Every picture tells a story, and that's why developers love to have their pictures taken at job sites, plans in hand, hard hat on head and steel in the air behind them symbolizing big deals and booming times. But not F. Patrick Hughes, president of BTR Realty Inc.
Pat Hughes had his picture taken at his office, and that picture tells Linthicum-based BTR's story this winter. Retrenchment is the key word, as the developer of such local projects as the Harford Mall in Bel Air and the Gateway office complex near Baltimore-Washington International Airport digs in and retrenches to ride out the real estate industry's storm.
It has been a tough year for BTR, as it has for all sorts of real estate companies. Its stock has fallen from $7.625 a share to as low as $2.625. It took charges against earnings of $4.5 million in the first three quarters of the year, mostly reflecting bad investments the company had made in Arizona, where parts of the Phoenix real estate market were vastly overbuilt and are now seriously depressed.
And there are few new property developments in the pipeline these days. For BTR, as for everyone else, the boom of the 1980s is over.
That's the reason Pat Hughes is ready to be photographed at his office, which he jokes is his natural environment these days. In fact, it's the reason Mr. Hughes is president and chief operating officer of BTR at all. Until last month, he was the company's chief financial officer, but he was moved into the president's chair as the company came to grips with the fact that times like these call not for go-go deal-makers but for people such as Mr. Hughes, who can run operations, juggle the money and deal with the banks.
"Our corporate strategy is a drive for liquidity," said BTR Chairman Archibald E. McKay. "That weaves right into our management change. It's not a question of someone doing a bad job. It's a question of moving our strengths to where they can help the company."
The company's key financial result -- the earnings from properties it has finished developing and is now renting to tenants -- has risen 29 percent this year compared with the same period of 1989, but that gain was more than wiped out by the special charges.
"For the short term, we're going to have to emphasize operations and liquidity -- my two areas of the company," Mr. Hughes said.
BTR's stock has come down with those of other real estate companies that have been pounded by investor fears of weak property markets and even weaker banks.
BTR says that much of the drop in its stock has been unfair, a case of the market throwing out the baby with the real estate bathwater, and the few outside experts who follow the small company's thinly traded stock say that's mostly true.
But not entirely true. BTR made its share of bad deals, especially in Arizona, an unfamiliar market where it failed to stop developing before the good times ended -- a trick BTR mostly managed to pull off in its home market of Baltimore.
"Where they stuck close to home, they're doing fine," said Michael T. Oliver, president of PRA Securities Advisers in San Francisco, which holds an undisclosed number of BTR shares. "They ran into trouble in Phoenix. The question has to be, 'Why did they go to Phoenix?' "
Analysts say the stock market is also punishing BTR because of its $34 million in construction loans outstanding from recent projects. The fear is that with banks weak and insurance companies leery of new real estate investment, BTR may have trouble lining up long-term mortgage financing to take the place of short-term construction loans. At the end of the third quarter, BTR could conceivably face a cash squeeze.
"The question becomes, will I have enough cash flow . . . to refinance the construction loans when the development is finished?" said Robert Frank, an analyst who follows BTR for Alex. Brown & Sons Inc. in Baltimore. "The issue, like one facing most developers, is what do they have coming to the market and will they be able to finance them?"
Here's the good news about BTR. It isn't broke. In fact, it has
only used about half of its credit line at First National Bank of Maryland, Mr. McKay said.
Second, rather than constructing buildings and hoping to turn around and sell them, BTR constructs buildings it intends to hang on to and rent out.
Instead of glittery office towers or suburban office parks that are begging for tenants these days, BTR builds mostly local shopping centers. The retail space is 92 percent rented, Mr. Hughes said. It was 95 percent occupied a year ago, but a small department store that was a tenant in a Harrisonburg, Va., center went bankrupt.
The York Road Plaza at the Baltimore-Baltimore County line is a typical BTR development. The big tenant there is a Giant supermarket. Mostly, BTR's centers are anchored by a supermarket or drugstore, and, though nothing is foolproof, there are few more recession-resistant tenants than sellers of food and drugs.