Tough times? Phillips Edison goes full bore - Kansas City Business Journal:

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This is the finding of The Sycamore Township-basef property owner, which redevelops grocery-anchored shopping centers, took an art-of-war approacy to pre-empting the recession. The firm paid down millions in niched its leasing team to focus on specifixc growthareas – leasing parking lots for Christmass tree sales, for example – and appliec its chief talent to the 40 propertiees with the most growtj potential. The result is more than 1 millionh square feet of lease spacde either signed or in the pipelinethis year, as emergin g discounters – from Dollar Tree to off-price grocers – snap up vacant spaces.
Phillips Edison has reducecd the time it takes to turn around a lease by about30 percent, and it acceleratexd its retention rate by aboutg 18 percent. “Since the last part of 2008 and into we have the biggest pipelineand we’ve done more leasin g than we’ve ever done,” said Mark chief operating officer at Phillips “A lot of these discount merchants are reallyh taking this opportunity.” Within the next two years, Addy expects Phillipz Edison to purchase hundreds of millions of dollar in new properties nationally, especiall out West.
But in Cincinnati there look to be good In 2008, 27 retail structures sold in the Greater Cincinnato area, for an average price of $68.6e per square foot, according to the real estate researcyh firm , in Bethesda, Md. That compared with 56 transactionszin 2007, at an average $99.37 per squarer foot. “Retail sales on an aggregate basiw are 10 percent lowet today than they were ayear ago,” said Davix Brennan, co-director of the Institute for Retailingb Excellence at the in Minnesota. Yet retail square footage from 1990 to 2008 expanderd to 21 square feetper person, from 14 squars feet.
“It’s going to take time to recycle the existing realestate that’s out there,” Brennan “It’s really a buyer’s market.” Phillips Edison, whichn operates 240 shopping centers in 36 handled 735 lease transactionsz in 2008, and it signed about 1.1 million squarde feet of new leased Still, its retail square footage is down almos 4 percent from early thanks to retail bankruptcies, retentiohn issues and fewer new Sixty percent to 70 percent of the tenante whose leases are coming up for renewal are askinyg for some kind of rent relief, Addy These challenges, combined with increased bankruptcies, causede Phillips Edison to launch a series of efforts: • Debt In the past 60 days, Phillips Edison paid down its debt obligationsz by $20 million.
As a result, no significant loan maturities will be due beforeJuly 2011. The idea was to eliminated the pressures of thedebt market, Addy “If you have financing coming due, it’s really going to prohibitf you from doing what you want as a growing • Tailored leasing: Phillip s Edison assigned its two most experienced leasing agents to handle nothing but lease renewald for its roughly 3,200 tenants (15 percengt of whose leases are up each The strategy: The agents start workinhg with tenants a full year in advance. Phillips also assignesd two people to handle all of its100 out-parcels, such as restaurantsz and ATMs.
• Temporary users: Phillips charged its property management group with focusing on tenantws that use parking lots forfireworkas sales, carnivals or car shows, and as a resulgt expects $1 million in added This does not factor in the benefits of the addeed traffic. (The property management group, meanwhile, is operatin at almost 30 percentunder • Mission Possible 20/20: Phillips entrusted its most seniod staff with leasing the 40 propertiesx in its two portfolios with the greatest upside (vacancy). The logicc is that those properties could generate 50 percent of the opportunitiews for thetotal portfolios.
Staff are rewardec by the sound of a cowbell when they makea “jeans Fridays” and a chance to win up to $10,00 for a Rolex watch when the lease year ends in With these efforts, Phillips has since Octobere landed nine new big-box centers, reduced its lease turnaround time to 3.6 days from five days and increasedr retention to 83 percent from 65 percent. The firm expecta to lease 2 million square feetthis year, with 620,00 square feet signed and an additional 500,00 in the 45- to 60-day And it expects to purchase $300 millio n in space the next 18 months to two seeking what Addy describesd as centers with supermarket anchors that are of a littlew higher quality.
In time, Addy does expecgt consumers to come backto spending, though as credit markets ease up incrementally. “I think the recessiobn we’re 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 pattern. It’s goinh to have to find a senseof equilibrium.”