In the wake of a 1990 loss of more than $6.3 million, BTR Realty Inc. is considering a restructuring that would have it primarily involved in acquiring and managing properties.
The Linthicum-based development firm will investigate the possibility of converting to a Real Estate Investment Trust, President F. Patrick Hughes told stockholders yesterday at BTR's annual meeting.
Broadsided by the slump in the commercial real estate market, the company has also deferred all dividends until payment can ** be reconsidered at the end of this year, officials said.
Chairman Archibald E. MacKay called 1990 a "poor year" for the company. BTR stock has slipped from 7 5/8 a share to as low as 2 5/8 during the past year. The stock closed yesterday at $3, up 1/4 .
Hughes said BTR will take a number of steps to maintain its liquidity and improve its long-term prospects in the face of its current financial problems.
Converting to a REIT would allow the company to defer federal corporate income tax as it passes 95 percent of its interest income on to shareholders.
Such a conversion would require that the company make an immediate payment of dividends to shareholders totaling about $10 million, Hughes said. The payment would be required under federal law and is based on the company's accumulated earnings since it was founded in 1947.
In order to become a REIT, BTR would also need a major money partner, most likely a pension investment fund, said Hughes.
But finding such a partner could prove difficult.
Kenneth Campbell, an analyst with Audit Investments in Washington, said BTR may have trouble developing a reliable name for itself among potential investors.
"People that go into investment trusts are going to want a fairly well defined potential out there," Campbell said. "I'm not sure BTR is in that category. I just don't think it's known that well."
Hughes said there is currently a better than 50 percent chance that BTR will seek conversion, but that no decision will be made until the end of this year.
But first, Hughes said, the company needs to stabilize and improve its financial situation by selling off some of its land holdings and lowering the vacancy rate in BTR-owned properties.
Last month, BTR collected $2.3 million on the sale of four acres of land it held in Prince Frederick in Calvert County to Wal-Mart Stores Inc. Also, BTR garnered a $300,000 return for the sale of La Petite Academy in Atlanta. A second academy in Atlanta is under contract for sale and could earn the company an additional $600,000, Hughes said.
Vacancy rates in BTR properties -- which include office buildings and shopping centers in Arizona, Maryland, New York, North Carolina and Pennsylvania -- are running as high as 16 percent, Hughes said, with more than 400,000 square feet of space vacant.
"That sounds like bad news, but it's not," said Hughes, adding that there are good prospects for major tenants in a number of BTR buildings.
Despite the poor results, company officials said BTR is sound. MacKay noted that the company has not defaulted on any of its obligations. And Hughes said BTR has secured a $10 million line of credit from First National Bank of Maryland.