- March 4, 2022
Don Phillips is a changed man.
After surviving last decade's devastating economic recession — when he was saddled with $423 million in recourse debt that he had personally guaranteed — Phillips is focusing on what he calls “legacy projects,” developments that contribute as much to the communities they are built in as they do to his firm's bottom line.
Exhibit A is the $77 million, mixed-use project he's planning in St. Petersburg's Skyway Marina District, which will combine 296 residences with 13,000 square feet of self-storage units and other retail and public art. Phillips bought the land, once owned by Home Depot, in February for $4.2 million.
“I've come to realize there's a better future in slow dimes as opposed to fast nickels,” says Phillips, the managing director of Phillips Development & Realty, a Tampa-based firm he started in his native North Carolina nearly a quarter century ago.
He's also gone lean, trimming overhead and staff while doing fewer projects overall.
At 51, Phillips is mindful of the future, his family of five children and his own legacy.
“I've learned production does not reward creativity,” he says. “That's been a huge transition for me. To have the time to conceptualize and create has been very rewarding.
“I'm much more contemplative now, and interested in the body of work I'm going to leave behind. What do I want my legacy to be — another apartment complex or something that adds, in a meaningful way, to the community?”
That said, it's not readily apparent that Phillips is slowing down based on the number of projects in which his company is involved.
On the books at present are $200 million worth of developments, ranging from apartment communities in Brandon, Cape Coral and the aforementioned St. Petersburg -- slated to begin in July — to self-storage projects in Brandon, Largo and Raleigh, N.C.
In all, the projects will result in 769 new apartments and 384,000 square feet of modern, climate-controlled self-storage units.
Still, Phillips insists his attitude is as different as his operation. Geographically, he's focused on Florida, where he moved his company in 2003, and North Carolina, where he still owns a farm and has family.
It's a big change from 2008, when Phillips Development was mainly a merchant developer, cranking out a handful of apartment complexes containing roughly 3,000 new units annually.
The work earned the company accolades as one of the largest multifamily developers in the U.S., but it also meant Phillips Development needed a staff of more than 50 and an annual payroll that topped $5 million.
As the projects ballooned — the company's Mosaic on Hermann Park in Houston, a 30-story, twin-towered apartment project with 788 units and retail space, cost $215 million — so did the amount of recourse debt Phillips racked up.
“We were plowing through all our revenue, whatever came in went out just as fast,” Phillips says.
Just as debilitating, from his perspective, Phillips was increasingly spending time on what he calls “relationship management” with equity partners and others.
When the recession took hold in 2008, Phillips pared down, and approached his lenders regarding his vast personal debt.
“Don really attacked the Great Recession — he had to,” says Will Weatherspoon, a Raleigh, N.C., attorney who has worked with Phillips for two decades. “Unlike a lot of folks, who waited to see if the next shoe would drop, Don proactively approached his creditors, and that made all the difference.”
Today, Phillips is focused on fewer, but larger and more complex, projects. Many are a mix of uses that play off and complement one another: think apartments, self-storage and retail, rather than a residential-only, suburban community.
“The beauty of mixed-use projects are that they give us the ability to take down a larger piece of land, typically, and often the sites are better,” Phillips says.
“And the multiple revenue streams allow us to do fewer overall projects and focus on doing more iconic projects. From a personal satisfaction standpoint, it's a much better place to be.”
In the self-storage arena, Phillips has partnered with Dean Jernigan, the chairman and CEO of Memphis-based Jernigan Capital, for financing and expertise.
Prior to forming his own firm four years ago, Jernigan led self-storage companies Storage USA and CubeSmart, both industry leaders.
“I like Don a lot as a person, and that's my first criteria,” says Jernigan. “We work with about 30 program developers around the country, and they need to be people I trust and they need to be good developers, and certainly Don is both. It's really what we consider a perfect fit: He has a nice team, development experience with multifamily projects and we bring expertise in storage.
“We're lucky to have found each other.”
Phillips says he's drawn to self-storage because it's “most closely aligned” with apartments, and because “there's no end to the stuff that Americans accumulate and need to put somewhere.”
But Phillips' projects won't be your uncle's self-storage variety. Many are multistory, measuring as much as 100,000 square feet, with air conditioning and other amenities.
“He says he wants to slow down, but he has a lot of irons in the fire,” says Weatherspoon. “Don doesn't hesitate when he sees an opportunity, never has. The difference is now he's focused on aesthetics, and he's always had a very good eye for architecture and color and texture.”
One project Phillips won't be doing is the long-planned Gas Worx mixed-use development in Ybor City.
After a squabble with Teco Energy and Tampa officials over environmental issues and zoning, Phillips sold the land for the project to Ybor investor Daryl Shaw. Phillips Development still may be involved in developing the 6-acre site, however.
“That site will be to Ybor what the Skyway Marina District will be to St. Petersburg, eventually,” Phillips says. “It's the piece of land that stands between the eventuality of Ybor and the reality of Channelside.”
Phillips and his employees have enough to do without Gas Worx, though. Today, the company is composed of seven people, including Phillips, squeezed into a 2,400-square-foot office.
Phillips has shrunk his debt exposure, too, to $3 million of non-recourse loans.
“The downturn gave me a lot of perspective,” he says. “And, it takes a lifetime to get where I am, at my age. I have the conceptual and financial ability now, which I've earned through a lot of trials and tribulations.”