The first shopping center Michael A. Pollack purchased was a neighborhood eyesore in Phoenix: a 23,600 sq. ft. property that was 90% vacant. Using his own funds, the entrepreneur quickly renovated and leased the property.

Then he found a second property and renovated it. Another center followed and another. Buying properties one at a time and leasing the space himself, Pollack closed deals quickly, renovated the centers rapidly and leased swiftly. It was a simple strategy - and ultimately a hugely successful one.

Today, Pollack owns or controls 40 shopping centers in Arizona totaling more than 1.8 million sq. ft. The 44-year-old is considered by those in the real estate industry to be one of the largest independent shopping center owners/operators in the Phoenix area and possibly the state. His firm, Michael A. Pollack Real Estate Investments, is based in Chandler, Ariz.

"Pollack has shown that even today, despite the dominance of REITs, pension funds and insurance companies, a savvy visionary can still create an incredible retail portfolio almost single-handedly," says Rick Robertson, founding partner of Lee & Associates Arizona, a brokerage firm in Phoenix.

James V. DuMars, vice president and senior producer in the Phoenix office of Minneapolis-based Northland Marquette Capital Group, a mortgage banking firm, further distinguishes Pollack's accomplishments.

"The difference between Pollack and other buyers is that Pollack adds value to centers," he says. "A number of people bought shopping centers in the early 1990s, rode the market up and then sold them. Michael purchases centers cautiously and painstakingly repositions them because he retains the centers. He buys at the right price and can later raise rents significantly and thus increase value."

Pollack, who has worked on projects in the Grand Canyon State as small as 10,000 sq. ft. and as large as 180,000 sq. ft., says there is no substitute for hard work and smart decisions.

"A lot of people think they can copy a formula, or transfer a practice that worked in one market to another," he says. "But there's no crystal ball, just hard work and careful planning."

'Golden thumb' of real estate Today, real estate sources value Pollack's Arizona portfolio at more than $200 million, up from zero just seven years ago. His renovated centers are 97% to 100% leased.

Pollack has prospered because his timing was excellent and he was able to buy well-located retail properties at a fraction of replacement costs, says Cam Stanton, first vice president in the Phoenix office of Los Angeles-based CB Richard Ellis.

"Michael has good instincts and does a tremendous amount of homework," says Stanton. "He had cash when others didn't, and he was able to increase a center's value better than almost anyone."

Waterfall Shopping Center, a 57,583 sq. ft. property in Chandler outside Phoenix, is a good example of Pollack's strategy. He purchased the center for about $1 million several years ago. At that time, Waterfall was a mere 19% occupied and had a gross income of only $150,000 per year.

Pollack renovated the property and began an aggressive leasing program. Within six months he had turned the center around. Waterfall Shopping Center is currently 100% leased with a gross income of over $700,000 per year. Real estate experts estimate the center is worth at least $4 million.

Other properties in the Pollack portfolio have reported similar gains in occupancy, value and income. Lindsay Marketplace, an 86,285 sq. ft. center in Mesa, was only 40% occupied and generating $321,000 annually in gross income when Pollack purchased it. Today, Lindsay is 100% occupied. The center's gross income has tripled.

"We classify Michael as the 'golden thumb' of value-added real estate," says Robert E. Long, field vice president at Conning Asset Management, a subsidiary of General American Life Insurance Co. in Phoenix. "He has an uncanny knack for purchasing real estate at a low cost and turning it into a tremendous success."

Dealmaking agility Real estate is in Pollack's blood. His grandfather was noted San Jose developer Sid Gambord, who at the age of 93 was still doing deals. His father, Robert Pollack, built a number of successful industrial and residential projects throughout Silicon Valley.

"My parents taught me many things that prepared me for the real estate world," Pollack says. "The most important was to always be honest and ethical in everything you do."

Receiving his general contractor's license in his early 20s, Pollack designed and built a number of multifamily and industrial projects in California before heading to the Phoenix area. "California was hitting its slump, and I saw Arizona as a great upside potential play," he says. "Properties were selling for very low prices per sq. ft., and I knew the economy had to turn around soon."

Pollack started as a one-man operation, talking to brokers, negotiating deals, overseeing renovations and leasing space. "It was terrific because you learned the area and met all the players," he recalls.

Pollack still signs all checks, answers his own phone, and can recite a center's tenants and square footage from memory. One of the least important factors he considers when buying a center is the property's rents. Market rents in the area are more interesting.

"It's great to look at a terrific center with a national tenant paying high rent, but it's also important to scrutinize the price per sq. ft. and the overall value of the project," he explains. "How would the center hold up if the tenant disappeared or if the local economy took a downturn? Or lease rates plunged? To me, money in real estate is made on the purchase. If you don't buy right, it will be difficult to sell right."

Pollack prefers all-cash deals, typically funded by a handful of backers or by cash flow from internal operations. "My investors understand that great deals don't last through long drawn-out decision-making processes," he says. "There is an advantage in not having to go through the bureaucracy that some larger companies are forced to undertake."

Speed is important to Pollack, adds Robertson of Lee & Associates. "Pollack does a first-class job of renovating centers rapidly," says Robertson. "We closed escrow on a center late one evening, and the very next morning he had 12 guys at the site at 8 a.m. painting and repairing the property."

In addition, Pollack employs the latest technology. A state-of-the-art Prevost touring bus, outfitted with the most up-to-date communications and computer equipment, serves as a mobile office. "We can visit a potential acquisition and act immediately," he says. "I can fax a letter of intent from the bus to the owner right from the parking lot of the center."

Using such high-tech tools has enabled Pollack to sign 1,067 leases totaling some 2.3 million sq. ft. with a total lease value in excess of $76 million since 1995. National tenants at Pollack centers include Safeway and Fry's supermarkets, McDonald's, Taco Bell, Blockbuster Video, Checker Auto, Osco Drug and Circle K, to name a few.

Sticking to proven strategy Although the retail real estate sector has slowed somewhat, Pollack continues to buy centers. He currently has 150,000 sq. ft. of retail in escrow and is building 100,000 in new space at eight of his 40 properties.

He is also expanding outside his Phoenix base. He recently purchased the 78,638 sq. ft. Flowing Wells Shopping Center in Tucson, a property that was 20% occupied and losing $180,000 a year. Renovating the center in less than 90 days, he signed up national tenants including Family Dollar Store and Sav-A-Lot Grocery Store. Today, Flowing Wells has a gross income in excess of $475,000 a year.

"Michael made the center institutional quality, with new tenants, new facades and so forth," says DuMars of Northland Financial. "Life companies were not interested in Flowing Wells at all until Pollack purchased it. The renovation caught their attention."

Despite overtures from a number of REITs and pension funds about a possible sale or merger, Pollack remains steadfast. "We will continue to do what we have been doing - finding undervalued shopping centers and repositioning them - into the new millennium," says Pollack. "While we plan to double our size in Arizona within the next three to five years, we will proceed cautiously with future acquisitions."

Proceeding prudently has been a hallmark of Pollack's success, and the entrepreneur isn't about to change a winning formula.

1. "There is no substitute for hard work. Roll up your sleeves and do it. Opportunities don't have set hours. Just because you're the president doesn't mean you can't get your hands dirty."

2. "Markets and outlooks are constantly in flux. Don't think that what worked in the 1990s will work in the new millennium. Be creative - but cautious."

3. "Buy right. The profit is made on the purchase. Don't overpay for a property. Oftentimes, the value of current rent rolls can be deceiving."

4. "Discipline, discipline, discipline. Know when to do a deal and when not to do a deal. Don't become a deal junkie."

5. "Prepare for good and bad markets. Consider the worst that could happen to a property - the anchor moves out, a retailer goes bankrupt or whatever - and ask yourself, 'Could I survive that?' Then plan accordingly."