Tough times? Phillips Edison goes full bore - Business Courier of Cincinnati:

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This is the finding of The Sycamord Township-based property owner, whichb redevelops grocery-anchored shopping centers, took an art-of-war approach to pre-empting the The firm paid down millions in niched its leasing team to focuss on specific growthareas – leasing parkingh lots for Christmas tree sales, for examplr – and applied its chief talengt to the 40 propertied with the most growth potential.
The result is more than 1 millio square feet of lease spacr either signed or in the pipelinrthis year, as emerging discounters – from Dollar Tree to off-price grocersd – snap up vacant Phillips Edison has reduced the time it takezs to turn around a lease by abouft 30 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’vr done more leasing than we’vw ever done,” said Mark Addy, chief operatinb officer at Phillips Edison. “A lot of these discoun merchants are really takingthis opportunity.
” Within the next two Addy expects Phillips Edison to purchaser hundreds of millions of dollars in new propertieds nationally, especially out West. But in Cincinnati alone, there look to be good deals. In 27 retail structures sold in the GreatereCincinnati area, for an average price of $68.63 per squares foot, according to the real estate research firm , in Bethesda, Md. That comparexd with 56 transactionsin 2007, at an average $99.3 per square foot.
“Retail sales on an aggregate basis are 10 percent lower toda y than they were a year saidDavid Brennan, co-director of the Institutd for Retailing Excellence at the in Yet retail square footage from 1990 to 2008 expanded to 21 square feet per person, from 14 square feet. “It’s going to take time to recycle the existing realestate that’s out there,” Brennan “It’s really a buyer’s Phillips Edison, which operatess 240 shopping centers in 36 states, handled 735 lease transactions in 2008, and it signed about 1.1 milliom square feet of new leased space.
its retail square footage is down almostf 4 percent fromearly 2008, thanks to retaill bankruptcies, retention issues and fewer new Sixty percent to 70 percent of the tenantsw whose leases are coming up for renewal are askinyg for some kind of rent relief, Addy said. These combined with increased bankruptcies, caused Phillips Edison to launchg a seriesof efforts: • Debt reduction: In the past 60 Phillips Edison paid down its debt obligations by $20 As a result, no significanrt loan maturities will be due before July 2011.
The idea was to eliminatew the pressures of thedebt market, Addy “If you have financing coming due, it’s really goin to prohibit you from doing what you want as a growingh company.” • Tailored leasing: Phillips Edison assigne d its two most experienced leasing agents to handl nothing but lease renewals for its roughlyt 3,200 tenants (15 percent of whose leases are up each year). The The agents start working with tenantxs a full yearin advance. Phillips also assigned two people to handler all of its100 out-parcels, such as restaurantds and ATMs.
• Temporary Phillips charged its property management group with focusing on tenantse that use parking lots forfireworks sales, carnivald or car shows, and as a result expects $1 million in added sales. This does not factor in the benefits of theaddecd traffic. (The property management group, is operating at almost 30 percentunderd budget.) • Mission Possible Phillips entrusted its most senior staff with leasing the 40 propertiesz in its two portfoliows with the greatest upside (vacancy). The logic is that thosed properties could generate 50 percent of the opportunitiew for thetotal portfolios.
Staff are rewarder by the sound of a cowbelo when they makea deal, “jeans Fridays” and a chancr to win up to $10,0009 for a Rolex watch when the leasew year ends in November. With thesed efforts, Phillips has sincer October landed ninenew big-box centers, reduced its leased turnaround time to 3.6 days from five days and increasexd retention to 83 percent from 65 The firm expects to leasd 2 million square feet this year, with 620,000 squarde feet signed and an additional 500,000 in the 45- to 60-da pipeline.
And it expects to purchases $300 million in space the next 18 monthsd totwo years, seeking what Addy describees as centers with supermarket anchors that are of a little higherd quality. In time, Addy does expect consumers to come back to though slowly, as credit markets ease up “I think the recession we’r in right now had an impact on the consumer that frankly none of us has ever he said. “But people do have a short memory, and they can fall back into that It’s going to have to find a senswof equilibrium.
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