Fashion District Philadelphia's opening is delayed until November 2018, PREIT CEO says
PREIT CEO Joseph Coradino spent most of 2017 reassuring investors. He revealed Thursday that the opening of the old Gallery mall will be delayed 6 months and then it will only partly open.
NEW YORK — 2017 was a year of reassurance for Pennsylvania Real Estate Investment Trust CEO Joseph Coradino.
He spent a good chunk of it reassuring investors that his 22 malls — seven in the Philadelphia market – were ahead of the trend in addressing the closing of classic department stores like Macy's, Sears, and JC Penney, the mall's traditional anchors.
And he has also reassured observers that the $325 million Fashion District Philadelphia – the old Gallery mall — will eventually open, although now he admits it will be six months later than expected.
Instead of a spring opening, Coradino revealed that Fashion District Philadelphia will now debut two-thirds of its new space about a year from now, in November, with the remaining third, what he calls a second phase with an AMC multiplex theater, opening in November 2019.
"It was a combination of things," he said of the delayed opening. "It had a lot to do with having to move Burlington (from 10th and Market to 8th and Market) after we decided to add a movie theater. That kind of had a domino effect, and it took time."
Coradino admits it has been an anxious year. "There's like this big mountain of negativity, and we are kind of chipping away at it," he said this week at the two-day confab, called the International Council of Shopping Centers – New York Deal Making conference. "The financial press is just hammering away that there's this retail Armageddon, when our occupancy by year end is 94 percent. So business is good."
What isn't so good, he said, were the pressures of being a REIT, a real estate investment trust, where quick turnarounds often clash with the reality of built-in leases and a slow development cycle.
"You've got to deliver," he said. "It's really because [investors] read the papers. They watch CNBC and all this negative hype. We took a hit."
The REITs in general "have been battered," said Coradino. In the last year, PREIT's stock has fallen from $19.91 to $10.59 on Thursday, though its dividend now pays over 8 percent. And analysts expect that REITs will benefit from the new tax bills winding through Congress.
"We opened four new anchor spaces this year, and we literally got the stores back from Sears and had new tenants in them in nine months. That's unheard of."
He said the name change from Fashion Outlets Philadelphia earlier this year had to do with taking full advantage of the city's enhanced profile.
"Philly is a great pitch," Coradino said. "Philly is hot. Before it was 'Philly is growing and has restaurants.' Now, people are telling us that Philly is great and they have to find a way to get there."
He predicted that 2018 will be a year of modest growth and that for 2019, "we should continue to ramp up in a positive direction."
But he admits the hard work isn't over.
"We're going through a realignment, and we like to think that PREIT is further along that continuum because we sold off 40 percent of our malls for that reason," he said. "The world is telling us that retail is over-stored and department stores are declining in importance at malls — we agreed on both and moved on. We got 12 departments stores back and 11 have been repurposed, with the final one being negotiated.
"There were a lot of in-line bankruptcies this year," he said. "At our 25 malls (PREIT has since sold off three near Pittsburgh), we lost 25 stores – one per mall. Over 80 percent of that has been covered. There is demand for space. The consumer is happy. Employment statistics that came out today are positive."
While he rejects the notion of the dying mall, Coradino agrees its purpose has changed.
"The mall used to be a place where people bought tops and bottoms," he said. "Now it's a place to dine, be entertained, and take yoga classes. It's a completely different experience. That is continuing to evolve."
Case in point: A second Whole Foods will open at Exton Square Mall in January, joining the first Whole Foods at Plymouth Meeting Mall, which opened in 2010.
PREIT recently signed two leases for the Macy's space at Moorestown Mall, with a third as a letter of intent. The mall at Willow Grove will soon get a movie theater.
For PREIT investors, "we're laying out how we've been in front of the curve," Coradino said.