By Upendra MishraLong before strip centers, malls and big-box discount stores came into vogue, Joe Edens recognized that certain items were a necessity for every customer regardless of income level or economic cycle. Based on this concept, Edens pioneered what today are called "necessity retail" centers.
More than three decades later, Edens has built one of the largest retail real estate companies in the Southeast. Today it is poised on the threshold of a new era.
"We doubled the size of the company in less than a year, and we will triple our size by the end of this year," says Edens, chairman and CEO of Columbia, S.C.-based Edens & Avant. "We should have in excess of 15 million sq. ft. of real estate by the end of 1998."
The privately held company traces its origin to 1966, when Edens entered the commercial real estate business as a sole practitioner. It shifted into high gear only last year after receiving financial backing from a major pension fund, the State of Michigan Retirement System.
The pension fund provided $145 million in equity capital to support Edens & Avant's strategic growth plan. The plan called for acquiring and developing grocery- and drugstore-anchored retail centers in targeted Southeastern markets, as well as increasing its scope of real estate services.
The equity capital infusion, combined with a simultaneous $85 million in debt financing by Morgan Stanley Mortgage Capital, has allowed the company to grow to more than 200 employees - up from 147 before the transaction in July 1997.
The firm today owns hard assets in 15 states and has a portfolio of 13 million sq. ft. - up from the 5 million sq. ft. it owned before the financial backing. Total asset value of the company's portfolio is currently estimated at $750 million, and is targeted to hit the $1 billion mark by year's end.
Edens predicts that the company's assets will grow to $2 billion by the year 2000 or 2001. "We would like to achieve a 30% annual growth in our asset size and a 2% to 3% internal growth," he says. "Revenue will be quadrupled by the end of this year from what it was in July 1997."
Edens declines to disclose revenue figures, but says his firm is well-prepared and right on target to achieve its goals.
Climbing the growth charts Edens first explored the firm's growth potential in the early 1990s. He investigated various sources of capital, including taking the company public and converting it into a REIT.
"We considered that alternative in the early '90s," he recalls, "but we decided that it was not appropriate for us." He wanted to keep the company private but recognized the need for a significant source of capital in order for growth to occur. The search for capital began in 1995.
In 1997, the State of Michigan Retirement System pension fund came in as an equity partner in the company, providing the needed capital for expansion.
"We are a very low-debt company," Edens says. "Our business plan calls for debt of less than 50% of the cost. The Michigan pension fund provides a substantial portion of the equity. It continues to fund the capital we need."
Edens & Avant, which has grown steadily through the years but more slowly than its current pace, plans to actively pursue retail properties through acquisition and development. The firm's new development, redevelopment and center expansion pipeline includes more than 30 projects. When delivered, the company's new developments are, on average, 93% leased.
This summer the company announced ground-breaking on three new developments: the 49,500 sq. ft. Springs Crossing in Lexington, S.C., to be anchored by Food Lion and Family Dollar; a 10,125 sq. ft. freestanding store for CVS in Florence, S.C.; and the 32,123 sq. ft. Robbins Towne Center in Robbins, N.C., to be anchored by Lowes Foods and Dollar General.
From bagging groceries ... Born in 1941 in Columbia, S.C., Edens has lived and worked in the Columbia area and throughout the Carolinas. His family's business, which included food retailing and later a manufacturing plant for architectural plastics and skylights, lured Edens to real estate.
"I had various jobs in the supermarket, from bagging groceries to stacking shelves in my father's store. I started working when I was 10 years old," Edens recalls. When his father went into the manufacturing business, Edens also joined him and worked at the manufacturing plant for six years.
"As a hobby, I started investing in income-producing real estate. I bought small rental residential properties. I thoroughly enjoyed it," Edens says. "Later, I gained keen interest in commercial real estate. I got involved in brokerage and anything I could do to generate income."
In the mid 1960s, Edens bought his first retail center, a 48,000 sq. ft. grocery-anchored shopping center in Columbia, S.C. That led him to other acquisition and development opportunities, as it cultivated solid relationships with anchor drugstores and grocery stores.
Displaying an ability to provide revenue-producing sites and to deliver projects on time and under budget, Edens began developing and buying retail centers throughout the Carolinas. His targets: retail centers leased to national or local grocery companies, drugstore chains, general merchandise stores, apparel and accessory stores, and other regional or local retail stores.
In 1979, Dan Avant became a principal in the firm through Joe Eden's acquisition of another company. With Avant heading the brokerage group and Edens heading development, the duo eventually built a fully integrated real estate company that would serve its own real estate needs as well as those of third-party customers. Today, Edens & Avant offers leasing, management, brokerage, development and corporate real estate services.
Charles J. Schreiber Jr., CEO of Newport Beach, Calif.-based Koll Bren Realty Advisors, has known Edens for two years and is impressed by his effectiveness.
"Joe operates an extremely professional shopping center investment company," Schreiber says. "The strength of his organization centers around his talented team of experts, who handle all responsibilities, including acquisitions, due diligence, property management, leasing, and construction and development."
... To bagging propertiess Edens & Avant has developed 150 shopping centers and 1.3 million sq. ft. of office space and freestanding stores. Retail accounts for 95% of the company's portfolio. The firm's acquisition approach includes both single and portfolio acquisitions.
The company is targeting high-growth markets in the eastern United States for expansion through acquisition and new development. With capital of more than $350 million available for acquisitions for calendar 1998, it has an additional $50 million for new development and redevelopment of necessity retail centers. In June of this year, Edens & Avant completed a secured debt facility transaction with New York-based Credit Suisse First Boston in the amount of $84.1 million.
Edens attributes the success of his company to a mixture of luck and hard work. "I think the harder we work, the luckier we get," Edens says. "We also have been very fortunate to have the Michigan pension fund as an investor."
A vigorous economy and a controlled supply of retail space are also contributing to his firm's growth. "Necessity retail is very healthy today," Edens says. "It has not seen overbuilding. Occupancy level in this type of product will be in the low- to mid-90s percentile. It does not offer huge annual increments in revenue, but it's pretty dependable."
Edens credits his staff and his ability to attract competent people for the company's growth over the past three decades. "They seem to respond to what our company's vision should be," he says. "I'm a really good motivator. I can set the vision."
His vision is to build the best full-service company in the United States: "That does not mean we would like to be the biggest - but the best."
Upendra Mishra is a Randolph, Mass.-based freelance writer.