What mall owners everywhere started doing during the pandemic—replacing lost anchors with health care facilities, adding experiential tenants, giving failing properties back to the bank—Joe Coradino began doing almost 10 years ago at PREIT. A lender that wouldn’t go along with a restructuring plan Coradino had put together with other investors forced him to file for Chapter 11 bankruptcy protection on Nov. 11. The owner-operator of some 20 regional and super-regional malls in the eastern half of the United States emerged a month later with an additional $130 million in capital. Joe talked to us about the vagaries of the coronavirus.
You filed for Chapter 11 in November and were out in short order. Can you share some background on what prompted the filing and how it moved so quickly?
It was a surprising and somewhat unnecessary filing. We had 95% of the banks on board. Two weeks before were about to go to the closing, one of the lenders sold their debt to a hedge fund and it turned into what I would call a 12-ticket ride—that roller coaster you couldn’t afford to get on as a kid. We felt we had created a good company and were resolute. We filed what they call a pre-package bankruptcy. We went in on Nov. 10 and came out on Dec. 1. The judge was almost surprised we were even there, but it was part of the job we had to do. I was pleasantly surprised by the retailer support we got. We had calls and emails and texts from people saying, “Hang in there, we’re for you.”
Everyone in the business knows we’ve been over-stored for decades. Will the pandemic finally cause an ultimate winnowing down of retail space?
There’s clearly going to be a reduction in the number of malls and retailers. It’s clear that there’s going to be a fight to improve quality and I think we’ve positioned ourselves well for that. We’re opening an Aldi and a Burlington. We’re bringing in residential developers to add apartments to properties. The added capital we obtained through the filing gives us the opportunity to do this.
You’ve been renovating and re-tenanting your malls for years, but residential’s new. What’s the thinking behind that?
We don’t develop residential. It’s not our specialty. So we’ll be selling pieces of our properties to experienced residential developers who understand that business. We’re not done with the evolution of malls. I think we’ll see more medical facilities. We’re working on a major deal right now with one health care provider and I think we’ll see more participation from life science industries. Because of the suburbanization occurring right now, offices will be part of malls and we’re on that right now. We’re extremely well located and have a tremendous amount of parking.
Are your leasing people keeping open minds about other new elements that might increase success at your malls? What are some possibilities?
Limitless possibilities. Life sciences, lab space, technology, incubators. It’s almost silly how much of Philly is under construction right now. Glaxo is coming to town. A lot of medical research companies.
What are the most important things physical retail centers must provide to consumers in order to survive in the 21st Century in a post-pandemic environment?
I’m a city planner by education. When I look at the trend that began as a result of the pandemic, I think that it’s not easily reversible. People work in their apartments or in their homes in the suburbs. It’s creating a cycle. I’m in the office downtown every day and the lack of traffic is mind-boggling. So we have to be mindful of this. Then again, I was at Cherry Hill Mall the Sunday before Christmas and it was so crowded it made me nervous. The stores had lines in front of them. So I think our future is going to just be fine, but different. We’ve got to be more engaged in helping our retailers do business and finding creative ways to build a future-ready environment.