DC Mall Buy Typifies PREIT's Transformation

PHILADELPHIA—It's a time of transformation at PREIT. The retail REIT's pending acquisition of the redeveloped Springfield Town Center from Vornado Realty Trust exemplifies that transformation; however, the $465-million purchase is only one aspect of it, PREIT CEO Joseph Coradino tells GlobeSt.com.

“As with many enclosed-mall REITs, portfolio quality is key for us,” says Coradino. “It drives metrics such as sales per square foot and certainly earnings growth, but it also makes our portfolio more compelling to retailers. We really attacked that on a number of levels,” including the ongoing sale of non-core, lower-productivity malls and focusing on internal growth.

Such growth, he says, includes the creation of merchandising plans for some of PREIT's core assets “where we thought there was room for improvement through re-merchandising and re-tenanting.” The deal for Springfield Town Center, originally developed as Springfield Mall in the Washington, DC, suburb of Springfield, VA, is an example of the third prong of that attack: adding high-quality assets to the portfolio.

Managing that aspect of the transformation is probably the most difficult, says Coradino, since “class A assets really don't come to market that frequently. So we're excited to be able to acquire Springfield Town Center, an A mall in what we would characterize as an off-market transaction.”

Integrating Springfield Town Center into the portfolio, and completing renovations on the 1.4-million-square-foot Gallery at Market East in Philadelphia, are near-term priorities for “creating the new PREIT,” says Coradino. “We're sticking to our knitting,” he adds, “and we want to execute on Springfield, the Gallery and the balance of the organic growth opportunities we have in the portfolio.”

That being said, while Coradino says PREIT is not emphasizing acquisitions over execution on what it already has, its newest addition does serve as a benchmark. “We see Springfield Town Center as an asset that has it all,” Coradino says. “It's located in one of the densest, highest-income, well-educated and under-retailed trade areas, with unemployment levels significantly below the national average.” And with the redevelopment, which VNO will complete before finalizing the deal with PREIT, the center is in effect “a brand-new product in a limited-supply environment.”