Q&A with Joseph Coradino, CEO of PREIT
Joseph Coradino stepped up to the post of CEO at Pennsylvania Real Estate Investment Trust in June of 2012. At the time, he had been with PREIT and a predecessor company for three decades. Since 2004, he had served as president of PREIT Services and PREIT-RUBIN. He had been a Trustee since 2006.
When the appointment was announced, Coradino evaluated PREIT’s business position. “We are operating from a position of strength today given the strides we have made in our development and redevelopment programs, diversifying our revenue streams and increasing occupancy and improving our margins,” he said.
His plan: keep moving forward. And he has. On the day of his appointment as CEO — June 7, 2012, PREIT stock opened at $12.27 per share. On October 25, 2013, about 16 months later, shares cost $18.99, an increase of nearly 55%.
Back in February of this year, the company declared a 12.5% increase in dividends per common share.
PREIT is on the move, and Coradino aims to keep it moving. The strategy as laid out in the 2012 annual report has four objectives:
- Balance sheet improvement
- Operational excellence
- Elevating portfolio quality
- Positioning for growth
The 2012 annual report describes progress toward each of those objectives. Recently, Chain Store Age asked Joseph Coradino if 2013 has kept pace with 2012. Here’s what he had to say.
Your 2012 annual report called 2012 “a year of tremendous transformation and accomplishment for PREIT” and looked to continue the momentum in 2013. Have you?
We absolutely have — we have a strong balance sheet, have continued to demonstrate stable operational performance, have improved the quality of our portfolio and have put ourselves in a position to be able to grow the platform.
Let’s talk about balance sheet improvements for 2013. Have you issued any securities this year? What did the proceeds go toward?
In May, we issued $230 million in common equity. We used the proceeds to pay down debt. We were one of the most highly leveraged companies in our sector, and it was a very high priority for us to change that.
What balance sheet ratios are you working to improve? What are the ratios now? What is your goal?
We are primarily concerned with our leverage ratio, defined by our banks as debt to gross asset value. As of the end of the second quarter, we were at 49.8%, the lowest since 2005. We hope to get into the low to mid 40s. But it has changed dramatically already. We used to say below 60 was the goal. Then we wanted to get to 50. So we’re happy to be talking about the prospects of the low 40s.
Let’s turn to your second strategic objective of operational improvements. In 2012, you brought a number of high quality retailers and restaurants — Apple and Grand Lux Café, for instance — to your properties. Have you been able to continue that?
This year has been a good year in that regard. We opened a lot of great stores.
We opened one of the first three Dynamite stores in the U.S. at Cherry Hill Mall, where we also signed Williams Sonoma.
At Woodland Mall in Grand Rapids, Mich., our tenant roster continues to improve with a new H&M store opening at the end of October, a new Soma store and an Art of Shaving.
We opened a Francesca’s Collection and Teavana at Exton Square Mall — upgrades for the affluent shoppers in that area.
We are also looking forward to a new J.Crew Factory at Plymouth Meeting Mall.
What is your portfolio occupancy rate?
Through June, mall non-anchor occupancy was up 200 basis points to 89.6% over the prior June.
You have classified PREIT properties under three headings — premier, core growth and opportunistic. How is this helping you to elevate portfolio quality?
This has helped us do a number of things. Primarily it helps us illustrate the inherent quality of our portfolio to retailers and investors. We have been defined by our lower-productivity properties and wanted to start educating the public that those are few in number, and their contribution to our income stream is limited as well. It has also helped us internally think about how and where to focus our energy.
What are the criteria for moving a property into a non-core category and selling it?
We have primarily moved properties that have been a drag on our ability to lease space and renew tenants at our better properties. In other cases, we felt we would need to make significant capital investments to stay competitive, and we have simply felt that we really wanted to allocate to our better properties.
Has all this work positioned PREIT for growth?
Well, I like to say all the work we’ve been doing has put us at the starting line — so for the next year, we’re looking to ramp up our performance and start to grow our portfolio, both by delivering on organic opportunities and finding quality new properties to add to our portfolio.