Kaim merchandised mall like store Houston Chronicle - Sunday, September 21, 1986 Author: TOMMY THOMPSON, Staff When Gerald D. Hines broke ground for the Galleria III garage in September 1984, everything was organized for the development of the third phase of the Post Oak Mall at Post Oak and Westheimer almost to a point of routine. Ground was broken for Galleria III on June 3, 1985, and it was opened for business on Sept. 1, 70 percent leased . The formal opening of Macy's Department Store Wednesday will just about complete the development of the 45 acres that is the showplace of the Magic Circle. Things were quite different in 1966, when Hines got the first rough plans for his Galleria Post Oak Mall. He knew he had a great location, he knew he had a great idea - but he did not know if it would work. He was dealing with some uncertainties - no three-level shopping mall had ever been built, no mall had been built with a skylight and no mall had featured an ice skating rink. He also needed a feasibility study on the productivity of the tenants so that profitability could be achieved - not only for the tenant but also for Hines. Reading the Houston Chronicle in the fall of 1966 helped solve the problem. Hines read that Robert H. "Bob" Kaim was taking early retirement, after a 25-year-career, from Foley's, where he was general merchandise manager, in hard lines. Kaim was a casual acquaintance of Hines. "I remember the retirement said that I was to retire the following Feb. 1, which was the start of the fiscal year," said Kaim at his office in Transco Tower. "Mr. Hines called and wanted to have lunch with me, to discuss leasing in the mall." [Hines] was not concerned about Kaim's lack of experience in malls. Hines gave him six books by architects and developers discussing the various aspects of shopping center development. Kaim read them all and made voluminous notes. "This still was a foreign field to me," said Kaim, "but, since I did know the retail business, I just treated the Galleria like it was a 450,000-square-foot department store and merchandised it in that manner. "I used the National Retail Dry Goods Association figures that gave information on the amount of space to be allocated to the different classifications of merchandise that would produce sales of $23.8 million to show profitability," Kaim said. Kaim quickly went from being a retired retail man to being general manager of leasing for the Galleria. Kaim said a key decision was where to put what. "All impulse and fashion merchandise was put on the street level and since the ice rink was on the lower level, we put all restaurants on one side - balanced by leisure time activities, such as books, records and sporting goods. Destination-type merchandise and everything else went on the third level." Kaim said that by knowing how many square feet was going to be available for each class of merchandise, the Galleria could use the technique once used by Sears , Roebuck, which was good, better and best groupings. "We use a minimal of the good, put emphasis on the better and got a good percentage of the best," said Kaim. One of the more interesting points in the early days of the Galleria Mall was that the mall pretty much selected the tenants, told them were they would be located in the mall and how much space they should occupy. No mall had ever applied such restrictions before. A few tenants were lost because they refused to accept either the limited space or the floor location, but mostly they accepted the rules. "We asked the prospective tenants how much volume they expected to do," Kaim said. "We knew they needed to do $200 per square foot annually for profitability, so if one expected to do $1.8 million, he was given 9,000 square feet. That was a good amount for that time; most malls' sales ranged from $90 to $100." Kaim said that the Galleria was careful not to have just chain store tenants. "We evaluated merchants on their capability of running a business in multiple locations, their financial strength and quality of their merchandise." Today, in Galleria III, about $300 per square foot in productivity is needed in order have the cost of occupancy be in correct relationship to the tenant's volume. Galleria I, which opened in 1970, had many 15- and 20-year leases. Of the 15-year leases, which expired last year, about 80 percent are still operating. Now leases are signed for only eight to 10 years, for protection of the tenants. When Galleria I was 100 percent leased, leasing for Galleria II, which opened in October 1977, was started. Where Galleria I had 425,000 square feet leasable, Galleria II had 311,000 square feet. Kaim, who was born in Berlin, came to the United States in 1936 and had started a career with Federated Department Stores in Boston when he went into the U.S. Army. He served four years and was a staff sergeant when he was seriously wounded in Italy in 1945. He joined Foley's after his discharge and recovery in January 1946. Originally appeared in Houston Chronicle, Sunday, September 21, 1986 Courtesy Houston Library Copyright 1986 Houston Chronicle