beverage, pre-paid phone card, currency exchange, baggage and hotel concessions are excluded from the new arrangements, Mr. Songer said.
Aviation officials plan to collect rent from the 18 outlets in the form of a minimum annual guarantee and a percentage of sales. Bids will be based on the dollar amount of the guarantee, officials said.
Lobbyists for contractors operating at Miami International say they welcome the Aviation Department's new plans for now-vacant retail space.
It will become a more profitable business for shop owners, said Chris Korge, a lobbyist who represented Sirgany's newsstand concession at the airport until a year ago and now has duty free shops as clients, said the change should have been made years ago.
"The county owns the stores," he said. "And it never re-invested those revenues on them. They look outdated."
He said the county's management agreements were generating one of the highest revenues in the states.
Retail revenues were $13.3 million in 1999, $12.8 million in 1990 and $11.2 million last year, according to county documents.
Although some suspect the aviation department will get less revenue under the new system, Mr. Songer said he projects revenues will be about the same. He said revenues were high but it was also expensive for the county to be in the airport retail business.
"We are delegating the capital and business risk" to business owners, he said.
Jorge Luis Lopez, attorney with the law firm Steel Hector & Davis, said he is watching the change closely because he may have clients interested in bidding.
"They will be leasing the space as it is done in malls," he said.
Mr. Korge said retail operators have fought the management contracts for years because they could not make any money.
"They were making 5% of the net profits," he said. "The airport got 95%. Now the airport will get a percentage of gross sales."
Under the old program, Mr. Korge said, the airport contractor of the newsstand concession, a $30 million operation saw annual revenue of $600,000. Under the new arrangement, the vendor could make $4 million after paying debt service on capital improvements.
Ms. Bustamante said she hopes to get from 15% to 20% in gross revenues from new retailers.
Under previous procedures, the Aviation Department owned retail inventory, determined which merchandise to sell, hired sales personnel and maintained the stores in return for 95% of sales revenues. Through management agreements between the aviation department and companies that run day-to-day operations, those operators got a flat fee and 5% of revenues.
Under the new system, retailers will pay the county a minimum annual guarantee and a percentage of sales, aviation officials said.
"The incentive was missing," lobbyist Eston "Dusty" Melton said of the outgoing system. "I think it is an excellent idea, long overdue," he said. "It is an infusion of new shops and new concepts."
Mr. Melton's clients include the company managing the airport's fuel farm, the joint venture South Terminal building, Duty Free and, in the past, American Airlines. He has been participating in meetings held by the aviation department to discuss the retail changes but said none of his current clients planned to bid.
"Management agreements historically seemed not to provoke superior performance by airport concessionaries," Mr. Melton said. "They got paid a flat fee whether they performed well or poorly."
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