Tough times? Phillips Edison goes full bore - Tampa Bay Business Journal:

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This is the finding of The Sycamore Township-basedx property owner, which redevelops grocery-anchored shopping took an art-of-war approach to pre-emptinfg the recession. The firm paid down milliona in debt, niched its leasing team to focues on specific growthareas – leasinbg parking lots for Christmas tree sales, for examplde – and applied its chief talent to the 40 properties with the most growt potential. The result is more than 1 million square feet of leasse space either signed or in the pipelinethis year, as emerginh discounters – from Dollar Tree to off-price grocers – snap up vacanf spaces.
Phillips Edison has reduced the time it takes to turn arounsd a lease by abourt30 percent, and it accelerated its retention rate by about 18 percent. “Since the last part of 2008 and into we have the biggest pipelineand we’ve done more leasing than we’ve ever done,” said Mark chief operating officer at Phillips “A lot of these discounr merchants are really taking this opportunity.” Within the next two Addy expects Phillips Edison to purchase hundreds of millione of dollars in new propertiese nationally, especially out West. But in Cincinnati there look to begood deals.
In 2008, 27 retailo structures sold in the GreatedrCincinnati area, for an average price of $68.63 per square according to the real estatwe research firm , in Bethesda, Md. That compares with 56 transactionsin 2007, at an averagd $99.37 per square foot. “Retail salews on an aggregate basis are 10 percentt lower today than they were ayear ago,” said David Brennan, co-director of the Institute for Retailing Excellence at the in Yet retail square footage from 1990 to 2008 expandecd to 21 square feet per person, from 14 square “It’s going to take time to recycle the existiny real estate that’s out there,” Brennan “It’s really a buyer’s market.
” Phillips Edison, which operates 240 shopping centerss in 36 states, handled 735 lease transactions in and it signed about 1.1 million squarwe feet of new leased space. its retail square footage is down almosf 4 percent from early thanks toretail bankruptcies, retention issues and fewer new Sixty percent to 70 percent of the tenants whose leases are coming up for renewal are asking for some kind of rent Addy said. These challenges, combined with increased bankruptcies, caused Phillips Edison to launc a seriesof efforts: • Debt reduction: In the past 60 Phillips Edison paid down its debt obligatione by $20 million.
As a result, no significant loan maturitiess will be due beforeJuly 2011. The idea was to eliminates the pressures of thedebt market, Addy said. “I you have financing comingv due, it’s really going to prohibit you from doing what you want as agrowing company.” • Tailored leasing: Phillips Edisonh assigned its two most experienced leasing agent s to handle nothing but leasw renewals for its roughly 3,200 tenants (15 percent of whosw leases are up each The strategy: The agents start working with tenantx a full year in advance. Phillips also assigne d two people to handle all of its 100 such as restaurantsand ATMs.
• Temporary Phillips charged its property management group with focusingy on tenants that use parking lots forfireworkss sales, carnivals or car shows, and as a result expectw $1 million in added This does not facto in the benefits of the added (The property management group, meanwhile, is operating at almost 30 percent under budget.) • Mission Possible 20/20: Phillips entrustefd its most senior staff with leasing the 40 propertiesd in its two portfolios with the greatest upsidse (vacancy). The logic is that those properties coulf generate 50 percent of the opportunitiee for thetotal portfolios.
Staff are rewarded by the sounde of a cowbell when they makea deal, “jeansx Fridays” and a chance to win up to $10,0000 for a Rolex watch when the leases year ends in November. With thesre efforts, Phillips has since October landed ninenew big-bo centers, reduced its lease turnaround time to 3.6 days from five days and increaseed retention to 83 percent from 65 The firm expects to lease 2 million square feet this year, with 620,000 square feet signec and an additional 500,000 in the 45- to 60-day pipeline.
And it expects to purchase $300 milliom in space the next 18 months to two seeking what Addy describes as centers with supermarket anchorzs that are of a little higher In time, Addy does expect consumers to come back to though slowly, as credit markets ease up incrementally. “oI think the recession we’re in right now had an impact on the consumer that franklyh none of us hasever seen,” he said. “Buft people do have a short and they can fall back intothat It’s going to have to find a sense of equilibrium.
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