Hammered by a weak market for commercial real estate, BTR Realty Inc. of Linthicum said yesterday that it will suspend its dividend and will study converting the company to a real estate investment trust, a form of organization in which the company would emphasize managing existing commercial properties and slow down its pace of developing new ones.
The board of directors of the company "decided to defer the dividend we normally would declare at this time," BTR Chairman Archibald McKay told yesterday's annual shareholders' meeting at the World Trade Center in the Inner Harbor. In 1990, BTR paid dividends of 8 cents a share.
The dividend omission will immediately take some money out of stockholders' pockets, but the possible change in the form of organization is more important to the company's long-term future.
The company will de-emphasize its role as a developer of new commercial real estate projects if it converts to a real estate investment trust, or REIT, said F. Patrick Hughes, the company's president. Instead, it will focus on acquiring properties that are already built and rented out to tenants and will operate the properties BTR already owns.
BTR will do most of its future developments in joint ventures with institutional investors, which will put up most of the capital and share the financial risk of the project. BTR will provide development expertise in exchange for part ownership of the resulting developments, he said.
Mr. Hughes said that the stock market gives a higher value to REITs than it does to development-oriented corporations such as BTR. Wall Street doesn't take well to the uncertainties of the development business, he said.
REITs also don't pay federal income taxes. They pass their profits directly through to shareholders as dividends, who pay the taxes instead.
Mr. Hughes said that there is a better than 50 percent chance that the company will convert to a REIT, but he said that the company will have to fill up some of the existing vacancies in its retail, office and other commercial centers before making the change.