December 4, 2022

Thrive Insider

Exclusive stories of successful entrepreneurs

Michael Pilevsky of Philips International on Chance

Michael Pilevsky, Co-President of Philips International, believes the idea of Chance is best relegated to the game of Monopoly.   “The Chance cards are not the best way to get ahead in Monopoly,” he said. “Sure, there are some positive outcomes in that little stack of cards, but if you draw ‘advance to Boardwalk’ and your competitor has a hotel there, it may be ‘game over’ for you.  I prefer not to leave things to Chance. 

When approaching real-life real estate transactions, he recommends leaving as little to chance as humanly possible. 

One, Two, Three

A number of years ago, a Mervyn’s location at a Philips International shopping center closed operations. The lease had not yet expired and the company, was still paying rent on the empty space.  Eventually, there were some legal efforts by Mervyn’s to get out of the lease.

“We respected Mervyn’s legal creativity,” Pilevsky said, “but we weren’t about to let them get away with it.”

While the Mervyn’s saga unfolded, Philips International quietly began looking for a replacement tenant and soon outlined an agreement to lease the location to Kohl’s Department Stores, which included the demolition of the existing space and the construction of a brand new two-story department store.

“We were going to get a 100,000-square-foot tenant, more rent, and a new 20-year lease with a very strong company,” he said.

The third component of the situation was the local municipal building department. “We had to confirm that the building department was going to allow us to develop a new two-story building to accommodate Kohl’s,” Pilevsky said. “So, there were three balls being juggled – Mervyn’s, Kohls and the municipal approvals.”

One after the other

As the talks continued, Mervyn’s drew the proverbial “line in the sand.” If an agreement wasn’t signed by the end of the year, the deal would be void and the litigation would resume. Pilevsky was unwilling to take the risk – the chance – of letting Mervyn’s out of its lease without the Kohl’s lease in place.  “My father, Philip Pilevsky, always advised me not to give up the ‘bird in hand,’ said Michael Pilevsky.  “That advice has always served me well.”

Everything seemed to fall into place at the same time, just as the end of the calendar year was approaching. 

The building department approved the construction project. With that hurdle cleared, Pilevsky could execute the lease with Kohl’s, while simultaneously, signing an agreement to terminate the existing Mervyn’s lease.

“So, in the normal course of things, you would go to FedEx and overnight the lease to Kohls’ office. They would sign and send original signatures right back for countersignature, right?” he said. But he was concerned about the timing. “All this was happening during the holiday season. And there was a weekend in there, too. There could be storms, road closures, anything.”

The apprehension wasn’t unfounded. Shortly before the lease signing, Philips International did have three packages delayed by the carrier for one reason or another. The delay was minor in each instance, but it raised a red flag.  With the year-end deadline a few days away, he was unwilling to risk the entire deal on a potential delivery snafu.

Postage versus Personal

Pilevsky came up with an unusual solution.  He tasked a company team member to personally take the lease, board a flight to Menomenee Falls, Kohl’s headquarters in Wisconsin, get the lease signed, and bring it back to Philips International main offices.

“The Kohl’s people thought it was extreme,” he said. “But we were removing an uncertainty from the equation. We didn’t want to take any chances”.

“Was it an unnecessary precaution to take? Probably. But, you know what? There was so much relying on that document. So we did what we did and we pulled it off. We got the lease signed in time to sign the settlement with Mervyn’s. That’s what I mean about not leaving things to chance… when you can avoid it. Things will always happen that are unforeseeable. But, to the extent that one can control things, why take the risk of giving up that control?”

The Winner’s Circle

To take the real estate game analogy a little further, Pilevsky said he only “rolls the dice” when no other option is available.

“In situations like this, I rely on what I know and I make decisions based on what I know,” he said. “I don’t want to rely on the flip of a random card. In this case, we were able to pass Go and collect our proverbial $200.”