December 31, 1990
A. I believe that in the coming year the potential will be community-based shopping centers with food (stores), drug (stores) and perhaps a discount store. . . . In some case in certain areas these will be consolidations of existing smaller shopping centers that are outdated, and in other cases, they'll be into new areas, but I think mostly you'll see some consolidations . . .
Q. In the future, will you depend more on your existing operations?
A. The way the markets are currently, obviously, yes. We've always tried to manage our existing operations in a very businesslike fashion. We've always looked for opportunities to increase the cash flow from those projects, and that's not anything new to us. We've always been not only a developer, but an owner and a manager, controlling our own destiny. Where we've seen the need for redevelopment, we've done it and increased the rent, too, but it's not so much we that we emphasize operations over development, it's just that with development being de-emphasized in the current environment, it obviously will be.
Q. Is it possible that you will get out of the development business and concentrate on managing properties?
A. It's one of the things that is under consideration. We've talked about that. We think that we do a good job of managing properties. . . . The problem with property management is that you don't make a great deal of money doing it. And you don't want to divert your staff from managing your own properties, because you get 100 percent of any profit and improvement you make there, but you get a piece of the rents if you manage for someone else, unless you can do it like the Rouse Co. situation, where you would manage your way into more equity in the project. . . . We have offered our services to local financial institutions. If they need any help in terms of projects they're taking over, we've offered to help them.
Q. Has that offer been accepted?
A. Not yet.
Q. Is BTR healthy?
A. We may have a slight cold, but that's compared to near-terminal diseases that you see other people get.
Q. What about your debt load?
A. Compared to most real estate development firms, our debt-to-asset ratio is very good. Also, I'm in the middle of a discussion with our bank about restructuring all our credit that's coming due in the next few years. . . . We'll be looking through our own portfolio of assets, and things that don't fit in our portfolio we will probably be moving, and that will be another source of cash, so we have a rational strategy.
Q. What about your employment situation?
A. By the end of the year, we'll probably have five fewer people than we had 18 months ago. It's attrition more than anything else. One of the good things about this business is you have to use outside consultants for so many things, you need civil engineers and architects, and you don't have to have those on staffs, so the overhead stops when you stop calling them up.
Q. And how many people do you employ?
A. The total company is about 55, but in this office we currently have 22.
Q. Recently you assumed the position of president and chief operating officer, and Vernon Kalkman, who was the president, became head of development. Could you explain why this was done?
A. The board felt that what they wanted to do was two things: Vernon's area of expertise is and has been development make sure that received time attention. . . . Additionally, if things work well and we develop some surplus cash, there are opportunities out there to acquire things, we believe, in the next year to 18 months, so if our plan works well we get very liquid with some existing projects. The other thing that's obvious is that in a time when there is a so-called crisis and illiquidity, we're going to emphasize the short-run operations. And that's my area of expertise.
Q. What do you think should be done to improve the building environment?
A. The biggest threat to real estate developers right now is illiquidity, from the standpoint of companies and their inability to refinance projects that they have. The availability of credit is practically nil in the Middle Atlantic area, and it's just reflecting what happened in New England -- now it's down here. That's the (biggest) problem facing developers. And today I think there's an ongoing problem with government regulation in terms of being able to develop projects. . . . I think it's not so much the regulations, but the time it takes for approvals. Time is money in this business, and if you're carrying a loan, and it takes you 18 months just to get to the point where you can start applying for permits, then you've carried a piece of property for 18 months where the process should have only taken three months if it's being worked properly.
Q. Do you think you see an end of the problems in sight? Have we gone through the worst period of time?
A. Nineteen ninety-one is going to be a very tough year. I think the liquidity problem has not bottomed out yet. . . . The banks themselves, sooner or later, are going to have to start lending money again, but it's going to have to be on entirely different terms. For right now, there's no evidence that anyone's out there looking for new deals.
Q. Can you predict when things will get better? You said next year would be rough. Do you see coming out of this in a couple years?
A. All parts of the market never recover at the same time. Usually you see things occurring in phases.
Q. Do you see certain geographic areas for growth?
A. We have been looking around North Carolina. There's steady growth in terms of population there.
